Question 1

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. 
-The working capital is:

Accepted Answer

A)  71%. 
B)  41%. 
C)  $56,000. 
D)  141%. 
E)  ($56,000). 
A)  71%. 
B)  41%. 
C)  $56,000. 
D)  141%. 
E)  ($56,000).

Question 2

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

Accepted Answer

A) True 
 B)False

Question 3

Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Describe ratio analysis including its purpose, application, and interpretation.

Accepted Answer

A ratio is a mathematical relation betwe

Question 5

Net sales divided by average total assets is the:

Accepted Answer

A)  Sales return ratio. 
B)  Total asset turnover. 
C)  Profit margin. 
D)  Return on total assets. 
E)  Current ratio. 
A)  Sales return ratio. 
B)  Total asset turnover. 
C)  Profit margin. 
D)  Return on total assets. 
E)  Current ratio.

Question 6

Intra-company analysis compares a company's current performance to its own prior performance.

Accepted Answer

A) True 
 B)False

Question 7

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Accepted Answer

A)  General-purpose financial statements. 
B)  Asset comparative statements. 
C)  Percentage comparative statements. 
D)  Sales comparative statements. 
E)  Common-size comparative statements. 
A)  General-purpose financial statements. 
B)  Asset comparative statements. 
C)  Percentage comparative statements. 
D)  Sales comparative statements. 
E)  Common-size comparative statements.

Question 8

Current assets divided by current liabilities is the:

Accepted Answer

A)  Solvency ratio. 
B)  Liquidity ratio. 
C)  Quick ratio. 
D)  Current ratio. 
E)  Debt ratio. 
A)  Solvency ratio. 
B)  Liquidity ratio. 
C)  Quick ratio. 
D)  Current ratio. 
E)  Debt ratio.

Question 9

A company had a market price of $27.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:

Accepted Answer

A)  32.0. 
B)  3.1. 
C)  93.8. 
D)  3.3. 
E)  22.0. 
A)  32.0. 
B)  3.1. 
C)  93.8. 
D)  3.3. 
E)  22.0.

Question 10

Rajan Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its Debt to equity ratio is:

Accepted Answer

A)  0.58 
B)  1.38 
C)  1.00 
D)  0.73 
E)  0.42 
A)  0.58 
B)  1.38 
C)  1.00 
D)  0.73 
E)  0.42

Question 11

The ability to provide financial rewards sufficient to attract and retain financing is called:

Accepted Answer

A)  Profitability. 
B)  Market prospects. 
C)  Solvency. 
D)  Liquidity and efficiency. 
E)  Creditworthiness. 
A)  Profitability. 
B)  Market prospects. 
C)  Solvency. 
D)  Liquidity and efficiency. 
E)  Creditworthiness.

Question 12

Refer to the following selected financial information from Keller Company. Compute the company's debt to equity for Year 2. $$\begin{array} { | l | r | c | } 
\hline & \text { Year 2 } &{ \text { Year 1 } } \
\hline \text { Total assets } & \$ 327,800 & \$ 301,000 \
\hline \text { Total liabilities } & 171,400 & 169,300 \
\hline \text { Total equity } & 156,400 & 131,700 \
\hline
\end{array}$$

Accepted Answer

A)  1.9. 
B)  0.5. 
C)  1.1. 
D)  0.9. 
E)  2.1. 
A)  1.9. 
B)  0.5. 
C)  1.1. 
D)  0.9. 
E)  2.1.

Question 13

A company's calendar-year financial data are shown below. The company had total assets of $339,000 and total equity of $144,400 for the prior year. No additional shares of common stock were issued during the year. The December 31 market price per share is $49.50. Cash dividends of
$19,500 were paid during the year. Calculate the following ratios for the company:

Accepted Answer

(a) ($74,100 + $97,500)/$351,0

Question 14

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

Accepted Answer

A) True 
 B)False

Question 15

The ability to generate future revenues and meet long-term obligations is referred to as:

Accepted Answer

A)  Liquidity and efficiency. 
B)  Profitability. 
C)  Solvency. 
D)  Market prospects. 
E)  Creditworthiness. 
A)  Liquidity and efficiency. 
B)  Profitability. 
C)  Solvency. 
D)  Market prospects. 
E)  Creditworthiness.

Question 16

Describe the purpose of vertical financial statement analysis and how it is applied.

Accepted Answer

Vertical analysis is used to evaluate in

Question 17

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

Accepted Answer

A)  100%. 
B)  13%. 
C)  15%. 
D)  87%. 
E)  115%. 
A)  100%. 
B)  13%. 
C)  15%. 
D)  87%. 
E)  115%.

Question 18

Refer to the following selected financial information from McCormik, LLC. Compute the company's current ratio for Year 2. $$\begin{array} { | l | r | r | } 
\hline &{ \text { Year 2 } } & { \text { Year 1 } } \
\hline \text { Cash } & \$ 37,500 &3 6 , 8 5 0  \
\hline \text { Short-term investments } & 90,000 & 90,000 \
\hline \text { Accounts receivable, net } & 85,500 & 86,250 \
\hline \text { Merchandise inventory } & 121,000 & 117,000 \
\hline \text { Prepaid expenses } & 12,100 & 13,500 \
\hline \text { Plant assets } & 388,000 & 392,000 \
\hline \text { Accounts payable } & 113,400 & 111.750 \
\hline \text { Net sales } & 711,000 & 706,000 \
\hline \text { Cost of goods sold } & 390,000 & 385,500 \
\hline
\end{array}$$

Accepted Answer

A)  2.95. 
B)  2.26. 
C)  1.88. 
D)  3.05. 
E)  1.98. 
A)  2.95. 
B)  2.26. 
C)  1.88. 
D)  3.05. 
E)  1.98.

Question 19

The current ratio and acid-test ratio are used to reflect the ________ of a business.

Accepted Answer

The answer of The current ratio and acid-test ratio are...

Question 20

Desjardin Landscaping's income statement reports net income of $75,300, which includes deductions for interest expense of $11,500 and income taxes of $34,900. Its times interest earned is:

Accepted Answer

A)  0.15 times 
B)  7.5 times 
C)  10.6 times 
D)  4.0 times 
E)  6.5 times 
A)  0.15 times 
B)  7.5 times 
C)  10.6 times 
D)  4.0 times 
E)  6.5 times

Exam 17: Analysis of Financial Statements

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. -The working capital is:

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.

Describe ratio analysis including its purpose, application, and interpretation.

Net sales divided by average total assets is the:

Intra-company analysis compares a company's current performance to its own prior performance.

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Current assets divided by current liabilities is the:

A company had a market price of $27.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:

Rajan Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its Debt to equity ratio is:

The ability to provide financial rewards sufficient to attract and retain financing is called:

Refer to the following selected financial information from Keller Company. Compute the company's debt to equity for Year 2. Year 2 Year 1 Total assets \ 327,800 \ 301,000 Total liabilities 171,400 169,300 Total equity 156,400 131,700

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

The ability to generate future revenues and meet long-term obligations is referred to as:

Describe the purpose of vertical financial statement analysis and how it is applied.

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

The current ratio and acid-test ratio are used to reflect the ________ of a business.

Desjardin Landscaping's income statement reports net income of $75,300, which includes deductions for interest expense of $11,500 and income taxes of $34,900. Its times interest earned is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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