Question 1

In a vertical analysis of the balance sheet,the 100% amount is

Accepted Answer

A) current assets. 
B) working capital. 
C) total assets. 
D) total stockholders' equity. 
A) current assets. 
B) working capital. 
C) total assets. 
D) total stockholders' equity.

Question 2

Which of the following statements is true regarding valuation amounts on the balance sheet?

Accepted Answer

A) Stockholders' equity reflects the amount the stockholders would receive upon liquidation. 
B) Assets are recorded at current cost. 
C) Stockholders' equity reflects the current market value of the stock 
D) A variety of assumptions are used in determining amounts reported on the balance sheet. 
A) Stockholders' equity reflects the amount the stockholders would receive upon liquidation. 
B) Assets are recorded at current cost. 
C) Stockholders' equity reflects the current market value of the stock 
D) A variety of assumptions are used in determining amounts reported on the balance sheet.

Question 3

Carlton, Inc. presented the following information in a note to its financial statements for the year ending December 31, 2017:

The company has a loan agreement with Beachside Bank that states:
 
1. The current ratio should remain at least 2.0 to 1 at all times.
2. The debt-to-equity ratio should not exceed 0.7 to 1 at any time.
3. The times interest earned should be 5.0 or better.
4. The inventory turnover should be 4.0 or better.

The ratios at year-end are current ratio, 2.3 to 1; debt-to-equity ratio, 0.6 to 1; times interest earned, 7.1; and inventory turnover, 3.7. Which of the following statements is true?

Accepted Answer

A) Carlton was in default because of the inventory turnover. 
B) Carlton was in default because of the current ratio. 
C) Carlton was in default because of the debt-to-equity ratio. 
D) Carlton was in default because of the times interest earned. 
A) Carlton was in default because of the inventory turnover. 
B) Carlton was in default because of the current ratio. 
C) Carlton was in default because of the debt-to-equity ratio. 
D) Carlton was in default because of the times interest earned.

Question 4

Which of the following ratios is used to analyze a company's liquidity?

Accepted Answer

A) Return on assets ratio 
B) Inventory turnover ratio 
C) Earnings per share 
D) Asset turnover ratio 
A) Return on assets ratio 
B) Inventory turnover ratio 
C) Earnings per share 
D) Asset turnover ratio

Question 5

Culinary Delights Company

Use the financial statements for Culinary Delights Company to answer the questions that follow.
Consolidated Statement of Earnings and Retained Earning

-Refer to the financial statements for Culinary Delights Company.
 
Required
(A)Calculate the company's current and acid-test ratios for 2018.Would you lend this company $4,000,000 at 10% over a one-year period? Explain.(Note: The statements provided are in "thousands.")
 
(B)Suppose the company has credit terms of 20 days and all sales are on credit.During 2018,what credit management problems does this company have,if any? Explain

Accepted Answer

(A)Current ratio: Current Assets/Current

Question 6

Auto Industries Company reported the following on its income statement:  
$\begin{array}{lr}
\text { Income before income taxes } & \$ 420,000 \
\text { Income tax expense } & \$ 120,000 \
\text { Net income } & \$ 300,000
\end{array}$ If the income statement also shows interest expense equal to $80,000,what is the company's times interest earned ratio?

Accepted Answer

A) 5 times 
B) 8 times 
C) 5.25 times 
D) 6.25 times 
A) 5 times 
B) 8 times 
C) 5.25 times 
D) 6.25 times

Question 7

Which of the following is least useful in evaluating a company's financial statements?

Accepted Answer

A) Comparison of the company's current period data with accounting data from five years ago 
B) Comparison with other companies in the same industry 
C) Comparison with government economic data for the economy as a whole. 
D) Comparison of the company's current period data with that of the last year 
A) Comparison of the company's current period data with accounting data from five years ago 
B) Comparison with other companies in the same industry 
C) Comparison with government economic data for the economy as a whole. 
D) Comparison of the company's current period data with that of the last year

Question 8

Inventories and prepaid assets are excluded from the numerator used to compute the quick ratio.

Accepted Answer

A) True 
 B)False

Question 9

Pinecrest Company
Use the selected data from Pinecrest Company's financial statements to answer the following question.
​
 $\begin{array}{lrr}&2018&2017\\text { Cash } & \$ 22,000 & \$ 14,000 \
\text { Accounts receivable } & 42,000 & 16,000 \
\text { Merchandise inventory } & 22,000 & 83,000 \
\text { Prepaid expenses } & 23,000 & 18,000 \
\text { Total current assets } & \$ 109,000 & \$ 131,000\\
\text { Total current liabilities } & \$ 65,000 & \$ 72,000 \
\text { Net credit sales } & 221,000 & 326,000 \
\text { Cost of goods sold } & 168,000 & 299,000 \
\text { Net cash flow from operating activities } & 16,000 & 29,000
\end{array}$ ​
-Refer to the data for Pinecrest Company.  
Competitors in Pinecrest Company's industry have an average accounts receivable turnover of 10.8 times.Pinecrest reported accounts receivable at December 31,2018,of $42,000 and has normal credit terms requiring payment within 30 days.Pinecrest's accounts receivable turnover for 2018 is

Accepted Answer

A) indicating that the company probably has stricter credit terms and policies than the industry as a whole,which may repel potential buyers. 
B) of no value to bankers and other creditors. 
C) less efficient in its collection policies in 2018 than the industry as a whole. 
D) less than the industry,which means that its customers are paying on their accounts in a more timely manner than are customers reflected by the industry average. 
A) indicating that the company probably has stricter credit terms and policies than the industry as a whole,which may repel potential buyers. 
B) of no value to bankers and other creditors. 
C) less efficient in its collection policies in 2018 than the industry as a whole. 
D) less than the industry,which means that its customers are paying on their accounts in a more timely manner than are customers reflected by the industry average.

Question 10

The net assets of a company are equal to

Accepted Answer

A) current assets less current liabilities. 
B) total assets less current assets. 
C) long-term assets less accumulated depreciation. 
D) the stockholders' equity. 
A) current assets less current liabilities. 
B) total assets less current assets. 
C) long-term assets less accumulated depreciation. 
D) the stockholders' equity.

Question 11

The two groups of users that are especially interested in profitability are __________ and __________.

Accepted Answer

creditors,

Question 12

St.Petersburg Corporation
Use the information obtained from the comparative financial statements included in the St.Petersburg Corporation's 2018 annual report that is presented below to answer the questions that follow.All amounts are in thousands of dollars.
​
 $\begin{array}{lrr}&\text { Dec. 31, } 2018&\text { Dec. 31, } 2017\
\text { Total assets } & \$ 800,000 & \$ 975,000 \
\text { Total common stockholders' equity } & 405,000 & 578,000 \
\text { Total stockholders' equity } & 504,000 & 702,000
\\\&\text { December } 31\
\text { FOR THE FISCAL YEARS ENDED }&2018&2017\\hline
\text { Interest expense, net of tax } & 5,000 & \$, 700 \
\text { Interest expense } & 6,100 & 5,800 \
\text { Income tax expense } & 22,600 & 32,600 \
\text { Net income } & 110,000 & 27,000 \
\text { Common dividends } & 12,600 & 7,200 \
\text { Net sales } & 2,667,600 & 1,971,000 \
\text { Preferred dividends } & 9,000 & 14,400
\end{array}$ ​
-Refer to the financial information for St.Petersburg Corporation.
Required
During 2018,has St.Petersburg successfully employed favorable leverage based on the average cost of capital? What action should the company take?

Accepted Answer

The return on assets ratio is a good ind

Question 13

Which of the following will decrease working capital?

Accepted Answer

A) Collection of accounts receivable 
B) Purchase of a new computer with cash 
C) Payment of salaries payable 
D) Purchase of merchandise on credit 
A) Collection of accounts receivable 
B) Purchase of a new computer with cash 
C) Payment of salaries payable 
D) Purchase of merchandise on credit

Question 14

__________ ratio is capable of telling the user everything there is to know about a particular company.

Accepted Answer

The answer of __________ ratio is capable of telling the...

Question 15

Mother Nature Supplies
Following are selected data from the financial statements of Mother Nature Supplies:
​
 $\begin{array}{lrr}&2018&2017\
\text { Accounts receivable } & \$ 60,000 & \$ 38,000 \
\text { Merchandise inventory } & 12,000 & 16,000 \
\text { Total assets } & 450,000 & 380,000 \
\text { Net sales } & 380,000 & 270,000 \
\text { Cost of goods sold } & 160,000 & 210,000
\end{array}$ ​
-Refer to the data for Mother Nature Supplies.  
Which of the following would result from a vertical analysis of its income statement?

Accepted Answer

A) Accounts receivable increased $22,000,or 57.9%,during 2018. 
B) Gross profit is 57.9% of net sales for 2018. 
C) Cost of goods sold increased $50,000,or 23.8%,during 2018. 
D) Net sales increased $110,000,or 28.9%,during 2018. 
A) Accounts receivable increased $22,000,or 57.9%,during 2018. 
B) Gross profit is 57.9% of net sales for 2018. 
C) Cost of goods sold increased $50,000,or 23.8%,during 2018. 
D) Net sales increased $110,000,or 28.9%,during 2018.

Question 16

$\text { Fawnsworth Industries }$

$\text { Below are some financial data for Fawnsworth Industries' current year. }$

$\begin{array}{lr}
\text { Net sales on account during year } & \$ 500,000 \
\text { Cost of merchandise sold during year } & 300,000 \
\text { Accounts receivable, beginning of year } & 45,000 \
\text { Accounts receivable, end of year } & 35,000 \
\text { Inventory, beginning of year } & 90,000 \
\text { Inventory, end of year } & 110,000
\end{array}$

-Refer to the data for Fawnsworth Industries. 
Based on this information,what is Fawnsworth's number of days' sales in inventory (assuming a 360-day year)?

Accepted Answer

A) 132 days 
B) 216 days 
C) 1,091 days 
D) 120 days 
A) 132 days 
B) 216 days 
C) 1,091 days 
D) 120 days

Question 17

Assume the current ratio for Allegheny Supply Co.is 2 to 1.If the company purchased supplies on credit,the effect of this transaction is to

Accepted Answer

A) increase the current ratio. 
B) decrease the current ratio. 
C) have no effect on the current ratio. 
D) decrease cash. 
A) increase the current ratio. 
B) decrease the current ratio. 
C) have no effect on the current ratio. 
D) decrease cash.

Question 18

What two difficulties may be that are encountered when two companies are compared?

Accepted Answer

Alternative accounting princip

Question 19

Below are selected data from the financial statements of Moriarty Company.$\begin{array}{lrr}&2018&2017\
\text { Total liabilities } & \$ 1,205,000 & \$ 952,000 \
\text { Common stock }(\$ 30 \text { par) } & 250,000 & 225,000 \
\text { Paid-in capital in excess of par-Common stock } & 150,000 & 135,000 \
\text { Retained earnings } & 155,000 & 145,000
\end{array}$ The debt-to-equity ratio for 2018 is

Accepted Answer

A) increasing,which should be a major cause of concern for Moriarty Company. 
B) increasing,which should be a good sign in investors' eyes. 
C) decreasing,which should be a major cause of concern for Moriarty Company. 
D) decreasing,which should be a good sign in investors' eyes. 
A) increasing,which should be a major cause of concern for Moriarty Company. 
B) increasing,which should be a good sign in investors' eyes. 
C) decreasing,which should be a major cause of concern for Moriarty Company. 
D) decreasing,which should be a good sign in investors' eyes.

Question 20

Most companies

Accepted Answer

A) are not concerned with the management of working capital because cash flows are good. 
B) strive for a balance between current assets and current liabilities. 
C) try to maintain protection from the creditors by keeping only a small amount of cash available. 
D) agree that working capital of $3,000,000 is sufficient for business operations. 
A) are not concerned with the management of working capital because cash flows are good. 
B) strive for a balance between current assets and current liabilities. 
C) try to maintain protection from the creditors by keeping only a small amount of cash available. 
D) agree that working capital of $3,000,000 is sufficient for business operations.

In a vertical analysis of the balance sheet,the 100% amount is

Which of the following statements is true regarding valuation amounts on the balance sheet?

Which of the following ratios is used to analyze a company's liquidity?

Auto Industries Company reported the following on its income statement: Income before income taxes \ 420,000 Income tax expense \ 120,000 Net income \ 300,000 If the income statement also shows interest expense equal to $80,000,what is the company's times interest earned ratio?

Which of the following is least useful in evaluating a company's financial statements?

Inventories and prepaid assets are excluded from the numerator used to compute the quick ratio.

The net assets of a company are equal to

The two groups of users that are especially interested in profitability are and .

Which of the following will decrease working capital?

__________ ratio is capable of telling the user everything there is to know about a particular company.

Assume the current ratio for Allegheny Supply Co.is 2 to 1.If the company purchased supplies on credit,the effect of this transaction is to

What two difficulties may be that are encountered when two companies are compared?

Below are selected data from the financial statements of Moriarty Company. 2018 2017 Total liabilities \ 1,205,000 \ 952,000 Common stock (\ 30 par) 250,000 225,000 Paid-in capital in excess of par-Common stock 150,000 135,000 Retained earnings 155,000 145,000 The debt-to-equity ratio for 2018 is

Most companies

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

International Financial Reporting Standards

Filters

Exam 13: Financial Statement Analysis

In a vertical analysis of the balance sheet,the 100% amount is

Which of the following statements is true regarding valuation amounts on the balance sheet?

Which of the following ratios is used to analyze a company's liquidity?

Auto Industries Company reported the following on its income statement: Income before income taxes \ 420,000 Income tax expense \ 120,000 Net income \ 300,000 If the income statement also shows interest expense equal to $80,000,what is the company's times interest earned ratio?

Which of the following is least useful in evaluating a company's financial statements?

Inventories and prepaid assets are excluded from the numerator used to compute the quick ratio.

The net assets of a company are equal to

The two groups of users that are especially interested in profitability are __________ and __________.

Which of the following will decrease working capital?

__________ ratio is capable of telling the user everything there is to know about a particular company.

Assume the current ratio for Allegheny Supply Co.is 2 to 1.If the company purchased supplies on credit,the effect of this transaction is to

What two difficulties may be that are encountered when two companies are compared?

Below are selected data from the financial statements of Moriarty Company. 2018 2017 Total liabilities \ 1,205,000 \ 952,000 Common stock (\ 30 par) 250,000 225,000 Paid-in capital in excess of par-Common stock 150,000 135,000 Retained earnings 155,000 145,000 The debt-to-equity ratio for 2018 is

Most companies

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

International Financial Reporting Standards

Filters

The two groups of users that are especially interested in profitability are and .