Question 1

The debt to equity ratio shows the proportion of total liabilities relative to total equity.

Accepted Answer

A) True 
 B)False

Question 2

O'Connors,Inc.provides the following information for 2018:
 $\begin{array}{ll}
\text { Net income } & \$ 180,000 \
\text { Market price per share of common stock } & \$ 20,00 / \text { share }
\end{array}$
 $\begin{array}{ll}
\text { Common stockholders' equity at Jan. } 1,2018 & \$ 1,100,000 \
\text { Common stockholders' equity at Dec. } 31,2018 & \$ 1,500,000 \
12 \% \text { preferred stock outstanding } & \$ 100,000
\end{array}$
 Calculate the return on common stockholders' equity.(Round to two decimals.)

Accepted Answer

* Preferred Dividend = $100,00

Question 3

Which of the following is NOT a way to accurately determine the financial performance of a company?

Accepted Answer

A)  carefully examining one year of data 
B)  evaluating a company's performance from year to year 
C)  comparing a company's performance with a competing company 
D)  comparing a company's performance with the same industry as a whole 
A)  carefully examining one year of data 
B)  evaluating a company's performance from year to year 
C)  comparing a company's performance with a competing company 
D)  comparing a company's performance with the same industry as a whole

Question 4

Annual reports ________.

Accepted Answer

A)  are required to be prepared by every corporation 
B)  discuss the company's competitors and the risks related to the company's business 
C)  are also called a Form 10-Q 
D)  only include the company's financial statements 
A)  are required to be prepared by every corporation 
B)  discuss the company's competitors and the risks related to the company's business 
C)  are also called a Form 10-Q 
D)  only include the company's financial statements

Question 5

Benchmarking often compares a company against a key competitor or the industry average.

Accepted Answer

A) True 
 B)False

Question 6

The audit report in the annual report is prepared by an internal auditor of a company.

Accepted Answer

A) True 
 B)False

Question 7

A trend analysis would be used if an analyst wants to see how the gross profit of a company has changed from one year to the next.

Accepted Answer

A) True 
 B)False

Question 8

Mercer,Inc.provides the following data for 2019: $$\begin{array} { | l | r | } 
\hline \text { Net Sales Revenue } & 598,000 \
\hline \text { Cost of Goods Sold } & 360,000 \
\hline
\end{array}$$ The gross profit as a percentage of net sales is ________.(Round your answer to two decimal places.)

Accepted Answer

A)  37.96% 
B)  39.80% 
C)  60.20% 
D)  40.8% 
A)  37.96% 
B)  39.80% 
C)  60.20% 
D)  40.8%

Question 9

Reliable Moving Company reported the following amounts on its balance sheet as of December 31,2019 and December 31,2018: $$\begin{array} { | l | r | r | } 
\hline &{ 2019 } &  { 2018 } \
\hline \text { Cash and Receivables } & \$ 135,000 & \$ 135,000 \
\hline \text { Merchandise Inventory } & 185,000 & 150,000 \
\hline \text { Property, Plant and Equipment, net } & 780,000 & 740,000 \
\hline \text { Total Assets } & \$ 1,100,000 & \$ 1,025,000 \
\hline \text { Total Liabilities } & \$ 435,000 & \$ 465,000 \
\hline
\end{array}$$ For the vertical analysis,what is the percentage of total liabilities for December 31,2018? (Round your answer to two decimal places.)

Accepted Answer

A)  100.00% 
B)  39.55% 
C)  29.03% 
D)  45.37% 
A)  100.00% 
B)  39.55% 
C)  29.03% 
D)  45.37%

Question 10

Which of the following is NOT a part of a corporation's annual report?

Accepted Answer

A)  report of independent registered public accounting firm 
B)  MD&A 
C)  notes to financial statements 
D)  employees' pay rates 
A)  report of independent registered public accounting firm 
B)  MD&A 
C)  notes to financial statements 
D)  employees' pay rates

Question 11

Horizontal analysis is the study of percentage changes in line items in comparative financial statements.

Accepted Answer

A) True 
 B)False

Question 12

In regards to benchmarking,which of the following statements is correct?

Accepted Answer

A)  The two main types of benchmarks in financial statement analysis include benchmarking against a prior year of the same company and benchmarking against a key competitor. 
B)  Benchmarking is the practice of comparing a company with information provided by the Financial Standards Accounting Board. 
C)  The Risk Management Association provides common-size statements for most industries. 
D)  It is not helpful to provide common-size percentages in a graphical manner. 
A)  The two main types of benchmarks in financial statement analysis include benchmarking against a prior year of the same company and benchmarking against a key competitor. 
B)  Benchmarking is the practice of comparing a company with information provided by the Financial Standards Accounting Board. 
C)  The Risk Management Association provides common-size statements for most industries. 
D)  It is not helpful to provide common-size percentages in a graphical manner.

Question 13

The auditor's report ________.

Accepted Answer

A)  attests that the financial statements are error-free 
B)  is prepared by the internal auditors 
C)  states whether the financial statements are presented in accordance with GAAP 
D)  does not include an assessment of the effectiveness of the company's internal controls 
A)  attests that the financial statements are error-free 
B)  is prepared by the internal auditors 
C)  states whether the financial statements are presented in accordance with GAAP 
D)  does not include an assessment of the effectiveness of the company's internal controls

Question 14

Milton,Inc.provides the following income statement for 2019: $$\begin{array} { | l | r | } 
\hline & \
\hline \text { Net Sales } & \$ 240,000 \
\hline \text { Cost of Goods Sold } & \$ 10,000 \
\hline \text { Gross Profit } & \$ 130,000 \
\hline \text { Operating Expenses: } &\
\hline \text { Selling Expenses } &   45,000 \ 
\hline \text { Administrative Expenses } & \underline { 12,000 }\
\hline \text { Total Operating Expenses } &  \underline { 57,000 } \
\hline \text { Operating Income } & \$ 73,000\
\hline \text { Other Income and (Expenses): } & \
\hline \text { Loss on Sale of Capital Assets } &  (26,000 ) \
\hline \text { Interest Expense } & (1000 ) \
\hline \text { Total Other Income and (Expenses) } &(27,000 ) \
\hline \text { Income Before Income Taxes } & \$ 46,000\
\hline \text { Income Tax Expense } &  5700 \
\hline \text { Net Income } & \$ 40,300\
\hline
\end{array}$$ Calculate the times-interest-earned ratio.(Round your answer to two decimal places.)

Accepted Answer

A)  73.00 times 
B)  46.00 times 
C)  40.30 times 
D)  47.00 times 
A)  73.00 times 
B)  46.00 times 
C)  40.30 times 
D)  47.00 times

Question 15

Horizontal analysis provides a year-to-year comparison of a company's performance in different periods.

Accepted Answer

A) True 
 B)False

Question 16

The income statement is also known as the ________.

Accepted Answer

A)  statement of operations 
B)  statement of cash flows 
C)  statement of stockholders' equity 
D)  statement of financial position 
A)  statement of operations 
B)  statement of cash flows 
C)  statement of stockholders' equity 
D)  statement of financial position

Question 17

In a vertical analysis of the income statement,each line item is shown as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 18

Modern Moving Company reported the following amounts on its balance sheet as of December 31,2019 and December 31,2018: $$\begin{array} { | l | r | r | } 
\hline & { 2019 } & { 2018 } \
\hline \text { Cash and Receivables } & \$ 155,000 & \$ 145,000 \
\hline \text { Merchandise Inventory } & 205,000 & 160,000 \
\hline \text { Property, Plant and Equipment, net } & 850,000 & 730,000 \
\hline \text { Total Assets } & \$ 1,210,000 & \$ 1,035,000 \
\hline \text { Total Liabilities } & \$ 535,000 & \$ 475,000 \
\hline
\end{array}$$ For the vertical analysis,what is the percentage of stockholders' equity as of December 31,2019? (Round your answer to two decimal places.)

Accepted Answer

A)  100.00% 
B)  54.11% 
C)  55.79% 
D)  There is not enough information provided to make this computation. 
A)  100.00% 
B)  54.11% 
C)  55.79% 
D)  There is not enough information provided to make this computation.

Question 19

National,Inc.provides the following data: $$\begin{array} { | l | r | r | } 
\hline &\underline {2019 } & { \underline { 1018 } } \
\hline \text { Cash } & \$ 45,000 & \$ 25,000 \
\hline \text { Accounts Receivable, Net } & 98,000 & 62,000 \
\hline \text { Merchandise Inventory } & 75,000 & 50,000 \
\hline \text { Property, Plant, and Equipment, Net } & \underline { 185,000 } & \underline { 120,000 } \
\hline \text { Total Assets } & \$ 403,000 & \$ 257,000 \
\hline 
\end{array}$$ For the year ending December 31,2019:
$$\begin{array} { | l | r | } 
\hline \text { Net Credit Sales } & \$ 280,000 \
\hline \text { Cost of Goods Sold } & ( 150,000 \
\hline \text { Gross Profit } & \$ 130,000 \
\hline
\end{array}$$ Calculate the accounts receivable turnover ratio for 2019.(Round your answer to two decimal places.)

Accepted Answer

A)  5.60 times 
B)  4.11 times 
C)  3.50 times 
D)  2.86 times 
A)  5.60 times 
B)  4.11 times 
C)  3.50 times 
D)  2.86 times

Question 20

Online financial databases provide data on companies which allows investors to compare the companies' future earnings.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Statement Analysis

The debt to equity ratio shows the proportion of total liabilities relative to total equity.

Which of the following is NOT a way to accurately determine the financial performance of a company?

Annual reports ________.

Benchmarking often compares a company against a key competitor or the industry average.

The audit report in the annual report is prepared by an internal auditor of a company.

A trend analysis would be used if an analyst wants to see how the gross profit of a company has changed from one year to the next.

Mercer,Inc.provides the following data for 2019: Net Sales Revenue 598,000 Cost of Goods Sold 360,000 The gross profit as a percentage of net sales is ________.(Round your answer to two decimal places.)

Which of the following is NOT a part of a corporation's annual report?

Horizontal analysis is the study of percentage changes in line items in comparative financial statements.

In regards to benchmarking,which of the following statements is correct?

The auditor's report ________.

Horizontal analysis provides a year-to-year comparison of a company's performance in different periods.

The income statement is also known as the ________.

In a vertical analysis of the income statement,each line item is shown as a percentage of net income.

Online financial databases provide data on companies which allows investors to compare the companies' future earnings.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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