Question 1

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Accepted Answer

A)  Price-earnings ratio 
B)  Dividend yield 
C)  Book value per share 
D)  Return on equity 
A)  Price-earnings ratio 
B)  Dividend yield 
C)  Book value per share 
D)  Return on equity

Question 2

Solvency ratios are used to assess a company's:

Accepted Answer

A)  Long-term debt-paying ability. 
B)  Profitability. 
C)  Short-term debt-paying ability. 
D)  Efficiency in use of its assets. 
A)  Long-term debt-paying ability. 
B)  Profitability. 
C)  Short-term debt-paying ability. 
D)  Efficiency in use of its assets.

Question 3

Financial ratios can be used to assess which of the following aspects of a firm's performance?

Accepted Answer

A)  Liquidity 
B)  Solvency 
C)  Profitability 
D)  All of these answers are correct. 
A)  Liquidity 
B)  Solvency 
C)  Profitability 
D)  All of these answers are correct.

Question 4

A careless accountant splattered spaghetti sauce on Kitchen Company's balance sheet.The balance sheet with its missing amounts is provided below:
   
Kitchen Company's working capital is $138,000.
Required:
Compute the missing amounts.Record your answers in the following table:
 $$\begin{array} { | c | c | } 
\hline \text { A } & \text { F } \
\hline \text { B. } & \text { G. } \
\hline \text { C. } & \text { H. } \
\hline \text { D. } & \text { I } \
\hline \text { E } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { l l r l l l } 
\text {

Question 5

Discuss the limitations that affect financial statement analysis.

Accepted Answer

The results of financial statement analy

Question 6

You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:

Accepted Answer

A)  Number of times interest is earned. 
B)  Debt to assets ratio. 
C)  Debt to equity ratio. 
D)  Net margin. 
A)  Number of times interest is earned. 
B)  Debt to assets ratio. 
C)  Debt to equity ratio. 
D)  Net margin.

Question 7

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant collected $5,200 of accounts receivable.As a result of this transaction,Gant's working capital will:

Accepted Answer

A)  Increase. 
B)  Decrease. 
C)  Remain the same. 
D)  Cannot be determined. 
A)  Increase. 
B)  Decrease. 
C)  Remain the same. 
D)  Cannot be determined.

Question 8

Benson Company received cash of $1,000,000 from issuing common stock at par value.As a result of this transaction,the company's debt to equity ratio will:

Accepted Answer

A)  Decrease. 
B)  Increase. 
C)  Remain the same. 
D)  Cannot be determined. 
A)  Decrease. 
B)  Increase. 
C)  Remain the same. 
D)  Cannot be determined.

Question 9

The following balance sheet information is provided for Patton Company: $$\begin{array} { l r r } 
\text { Assets } & \text { Year 2 } & \text { Year } 1 \
\text { Cash } & \$ 4,000 & \$ 2,000 \

\text { Accounts receivable } &15,000 & 12,000\
\text { Inventory } & \$ 35,000 & \$ 38,000 
\end{array}$$
 Assuming Year 2 cost of goods sold is $730,000,what is the company's average days to sell inventory? (Use 365 days in a year.Do not round your intermediate calculations.)

Accepted Answer

A)  17.5 days 
B)  18.25 days 
C)  19 days 
D)  20.86 days 
A)  17.5 days 
B)  18.25 days 
C)  19 days 
D)  20.86 days

Question 10

The Dennis Company reported net income of $50,000 on sales of $300,000.The company has average total assets of $500,000 and average total liabilities of $100,000.What is the company's return on equity ratio?

Accepted Answer

A)  10.0% 
B)  16.7% 
C)  12.5% 
D)  50.0% 
A)  10.0% 
B)  16.7% 
C)  12.5% 
D)  50.0%

Question 11

Rialto Company collected $5,000 on account.What impact will this transaction have on the firm's current ratio?

Accepted Answer

A)  No impact 
B)  Increase it 
C)  Decrease it 
D)  Not enough information is provided to answer the question. 
A)  No impact 
B)  Increase it 
C)  Decrease it 
D)  Not enough information is provided to answer the question.

Question 12

Earnings before interest and taxes divided by interest expense is the formula for which of these analytical measures?

Accepted Answer

A)  Debt to assets ratio 
B)  Earnings per share 
C)  Return on investment 
D)  Number of times interest is earned 
A)  Debt to assets ratio 
B)  Earnings per share 
C)  Return on investment 
D)  Number of times interest is earned

Question 13

Describe the factors involved in communicating useful financial information.

Accepted Answer

The primary factors involved in communic

Question 14

Match between columns
                        Premises:  Another term for the current ratio
 Calculated by dividing dividends per share by the market price per share
 Presentation of too much information may serve to confuse users of the information
 Measure of efficiency in using assets, calculated as net sales divided by total assets
 Measure of immediate debt paying ability
 A profitability measure, net income divided by net sales
 Measures the profitability of a company's asset base, also known as return on assets
 Analysis technique that compares an item from the financial statements with a key amount from the same year's financial statements
 Measurement of volume of sales in relation to inventory levels
 Net income available for common stock divided by average number of outstanding shares
 Current assets minus current liabilities
 Ratio that measures how quickly a company collects its accounts receivable, calculated by dividing net sales by average net receivables
 Calculated by dividing 365 by the accounts receivable turnover ratio

Accepted Answer

The Answer of Accounts receivable turnover and Acid-test ratio and is...

Question 15

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Accepted Answer

A)  Current ratio. 
B)  Earnings per share. 
C)  Inventory turnover. 
D)  Average collection period. 
A)  Current ratio. 
B)  Earnings per share. 
C)  Inventory turnover. 
D)  Average collection period.

Question 16

Gamma Company and Chi Company are similar and similar-sized companies operating in the same industry.At the end of the most recent year,Gamma's price-earnings ratio was 22.0,and Chi's price-earnings ratio was 14.2.What conclusion would you draw based on the difference in price-earnings ratios for the two companies?

Accepted Answer

The price-earnings ratio is a measure of

Question 17

The following information was provided by Joseph Company as of December 31,Year 2:
 $\begin{array}{llr}
\text { Net income } & \$  528,000 \
\text { Preferred stock, }(20,000 \text { shares at } \$ 10 \text { par, 4\%) } & \$  200,000 \
\text { Common stock, (220,000 shares at } \$ 1 \text { par) } & \$  220,000 \
\text { Paid-in capital in excess of par-common } & \$ 2,475,500 \
\text { Retained earnings } & \$ 3,824,500
\end{array}$
 On the most recent trading date,Joseph's common shares sold at $36 and the preferred shares sold at $14.
The following information on industry averages is provided:
Earnings per share $2.06
Price-earnings ratio 13.2:1
Required:
1)Calculate and compare Joseph Company's ratios with the industry averages shown above.(Round your answer to two decimal places.)
2)Discuss whether you would invest in this company.

Accepted Answer

1)Earnings per share = ($528,000 ? $8,00

Question 18

Which of the following statements is generally incorrect from an investor's perspective?

Accepted Answer

A)  A 1:1 current ratio is generally preferred over a 1.5:1 current ratio. 
B)  A 20-day average collection period for accounts receivable is generally preferred over a 30-day average collection period. 
C)  A 5% dividend yield is generally preferred over a 3% dividend yield. 
D)  A 10% net margin is generally preferred over an 8% net margin. 
A)  A 1:1 current ratio is generally preferred over a 1.5:1 current ratio. 
B)  A 20-day average collection period for accounts receivable is generally preferred over a 30-day average collection period. 
C)  A 5% dividend yield is generally preferred over a 3% dividend yield. 
D)  A 10% net margin is generally preferred over an 8% net margin.

Question 19

The accounts receivable turnover ratio can be used to asses a firm's solvency.

Accepted Answer

A) True 
 B)False

Question 20

You are considering an investment in Frontier Airlines stock and wish to assess the firm's earnings performance.All of the following ratios can be used to assess profitability except:

Accepted Answer

A)  Average days to collect receivables. 
B)  Asset turnover. 
C)  Return on investment. 
D)  Net margin. 
A)  Average days to collect receivables. 
B)  Asset turnover. 
C)  Return on investment. 
D)  Net margin.

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Solvency ratios are used to assess a company's:

Financial ratios can be used to assess which of the following aspects of a firm's performance?

Discuss the limitations that affect financial statement analysis.

You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:

Benson Company received cash of $1,000,000 from issuing common stock at par value.As a result of this transaction,the company's debt to equity ratio will:

The Dennis Company reported net income of $50,000 on sales of $300,000.The company has average total assets of $500,000 and average total liabilities of $100,000.What is the company's return on equity ratio?

Rialto Company collected $5,000 on account.What impact will this transaction have on the firm's current ratio?

Earnings before interest and taxes divided by interest expense is the formula for which of these analytical measures?

Describe the factors involved in communicating useful financial information.

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Which of the following statements is generally incorrect from an investor's perspective?

The accounts receivable turnover ratio can be used to asses a firm's solvency.

You are considering an investment in Frontier Airlines stock and wish to assess the firm's earnings performance.All of the following ratios can be used to assess profitability except:

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Solvency ratios are used to assess a company's:

Financial ratios can be used to assess which of the following aspects of a firm's performance?

A careless accountant splattered spaghetti sauce on Kitchen Company's balance sheet.The balance sheet with its missing amounts is provided below: Kitchen Company's working capital is $138,000. Required: Compute the missing amounts.Record your answers in the following table: A F B. G. C. H. D. I E

Discuss the limitations that affect financial statement analysis.

You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:

Benson Company received cash of $1,000,000 from issuing common stock at par value.As a result of this transaction,the company's debt to equity ratio will:

The Dennis Company reported net income of $50,000 on sales of $300,000.The company has average total assets of $500,000 and average total liabilities of $100,000.What is the company's return on equity ratio?

Rialto Company collected $5,000 on account.What impact will this transaction have on the firm's current ratio?

Earnings before interest and taxes divided by interest expense is the formula for which of these analytical measures?

Describe the factors involved in communicating useful financial information.

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Which of the following statements is generally incorrect from an investor's perspective?

The accounts receivable turnover ratio can be used to asses a firm's solvency.

You are considering an investment in Frontier Airlines stock and wish to assess the firm's earnings performance.All of the following ratios can be used to assess profitability except:

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Statement of Cash Flows

Filters