Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

The relationship between total liabilities and total assets is the ________.

Accepted Answer

A) debt ratio 
B) debt to equity ratio 
C) current ratio 
D) earnings per share 
A) debt ratio 
B) debt to equity ratio 
C) current ratio 
D) earnings per share A

Question 3

What is a common-size statement? Why are these statements useful?

Accepted Answer

A common-size statement is a financial statement that reports only percentages.This removes dollar value bias when comparing one company to another company.Dollar value bias is the bias one sees from comparing numbers in absolute dollars rather than relative percentage terms.

Question 4

If inventory turnover is too slow,a company may be unable to sell goods or it may be understating merchandise inventory.

Accepted Answer

A) True 
 B)False

Question 5

Merchandise inventory and prepaid expenses are excluded from the acid-test ratio.

Accepted Answer

A) True 
 B)False

Question 6

A horizontal analysis would be used if an analyst wants to see how the assets of a company have changed from one year to the next.

Accepted Answer

A) True 
 B)False

Question 7

Regarding discontinued operations,which of the following statements is correct?

Accepted Answer

A) Gains and losses on the sale of plant assets are reported as discontinued operations. 
B) A loss on discontinued operations is reported with an addition for the applicable income tax. 
C) Most analysts include the results of discontinued operations in financial analysis. 
D) The disposal of the financing segment of a large corporation would be reported as a discontinued operation. 
A) Gains and losses on the sale of plant assets are reported as discontinued operations. 
B) A loss on discontinued operations is reported with an addition for the applicable income tax. 
C) Most analysts include the results of discontinued operations in financial analysis. 
D) The disposal of the financing segment of a large corporation would be reported as a discontinued operation.

Question 8

Which of the following best describes trend analysis?

Accepted Answer

A) calculating key ratios to evaluate performance 
B) expressing each financial statement amount as a percentage of a budgeted amount 
C) comparing a company's financial statements with that of other companies 
D) expressing each year's financial statement amounts as a percentage of the base year amounts 
A) calculating key ratios to evaluate performance 
B) expressing each financial statement amount as a percentage of a budgeted amount 
C) comparing a company's financial statements with that of other companies 
D) expressing each year's financial statement amounts as a percentage of the base year amounts

Question 9

When performing vertical analysis of a balance sheet,the base amount is ________.

Accepted Answer

A) total assets 
B) total cash and cash equivalents 
C) net income 
D) gross profit 
A) total assets 
B) total cash and cash equivalents 
C) net income 
D) gross profit

Question 10

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 11

Working capital measures a business's ability to meet its long-term obligations with its current assets.

Accepted Answer

A) True 
 B)False

Question 12

Wilson,Inc.provides the following data:

Calculate accounts receivable turnover ratio form 2017.(Round your answer to two decimal places. )

Accepted Answer

A) 4.80 times 
B) 3.85 times 
C) 2.82 times 
D) 2.22 times 
A) 4.80 times 
B) 3.85 times 
C) 2.82 times 
D) 2.22 times

Question 13

A high times-interest-earned ratio indicates difficulty in paying interest expense.

Accepted Answer

A) True 
 B)False

Question 14

Shelcal,Inc.provides the following data for the year 2017:
 
The cost of goods sold as a percentage of net sales revenue is ________.(Round your answer to two decimal places. )

Accepted Answer

A) 62.45% 
B) 62.58% 
C) 61.90% 
D) 62.24% 
A) 62.45% 
B) 62.58% 
C) 61.90% 
D) 62.24%

Question 15

Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year.

Accepted Answer

A) True 
 B)False

Question 16

Extraordinary items are both unusual and infrequent in nature.

Accepted Answer

A) True 
 B)False

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

A company reports total assets of $920,000 and stockholders' equity of $520,000.Calculate the debt ratio.(Round your answer to two decimal places. )

Accepted Answer

A) 36.11% 
B) 43.48% 
C) 56.52% 
D) 76.92% 
A) 36.11% 
B) 43.48% 
C) 56.52% 
D) 76.92%

Question 19

A company that reports a discontinued operation or an extraordinary item must also report earnings per share for each of these line items.

Accepted Answer

A) True 
 B)False

Question 20

If the debt ratio is too high,the company may be unable to pay its debts.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Statement Analysis

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

The relationship between total liabilities and total assets is the ________.

What is a common-size statement? Why are these statements useful?

If inventory turnover is too slow,a company may be unable to sell goods or it may be understating merchandise inventory.

Merchandise inventory and prepaid expenses are excluded from the acid-test ratio.

A horizontal analysis would be used if an analyst wants to see how the assets of a company have changed from one year to the next.

Regarding discontinued operations,which of the following statements is correct?

Which of the following best describes trend analysis?

When performing vertical analysis of a balance sheet,the base amount is ________.

The income statement is also known as the ________.

Working capital measures a business's ability to meet its long-term obligations with its current assets.

Wilson,Inc.provides the following data: Calculate accounts receivable turnover ratio form 2017.(Round your answer to two decimal places. )

A high times-interest-earned ratio indicates difficulty in paying interest expense.

Shelcal,Inc.provides the following data for the year 2017: The cost of goods sold as a percentage of net sales revenue is ________.(Round your answer to two decimal places. )

Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year.

Extraordinary items are both unusual and infrequent in nature.

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

A company reports total assets of $920,000 and stockholders' equity of $520,000.Calculate the debt ratio.(Round your answer to two decimal places. )

A company that reports a discontinued operation or an extraordinary item must also report earnings per share for each of these line items.

If the debt ratio is too high,the company may be unable to pay its debts.

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

Filters