Question 1

Discontinued operations and extraordinary items are reported without consideration of the income tax effects.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following best describes horizontal analysis?

Accepted Answer

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

Question 3

A corporation has 3,000 shares,10% preferred stock of $50.00 par preferred stock,and 6,000 shares of common stock outstanding.The net income for the year is $290,000.Calculate earnings per share.(Round your answer to the nearest cent. )

Accepted Answer

A) $50.00 
B) $45.83 
C) $48.33 
D) $96.67 
A) $50.00 
B) $45.83 
C) $48.33 
D) $96.67

Question 4

Which of the following statements is true for leverage?

Accepted Answer

A) asset turnover ratio measures financial leverage 
B) leverage always increases profitability 
C) leverage is shown in proportion of total assets relative to total equity 
D) the higher the debt to equity ratio,the higher the leverage 
A) asset turnover ratio measures financial leverage 
B) leverage always increases profitability 
C) leverage is shown in proportion of total assets relative to total equity 
D) the higher the debt to equity ratio,the higher the leverage

Question 5

The cash ratio helps to determine a company's ability to meet its short-term obligations using cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 6

Prepare a vertical analysis for the balance sheet data given below.(Round to two decimal places. )
   
Assets
Current Assets:
   
Liabilities
Current Liabilities:
   
Stockholders' Equity

Accepted Answer

@#IMG-DLM& 
Assets
Current Ass

Question 7

The trend analysis report of Marshall,Inc.is given below (in millions):
 
Which of the following is a correct conclusion from the above analysis?

Accepted Answer

A) Net income for 2016 has increased by 115% over that for 2014. 
B) Net income for 2016 has decreased by 15% over that for 2014. 
C) Net income for 2016 has decreased by 115% over that for 2014. 
D) Net income for 2016 has increased by 15% over that for 2014. 
A) Net income for 2016 has increased by 115% over that for 2014. 
B) Net income for 2016 has decreased by 15% over that for 2014. 
C) Net income for 2016 has decreased by 115% over that for 2014. 
D) Net income for 2016 has increased by 15% over that for 2014.

Question 8

Which of the following statements,regarding the management's discussion and analysis (MD&A)part of the annual report is not correct?

Accepted Answer

A) Investors are not interested in the MD&A because it is written by the company and could present a biased view of the company's financial condition and result. 
B) It often contains information that is not found in the financial data. 
C) It provides forward-looking formation. 
D) The MD&A is the company's attempt to explain its financial statements and to discuss its performance. 
A) Investors are not interested in the MD&A because it is written by the company and could present a biased view of the company's financial condition and result. 
B) It often contains information that is not found in the financial data. 
C) It provides forward-looking formation. 
D) The MD&A is the company's attempt to explain its financial statements and to discuss its performance.

Question 9

Empire Moving Company reported the following amounts on its balance sheet as of December 31,2016 and December 31,2017:
 
For the vertical analysis,what is the percentage of total liabilities for December 31,2016? (Round your answer to two decimal places. )

Accepted Answer

A) 100.00% 
B) 41.52% 
C) 36.26% 
D) 41.18% 
A) 100.00% 
B) 41.52% 
C) 36.26% 
D) 41.18%

Question 10

Newbury Office Supply reported the following gross profit percentages: 2014: 37.5%;2015: 36.2%;2016: 20.8%.The industry average is 35%.What are some possible reasons for the decline in 2016?

Accepted Answer

Possible reasons include: There could be

Question 11

The financial statements for Myers Service Company include the following items:
 
Compute the acid-test ratio for 2016.(Round your answer to two decimal places)

Accepted Answer

A) 0.96 
B) 0.78 
C) 0.86 
D) 0.69 
A) 0.96 
B) 0.78 
C) 0.86 
D) 0.69

Question 12

The debt ratio is the ratio of total debt divided by total equity.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is used to determine how the sales revenue of a company has changed from one year to the next?

Accepted Answer

A) vertical analysis of the balance sheet 
B) horizontal analysis of the income statement 
C) horizontal analysis of the balance sheet 
D) vertical analysis of the income statement 
A) vertical analysis of the balance sheet 
B) horizontal analysis of the income statement 
C) horizontal analysis of the balance sheet 
D) vertical analysis of the income statement

Question 14

Analysts look for red flags in financial statements that may signal financial trouble.Which of the following is a red flag that suggests that a company may be in trouble?

Accepted Answer

A) a significant increase in net income for several years in a row 
B) a consistent movement in sales,merchandise inventory,and accounts receivable 
C) a reduction in the debt ratio 
D) operating activities as is a major source of cash flows 
A) a significant increase in net income for several years in a row 
B) a consistent movement in sales,merchandise inventory,and accounts receivable 
C) a reduction in the debt ratio 
D) operating activities as is a major source of cash flows

Question 15

Zebra,Inc.cost of goods sold for the year is $2,300,000,and the average merchandise inventory for the year is $130,000.Calculate the inventory turnover ratio of the company.(Round your answer to two decimal places. )

Accepted Answer

A) 5.65 times 
B) 17.69 times 
C) 8.85 times 
D) 9.43 times 
A) 5.65 times 
B) 17.69 times 
C) 8.85 times 
D) 9.43 times

Question 16

Prepare a vertical analysis of the income statement shown below.(Round to two decimal places. )

Operating Expenses:
   
Other Revenues and (Expenses):

Accepted Answer

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 @#IMG-DLM& 
 @#IMG-DLM& 
Operating Ex

Question 17

Which of the following items is a measure of a company's ability to collect receivables?

Accepted Answer

A) inventory turnover ratio 
B) current ratio 
C) days' sales in receivables 
D) account receivable balance 
A) inventory turnover ratio 
B) current ratio 
C) days' sales in receivables 
D) account receivable balance

Question 18

The following is summary of information presented on the financial statements of a company on December 31,2017.
 
With respect to current liabilities,a horizontal analysis reveals ________.(Round your answer to two decimal places. )

Accepted Answer

A) that current liabilities are 37.98% of total equity 
B) a 38.60% increase in current liabilities 
C) a current ratio of 0.87 
D) a 27.85% increase in current liabilities 
A) that current liabilities are 37.98% of total equity 
B) a 38.60% increase in current liabilities 
C) a current ratio of 0.87 
D) a 27.85% increase in current liabilities

Question 19

The financial statements of Clearwater Furniture Company include the following items:
 
What is 2017 cash ratio? (Round your answer to two decimal places)

Accepted Answer

A) 0.21 
B) 0.12 
C) 0.39 
D) 0.27 
A) 0.21 
B) 0.12 
C) 0.39 
D) 0.27

Question 20

Use the following to calculate the inventory turnover ratio for the year 2017.

Accepted Answer

Inventory turnover ratio = Cos

Exam 17: Financial Statement Analysis

Discontinued operations and extraordinary items are reported without consideration of the income tax effects.

Which of the following best describes horizontal analysis?

A corporation has 3,000 shares,10% preferred stock of $50.00 par preferred stock,and 6,000 shares of common stock outstanding.The net income for the year is $290,000.Calculate earnings per share.(Round your answer to the nearest cent. )

Which of the following statements is true for leverage?

The cash ratio helps to determine a company's ability to meet its short-term obligations using cash and cash equivalents.

Prepare a vertical analysis for the balance sheet data given below.(Round to two decimal places. ) Assets Current Assets: Liabilities Current Liabilities: Stockholders' Equity

The trend analysis report of Marshall,Inc.is given below (in millions): Which of the following is a correct conclusion from the above analysis?

Which of the following statements,regarding the management's discussion and analysis (MD&A)part of the annual report is not correct?

Empire Moving Company reported the following amounts on its balance sheet as of December 31,2016 and December 31,2017: For the vertical analysis,what is the percentage of total liabilities for December 31,2016? (Round your answer to two decimal places. )

Newbury Office Supply reported the following gross profit percentages: 2014: 37.5%;2015: 36.2%;2016: 20.8%.The industry average is 35%.What are some possible reasons for the decline in 2016?

The financial statements for Myers Service Company include the following items: Compute the acid-test ratio for 2016.(Round your answer to two decimal places)

The debt ratio is the ratio of total debt divided by total equity.

Which of the following is used to determine how the sales revenue of a company has changed from one year to the next?

Analysts look for red flags in financial statements that may signal financial trouble.Which of the following is a red flag that suggests that a company may be in trouble?

Zebra,Inc.cost of goods sold for the year is $2,300,000,and the average merchandise inventory for the year is $130,000.Calculate the inventory turnover ratio of the company.(Round your answer to two decimal places. )

Prepare a vertical analysis of the income statement shown below.(Round to two decimal places. ) Operating Expenses: Other Revenues and (Expenses):

Which of the following items is a measure of a company's ability to collect receivables?

The following is summary of information presented on the financial statements of a company on December 31,2017. With respect to current liabilities,a horizontal analysis reveals ________.(Round your answer to two decimal places. )

The financial statements of Clearwater Furniture Company include the following items: What is 2017 cash ratio? (Round your answer to two decimal places)

Use the following to calculate the inventory turnover ratio for the year 2017.

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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