Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The times-interest-earned ratio measures the number of times earnings before interest and taxes can cover interest expense.

Accepted Answer

A) True 
 B)False

Question 3

What is an annual report? Briefly describe the key parts of the annual report.

Accepted Answer

An annual report (10-K)is a report requi

Question 4

An annual report provides information about a company's financial condition.

Accepted Answer

A) True 
 B)False

Question 5

An adverse opinion is issued if the auditor finds that the financial statements are not presented fairly.

Accepted Answer

A) True 
 B)False

Question 6

Income from continuing operations includes ________.

Accepted Answer

A) extraordinary losses but not extraordinary gains 
B) gains and losses from discontinued operations 
C) the taking of company assets by a foreign government 
D) losses due to labor strikes 
A) extraordinary losses but not extraordinary gains 
B) gains and losses from discontinued operations 
C) the taking of company assets by a foreign government 
D) losses due to labor strikes

Question 7

The profit margin ratio ________.

Accepted Answer

A) focuses on the liquidity of the business 
B) is computed by dividing net sales by net income 
C) shows how much gross profit a business earns on every $1.00 of sales 
D) is often compared to the industry average 
A) focuses on the liquidity of the business 
B) is computed by dividing net sales by net income 
C) shows how much gross profit a business earns on every $1.00 of sales 
D) is often compared to the industry average

Question 8

In regards to extraordinary items,which of the following statements is not correct?

Accepted Answer

A) Losses due to lawsuits do not qualify as extraordinary. 
B) An extraordinary gain is reported the same as a loss - net of the income tax effect. 
C) Taking of a company assets by a foreign government are generally considered to be extraordinary items. 
D) Extraordinary items are reported separately from continuing operations because of their infrequent and unusual nature. 
A) Losses due to lawsuits do not qualify as extraordinary. 
B) An extraordinary gain is reported the same as a loss - net of the income tax effect. 
C) Taking of a company assets by a foreign government are generally considered to be extraordinary items. 
D) Extraordinary items are reported separately from continuing operations because of their infrequent and unusual nature.

Question 9

Coleman,Inc.provides the following data from its income statement for 2017:
 
Calculate the gross profit percentage.(Round your answer to two decimal places. )

Accepted Answer

A) 25.00% 
B) 71.43% 
C) 100.00% 
D) 28.57% 
A) 25.00% 
B) 71.43% 
C) 100.00% 
D) 28.57%

Question 10

A quarterly report filed with the Securities and Exchange Commission is called a Form 10-K.

Accepted Answer

A) True 
 B)False

Question 11

Unexpected or inconsistent movements among sales,merchandise inventory,and receivables reflect normal market conditions and do not pose red flags in financial statements.

Accepted Answer

A) True 
 B)False

Question 12

The price/earnings ratio shows the ________.

Accepted Answer

A) dividend yield of the company 
B) market price of $1 of earnings 
C) proportion of total assets financed by debt 
D) value that the stock market places on the dividends paid by the company 
A) dividend yield of the company 
B) market price of $1 of earnings 
C) proportion of total assets financed by debt 
D) value that the stock market places on the dividends paid by the company

Question 13

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

Accepted Answer

A) Net income for 2018 is 168% of that for 2014. 
B) Net income for 2017 is 152% of the previous year. 
C) Net income for 2017 decreased by 152% from 2016. 
D) Net income for 2018 increased by 168% from 2017. 
A) Net income for 2018 is 168% of that for 2014. 
B) Net income for 2017 is 152% of the previous year. 
C) Net income for 2017 decreased by 152% from 2016. 
D) Net income for 2018 increased by 168% from 2017.

Question 14

Partridge,Inc.provides the following information for 2017:
 
The company has no preferred stock outstanding.Calculate the dividend yield for common stock.(Round your answer to two decimal places. )

Accepted Answer

A) 5.00% 
B) 1.67% 
C) 3.33% 
D) 5.26% 
A) 5.00% 
B) 1.67% 
C) 3.33% 
D) 5.26%

Question 15

The dividend yield provides information for both common and preferred stockholders.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) Benchmarking is the practice of comparing a company with other leading companies. 
B) The industry average is not a useful benchmark for evaluating a company. 
C) Providing common-size percentages in a graphical manner highlights differences. 
D) The two main types of benchmarks in financial statement analysis include benchmarking against the industry average and benchmarking against a key competitor. 
A) Benchmarking is the practice of comparing a company with other leading companies. 
B) The industry average is not a useful benchmark for evaluating a company. 
C) Providing common-size percentages in a graphical manner highlights differences. 
D) The two main types of benchmarks in financial statement analysis include benchmarking against the industry average and benchmarking against a key competitor.

Question 17

Normally,companies with low gross profit percentages will have low asset turnover.

Accepted Answer

A) True 
 B)False

Question 18

A common-size statement reports the same percentages that appear in a vertical analysis.

Accepted Answer

A) True 
 B)False

Question 19

Barn Owl,Inc.reported the following data:
 
The horizontal analysis shows that the amount of total liabilities has __________.

Accepted Answer

A) increased by $22,500 
B) increased by $2,400 
C) decreased by $2,400 
D) increased by $23,700 
A) increased by $22,500 
B) increased by $2,400 
C) decreased by $2,400 
D) increased by $23,700

Question 20

The asset turnover ratio is a way to evaluate how well a company can pay its short-term liabilities.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Statement Analysis

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

The times-interest-earned ratio measures the number of times earnings before interest and taxes can cover interest expense.

What is an annual report? Briefly describe the key parts of the annual report.

An annual report provides information about a company's financial condition.

An adverse opinion is issued if the auditor finds that the financial statements are not presented fairly.

Income from continuing operations includes ________.

The profit margin ratio ________.

In regards to extraordinary items,which of the following statements is not correct?

Coleman,Inc.provides the following data from its income statement for 2017: Calculate the gross profit percentage.(Round your answer to two decimal places. )

A quarterly report filed with the Securities and Exchange Commission is called a Form 10-K.

Unexpected or inconsistent movements among sales,merchandise inventory,and receivables reflect normal market conditions and do not pose red flags in financial statements.

The price/earnings ratio shows the ________.

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

Partridge,Inc.provides the following information for 2017: The company has no preferred stock outstanding.Calculate the dividend yield for common stock.(Round your answer to two decimal places. )

The dividend yield provides information for both common and preferred stockholders.

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

Normally,companies with low gross profit percentages will have low asset turnover.

A common-size statement reports the same percentages that appear in a vertical analysis.

Barn Owl,Inc.reported the following data: The horizontal analysis shows that the amount of total liabilities has __________.

The asset turnover ratio is a way to evaluate how well a company can pay its short-term liabilities.

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