Question 1

The financial statements for Stephens' Electric Company include the following items:
 
Compute the 2016 cash ratio.(Round your answer to two decimal places. )

Accepted Answer

A) 1.31 
B) 1.05 
C) 1.94 
D) 0.61 
A) 1.31 
B) 1.05 
C) 1.94 
D) 0.61

Question 2

Which of the following is used to see how a company's operating expenses,as a percentage of net sales,have changed from one year to the next?

Accepted Answer

A) vertical analysis 
B) horizontal analysis 
C) ratio analysis 
D) analysis of internal control system 
A) vertical analysis 
B) horizontal analysis 
C) ratio analysis 
D) analysis of internal control system

Question 3

Olivera,Inc.provides the following data for 2017:
 
The gross profit as a percentage of net sales is ________.(Round your answer to two decimal places. )

Accepted Answer

A) 36.04% 
B) 37.92% 
C) 62.08% 
D) 39.09% 
A) 36.04% 
B) 37.92% 
C) 62.08% 
D) 39.09%

Question 4

Prepare a comparative common-size income statement for Marion,Inc.for 2017 and 2016 data.(Round percentages to one decimal place. )

Operating Expenses:
   
Other Revenues and (Expenses):

Accepted Answer

@#IMG-DLM& 
 @#IMG-DLM& 
Operating Expen

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

An external auditor is responsible for assessing the effectiveness of a company's internal controls.

Accepted Answer

A) True 
 B)False

Question 7

Use the balance sheet of Maine,Inc.to calculate the current ratio for 2017 and 2018
   
Assets
   
Liabilities
   
Stockholders' Equity

Accepted Answer

@#IMG-DLM&
Explanation:
Curren

Question 8

Which of the following is not a decision tool based on working capital?

Accepted Answer

A) cash ratio 
B) acid-test ratio 
C) current ratio 
D) dividend payout ratio 
A) cash ratio 
B) acid-test ratio 
C) current ratio 
D) dividend payout ratio

Question 9

A summary of significant accounting policies and explanations of specific items on the financial statements are included in ________.

Accepted Answer

A) the balance sheet 
B) the income statement 
C) the notes to financial statements 
D) the report of the independent registered public accounting firm 
A) the balance sheet 
B) the income statement 
C) the notes to financial statements 
D) the report of the independent registered public accounting firm

Question 10

The vertical analysis statement of Peterson,Inc.is as shown below:
 
The 20% shown for net income in 2017 signifies that net income ________.

Accepted Answer

A) is 20% of net sales revenues 
B) increased by 20% over the previous year 
C) is 20% of gross profit 
D) equals 20 times of the income before income tax 
A) is 20% of net sales revenues 
B) increased by 20% over the previous year 
C) is 20% of gross profit 
D) equals 20 times of the income before income tax

Question 11

The current ratio may indicate that the company is using its assets effectively.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Kelemen,Inc.provides the following information for 2017:
 
The company has no preferred stock outstanding.Calculate the price/earnings ratio of common stock.(Round any intermediate calculations and your final answer to two decimal places. )

Accepted Answer

A) 55.56 times 
B) 70.00 times 
C) 49.65 times 
D) 43.48 times 
A) 55.56 times 
B) 70.00 times 
C) 49.65 times 
D) 43.48 times

Question 14

Data for Sherman,Inc.are as follows:
   
Prepare a horizontal analysis of the comparative income statement of Sherman,Inc.(Round to one decimal place. )Use a multi-step income statement.

Accepted Answer

@#IMG-DLM& 
Operating Expenses

Question 15

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

Accepted Answer

A) Gain and losses on the sale of plant assets are not reported as discontinued operations. 
B) A loss on discontinued operations is reported with an addition for the applicable income tax. 
C) Most analysts do not include the results of discontinued operations in financial analysis. 
D) The discontinued operations heading of the income statement includes segments of the business that have been sold. 
A) Gain and losses on the sale of plant assets are not reported as discontinued operations. 
B) A loss on discontinued operations is reported with an addition for the applicable income tax. 
C) Most analysts do not include the results of discontinued operations in financial analysis. 
D) The discontinued operations heading of the income statement includes segments of the business that have been sold.

Question 16

Gains and losses on the normal sale of plant assets are reported as discontinued operations.

Accepted Answer

A) True 
 B)False

Question 17

The price/earnings ratio shows the market price of $1 of earnings.

Accepted Answer

A) True 
 B)False

Question 18

The net income of a company for the year was $570,000.The company has no preferred stock.Common stockholders' equity was $1,700,000 at the beginning of the year and $2,300,000 at the end of the year.Calculate the rate of return on common stockholders' equity.(Round your answer to two decimal places. )

Accepted Answer

A) 24.78% 
B) 19.86% 
C) 33.53% 
D) 28.50% 
A) 24.78% 
B) 19.86% 
C) 33.53% 
D) 28.50%

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 17: Financial Statement Analysis

The financial statements for Stephens' Electric Company include the following items: Compute the 2016 cash ratio.(Round your answer to two decimal places. )

Which of the following is used to see how a company's operating expenses,as a percentage of net sales,have changed from one year to the next?

Olivera,Inc.provides the following data for 2017: The gross profit as a percentage of net sales is ________.(Round your answer to two decimal places. )

Prepare a comparative common-size income statement for Marion,Inc.for 2017 and 2016 data.(Round percentages to one decimal place. ) Operating Expenses: Other Revenues and (Expenses):

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

An external auditor is responsible for assessing the effectiveness of a company's internal controls.

Use the balance sheet of Maine,Inc.to calculate the current ratio for 2017 and 2018 Assets Liabilities Stockholders' Equity

Which of the following is not a decision tool based on working capital?

A summary of significant accounting policies and explanations of specific items on the financial statements are included in ________.

The vertical analysis statement of Peterson,Inc.is as shown below: The 20% shown for net income in 2017 signifies that net income ________.

The current ratio may indicate that the company is using its assets effectively.

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

Kelemen,Inc.provides the following information for 2017: The company has no preferred stock outstanding.Calculate the price/earnings ratio of common stock.(Round any intermediate calculations and your final answer to two decimal places. )

Data for Sherman,Inc.are as follows: Prepare a horizontal analysis of the comparative income statement of Sherman,Inc.(Round to one decimal place. )Use a multi-step income statement.

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

Gains and losses on the normal sale of plant assets are reported as discontinued operations.

The price/earnings ratio shows the market price of $1 of earnings.

Annual reports ________.

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

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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