Question 1

Long-term creditors are usually most interested in evaluating:

Accepted Answer

A) Liquidity. 
B) Managerial effectiveness. 
C) Solvency. 
D) Profitability. 
A) Liquidity. 
B) Managerial effectiveness. 
C) Solvency. 
D) Profitability.

Question 2

Factor(s)involved in communicating useful information is (are):

Accepted Answer

A) Attributes of the users 
B) Purpose for which the information will be used 
C) Process by which the information is analyzed 
D) All of these answers are correct. 
A) Attributes of the users 
B) Purpose for which the information will be used 
C) Process by which the information is analyzed 
D) All of these answers are correct.

Question 3

Which of the following statements about financial statements is not true?

Accepted Answer

A) The net margin ratio is a profitability ratio. 
B) The current ratio is a liquidity ratio. 
C) The debt-to-assets ratio is a liquidity ratio. 
D) The dividend yield is a stock market ratio. 
A) The net margin ratio is a profitability ratio. 
B) The current ratio is a liquidity ratio. 
C) The debt-to-assets ratio is a liquidity ratio. 
D) The dividend yield is a stock market ratio.

Question 4

Two ratios that provide insight on the relationship between credit sales and receivables are:

Accepted Answer

A) Current ratio and inventory turnover ratio. 
B) Accounts receivable turnover and average days to collect receivables. 
C) Average days to collect receivables and asset turnover. 
D) Accounts receivable turnover and current ratio. 
A) Current ratio and inventory turnover ratio. 
B) Accounts receivable turnover and average days to collect receivables. 
C) Average days to collect receivables and asset turnover. 
D) Accounts receivable turnover and current ratio.

Question 5

Which of the following statements regarding the analysis of absolute amounts of various accounts reported on the financial statements is not true?

Accepted Answer

A) Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area. 
B) To correctly evaluate an absolute amount,the analyst must consider its relative importance. 
C) Economic statistics such as the gross national product are built upon totals of absolute amounts reported by businesses. 
D) Using absolute amounts eliminates the problem of varying materiality levels. 
A) Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area. 
B) To correctly evaluate an absolute amount,the analyst must consider its relative importance. 
C) Economic statistics such as the gross national product are built upon totals of absolute amounts reported by businesses. 
D) Using absolute amounts eliminates the problem of varying materiality levels.

Question 6

The study of an individual item or account over several periods in the same financial year or over many years is known as:

Accepted Answer

A) Liquidity analysis 
B) Ratio analysis 
C) Vertical analysis 
D) Horizontal analysis 
A) Liquidity analysis 
B) Ratio analysis 
C) Vertical analysis 
D) Horizontal analysis

Question 7

The Fortune Company reported the following income for Year 2:
 
What is the company's number of times interest is earned ratio?

Accepted Answer

A) 7 times 
B) 6 times 
C) 4 times 
D) None of these answers is correct. 
A) 7 times 
B) 6 times 
C) 4 times 
D) None of these answers is correct.

Question 8

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 purchased merchandise on account for $4,000.Which of the following statements is true?

Accepted Answer

A) Gant's current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will increase. 
D) Gant's quick ratio will increase and its current ratio will decrease. 
A) Gant's current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will increase. 
D) Gant's quick ratio will increase and its current ratio will decrease.

Question 9

In vertical analysis,each item is expressed as a percentage of:

Accepted Answer

A) Total expenses on the income statement. 
B) Net income on the income statement. 
C) Sales on the income statement. 
D) None of these answers is correct. 
A) Total expenses on the income statement. 
B) Net income on the income statement. 
C) Sales on the income statement. 
D) None of these answers is correct.

Question 10

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

Accepted Answer

A) True 
 B)False

Question 11

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 paid $3,600 on accounts payable.Which of the following statements is not true?

Accepted Answer

A) Gant's quick ratio will increase and its current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will remain the same. 
D) Gant's current ratio will increase. 
A) Gant's quick ratio will increase and its current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will remain the same. 
D) Gant's current ratio will increase.

Question 12

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

Accepted Answer

A) True 
 B)False

Question 13

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

Accepted Answer

A) Ratio analysis. 
B) Contribution analysis. 
C) Horizontal analysis. 
D) Vertical analysis. 
A) Ratio analysis. 
B) Contribution analysis. 
C) Horizontal analysis. 
D) Vertical analysis.

Question 14

Which ratio measures the percentage of a company's assets that are financed by debt?

Accepted Answer

A) Debt to assets ratio 
B) Asset turnover 
C) Debt to equity 
D) Return on investment 
A) Debt to assets ratio 
B) Asset turnover 
C) Debt to equity 
D) Return on investment

Question 15

The quick ratio although similar to the current ratio is more conservative.

Accepted Answer

A) True 
 B)False

Question 16

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 paid $250 for transportation-in cost on merchandise it had received.Which of the following statements is not true?

Accepted Answer

A) Gant's current ratio will remain the same. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will remain the same. 
D) Gant's quick ratio will decrease and its current ratio will remain the same. 
A) Gant's current ratio will remain the same. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will remain the same. 
D) Gant's quick ratio will decrease and its current ratio will remain the same.

Question 17

The following balance sheet information is provided for Apex Company for Year 2:
 
What is the company's working capital?

Accepted Answer

A) $24,500 
B) $20,300 
C) $4,900 
D) $22,900 
A) $24,500 
B) $20,300 
C) $4,900 
D) $22,900

Question 18

Which of the following is not included in the computation of the quick ratio?

Accepted Answer

A) Cash 
B) Prepaid expenses 
C) Accounts receivable 
D) Marketable securities 
A) Cash 
B) Prepaid expenses 
C) Accounts receivable 
D) Marketable securities

Question 19

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares.Preferred dividends total $12,000.On the most recent trading day,the preferred shares sold at $50 and the common shares sold at $95.What is this company's current price-earnings ratio?

Accepted Answer

A) 19 
B) 17 
C) 20 
D) None of these answers is correct. 
A) 19 
B) 17 
C) 20 
D) None of these answers is correct.

Question 20

Common methods of financial statement analysis include all of the following except:

Accepted Answer

A) Incremental analysis. 
B) Horizontal analysis. 
C) Vertical analysis. 
D) Ratio analysis. 
A) Incremental analysis. 
B) Horizontal analysis. 
C) Vertical analysis. 
D) Ratio analysis.

Long-term creditors are usually most interested in evaluating:

Factor(s)involved in communicating useful information is (are):

Which of the following statements about financial statements is not true?

Two ratios that provide insight on the relationship between credit sales and receivables are:

Which of the following statements regarding the analysis of absolute amounts of various accounts reported on the financial statements is not true?

The study of an individual item or account over several periods in the same financial year or over many years is known as:

The Fortune Company reported the following income for Year 2: What is the company's number of times interest is earned ratio?

In vertical analysis,each item is expressed as a percentage of:

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

Which ratio measures the percentage of a company's assets that are financed by debt?

The quick ratio although similar to the current ratio is more conservative.

The following balance sheet information is provided for Apex Company for Year 2: What is the company's working capital?

Which of the following is not included in the computation of the quick ratio?

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares.Preferred dividends total $12,000.On the most recent trading day,the preferred shares sold at $50 and the common shares sold at $95.What is this company's current price-earnings ratio?

Common methods of financial statement analysis include all of the following except:

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

Long-term creditors are usually most interested in evaluating:

Factor(s)involved in communicating useful information is (are):

Which of the following statements about financial statements is not true?

Two ratios that provide insight on the relationship between credit sales and receivables are:

Which of the following statements regarding the analysis of absolute amounts of various accounts reported on the financial statements is not true?

The study of an individual item or account over several periods in the same financial year or over many years is known as:

The Fortune Company reported the following income for Year 2: What is the company's number of times interest is earned ratio?

In vertical analysis,each item is expressed as a percentage of:

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

Which ratio measures the percentage of a company's assets that are financed by debt?

The quick ratio although similar to the current ratio is more conservative.

The following balance sheet information is provided for Apex Company for Year 2: What is the company's working capital?

Which of the following is not included in the computation of the quick ratio?

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares.Preferred dividends total $12,000.On the most recent trading day,the preferred shares sold at $50 and the common shares sold at $95.What is this company's current price-earnings ratio?

Common methods of financial statement analysis include all of the following except:

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Filters