Question 1

After revenue,the next two important earnings-quality components are:

Accepted Answer

A) cost of goods sold and the resulting gross profit. 
B) operating expenses and the resulting net income. 
C) cost of goods sold and the resulting net income. 
D) operating expenses and the resulting total costs. 
A) cost of goods sold and the resulting gross profit. 
B) operating expenses and the resulting net income. 
C) cost of goods sold and the resulting net income. 
D) operating expenses and the resulting total costs.

Question 2

When computing trend percentages:

Accepted Answer

A) the current year is always equal to 100%. 
B) the base year is always the current year. 
C) the base year is always equal to 100%. 
D) the base year is equal to the current year plus the previous year divided by two. 
A) the current year is always equal to 100%. 
B) the base year is always the current year. 
C) the base year is always equal to 100%. 
D) the base year is equal to the current year plus the previous year divided by two.

Question 3

A type of analysis that indicates the direction a business is taking is:

Accepted Answer

A) benchmarking. 
B) current ratio. 
C) vertical analysis. 
D) trend percentages. 
A) benchmarking. 
B) current ratio. 
C) vertical analysis. 
D) trend percentages.

Question 4

XYZ Company has an inventory turnover of 20 times per year.The industry average is 5.0 times per year.What does a high inventory turnover mean?

Accepted Answer

A) The company has too much inventory on hand. 
B) The company may have obsolete inventory on hand. 
C) The company may not be keeping enough inventory on hand which can lead to lost sales. 
D) The company is having a difficult time selling the inventory. 
A) The company has too much inventory on hand. 
B) The company may have obsolete inventory on hand. 
C) The company may not be keeping enough inventory on hand which can lead to lost sales. 
D) The company is having a difficult time selling the inventory.

Question 5

To compute the gross (profit)margin percentage,divide:

Accepted Answer

A) sales by cost of goods sold. 
B) gross (profit)margin by net sales. 
C) net income by stockholders' equity. 
D) operating income by net sales. 
A) sales by cost of goods sold. 
B) gross (profit)margin by net sales. 
C) net income by stockholders' equity. 
D) operating income by net sales.

Question 6

To stockholders,the larger the net income,the greater the likelihood of dividends.

Accepted Answer

A) True 
 B)False

Question 7

The ratio that measures the number of times that operating income can cover interest expense is the:

Accepted Answer

A) leverage. 
B) rate of return on total assets. 
C) debt ratio. 
D) times-interest-earned ratio. 
A) leverage. 
B) rate of return on total assets. 
C) debt ratio. 
D) times-interest-earned ratio.

Question 8

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

Accepted Answer

A) True 
 B)False

Question 9

In general,the larger the working capital,the better the ability to pay debts.

Accepted Answer

A) True 
 B)False

Question 10

Carey's Department Store had net sales of $20 million and cost of goods sold of $16 million for the year.The beginning inventory for the year was $3 million.The ending inventory for the year was $5 million.What was the days' inventory outstanding? (Round any intermediary calculations to two decimal places and your final answer to the nearest day. )

Accepted Answer

A) 23 days 
B) 122 days 
C) 91 days 
D) 73 days 
A) 23 days 
B) 122 days 
C) 91 days 
D) 73 days

Question 11

A trend of high and persistently improving operating earnings in relation to a company's net sales reflects increasing earnings quality.

Accepted Answer

A) True 
 B)False

Question 12

In performing vertical analysis,the base for inventory is:

Accepted Answer

A) total stockholders' equity. 
B) total assets. 
C) total cash and cash equivalents. 
D) total current assets. 
A) total stockholders' equity. 
B) total assets. 
C) total cash and cash equivalents. 
D) total current assets.

Question 13

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

Accepted Answer

A) benchmarking. 
B) common-size statement. 
C) horizontal analysis. 
D) financial ratio analysis. 
A) benchmarking. 
B) common-size statement. 
C) horizontal analysis. 
D) financial ratio analysis.

Question 14

With regard to DuPont analysis,the leverage ratio measures:

Accepted Answer

A) the impact of equity financing on a company's profitability. 
B) the impact of debt financing on a company's profitability. 
C) the impact of leverage on a company's financial position. 
D) the impact of equity financing on a company's financial position. 
A) the impact of equity financing on a company's profitability. 
B) the impact of debt financing on a company's profitability. 
C) the impact of leverage on a company's financial position. 
D) the impact of equity financing on a company's financial position.

Question 15

When comparing companies of different sizes,vertical analysis is a useful tool.

Accepted Answer

A) True 
 B)False

Question 16

A financial statement line item expressed as a percentage of a base amount is a result of:

Accepted Answer

A) horizontal analysis. 
B) economic value added. 
C) vertical analysis. 
D) comparative analysis. 
A) horizontal analysis. 
B) economic value added. 
C) vertical analysis. 
D) comparative analysis.

Question 17

When performing a vertical analysis of the income statement,each line item is stated as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 18

Prepare a vertical analysis for Katrina Corporation using the information shown below.Round percentages to one decimal place.

Accepted Answer

The answer of Prepare a vertical analysis for Katrina Corporation...

Question 19

All public companies are required to have their financial statements audited ________ by a firm of independent certified public accountants.

Accepted Answer

A) monthly. 
B) quarterly. 
C) yearly. 
D) whenever financials are prepared. 
A) monthly. 
B) quarterly. 
C) yearly. 
D) whenever financials are prepared.

Question 20

All revenue should be recorded conservatively and clearly,and:

Accepted Answer

A) recorded only when cash is collected. 
B) quickly. 
C) faithfully represent the facts. 
D) All of the above. 
A) recorded only when cash is collected. 
B) quickly. 
C) faithfully represent the facts. 
D) All of the above.

After revenue,the next two important earnings-quality components are:

When computing trend percentages:

A type of analysis that indicates the direction a business is taking is:

XYZ Company has an inventory turnover of 20 times per year.The industry average is 5.0 times per year.What does a high inventory turnover mean?

To compute the gross (profit)margin percentage,divide:

To stockholders,the larger the net income,the greater the likelihood of dividends.

The ratio that measures the number of times that operating income can cover interest expense is the:

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

In general,the larger the working capital,the better the ability to pay debts.

A trend of high and persistently improving operating earnings in relation to a company's net sales reflects increasing earnings quality.

In performing vertical analysis,the base for inventory is:

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

With regard to DuPont analysis,the leverage ratio measures:

When comparing companies of different sizes,vertical analysis is a useful tool.

A financial statement line item expressed as a percentage of a base amount is a result of:

When performing a vertical analysis of the income statement,each line item is stated as a percentage of net income.

Prepare a vertical analysis for Katrina Corporation using the information shown below.Round percentages to one decimal place.

All public companies are required to have their financial statements audited ________ by a firm of independent certified public accountants.

All revenue should be recorded conservatively and clearly,and:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Investments

Time Value of Money

Filters

Exam 12: Financial Statement Analysis

After revenue,the next two important earnings-quality components are:

When computing trend percentages:

A type of analysis that indicates the direction a business is taking is:

XYZ Company has an inventory turnover of 20 times per year.The industry average is 5.0 times per year.What does a high inventory turnover mean?

To compute the gross (profit)margin percentage,divide:

To stockholders,the larger the net income,the greater the likelihood of dividends.

The ratio that measures the number of times that operating income can cover interest expense is the:

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

In general,the larger the working capital,the better the ability to pay debts.

A trend of high and persistently improving operating earnings in relation to a company's net sales reflects increasing earnings quality.

In performing vertical analysis,the base for inventory is:

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

With regard to DuPont analysis,the leverage ratio measures:

When comparing companies of different sizes,vertical analysis is a useful tool.

A financial statement line item expressed as a percentage of a base amount is a result of:

When performing a vertical analysis of the income statement,each line item is stated as a percentage of net income.

Prepare a vertical analysis for Katrina Corporation using the information shown below.Round percentages to one decimal place.

All public companies are required to have their financial statements audited ________ by a firm of independent certified public accountants.

All revenue should be recorded conservatively and clearly,and:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Investments

Time Value of Money

Filters