Question 1

A "big bath"

Accepted Answer

A) often occurs in years when there is a change in management. 
B) occurs in the current year so management can show improved results in future years. 
C) is often an indication of poor management decisions in the past. 
D) All of these choices. 
A) often occurs in years when there is a change in management. 
B) occurs in the current year so management can show improved results in future years. 
C) is often an indication of poor management decisions in the past. 
D) All of these choices.

Question 2

Cash flow yield is a

Accepted Answer

A) liquidity ratio. 
B) profitability ratio. 
C) long-term solvency ratio. 
D) market strength ratio. 
A) liquidity ratio. 
B) profitability ratio. 
C) long-term solvency ratio. 
D) market strength ratio.

Question 3

In general,the greater the investment risk taken,the higher the return required as compensation.

Accepted Answer

A) True 
 B)False

Question 4

What is the best way to study the relationship of the components of financial statements?

Accepted Answer

A) Perform ratio analysis. 
B) Perform trend analysis. 
C) Perform horizontal analysis. 
D) Prepare common-size statements. 
A) Perform ratio analysis. 
B) Perform trend analysis. 
C) Perform horizontal analysis. 
D) Prepare common-size statements.

Question 5

The calculation of free cash flow contains a deduction for

Accepted Answer

A) interest expense. 
B) depreciation. 
C) net capital expenditures. 
D) net cash flows from operating activities. 
A) interest expense. 
B) depreciation. 
C) net capital expenditures. 
D) net cash flows from operating activities.

Question 6

Using the following information from an annual report,prepare a vertical analysis of the consolidated balance sheet at June 30,20x5.(Round percentage answers to one decimal place. )

Accepted Answer

The answer of Using the following information from an annual...

Question 7

An example of vertical analysis is

Accepted Answer

A) common-size statements. 
B) trend analysis. 
C) ratio analysis. 
D) profitability analysis. 
A) common-size statements. 
B) trend analysis. 
C) ratio analysis. 
D) profitability analysis.

Question 8

Common-size statements are useful in assessing the changes in the composition of statements over time.

Accepted Answer

A) True 
 B)False

Question 9

A change from FIFO to LIFO in a period of rising prices will

Accepted Answer

A) decrease both the current ratio and the inventory turnover ratio. 
B) increase both the current ratio and the inventory turnover ratio. 
C) increase the current ratio and decrease the inventory turnover ratio. 
D) decrease the current ratio and increase the inventory turnover ratio. 
A) decrease both the current ratio and the inventory turnover ratio. 
B) increase both the current ratio and the inventory turnover ratio. 
C) increase the current ratio and decrease the inventory turnover ratio. 
D) decrease the current ratio and increase the inventory turnover ratio.

Question 10

The following selected amounts were extracted from the financial statements of Luca Corporation.
  Compute the following for net sales,cost of goods sold,and gross margin.(Round answers to one decimal place. )
a.The percentage change from Year 1 to Year 2
b.The percentage change from Year 2 to Year 3
c.The percentage change from Year 3 to Year 4

Accepted Answer

The answer of The following selected amounts were extracted from...

Question 11

The choice of accounting methods does not affect cash flows except for possible differences in income taxes.

Accepted Answer

A) True 
 B)False

Question 12

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures.    
-What is the current ratio for this corporation? Round your answer to two decimal places.

Accepted Answer

A) 0.66 times 
B) 1.50 times 
C) 1.70 times 
D) 2.00 times 
A) 0.66 times 
B) 1.50 times 
C) 1.70 times 
D) 2.00 times

Question 13

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.

Accepted Answer

The answer of Using the income statement below,develop a common-size...

Question 14

The length of the operating cycle equals the days' sales uncollected plus the

Accepted Answer

A) days' payable. 
B) days' inventory on hand. 
C) receivable turnover. 
D) payables turnover. 
A) days' payable. 
B) days' inventory on hand. 
C) receivable turnover. 
D) payables turnover.

Question 15

Which of the following describes the return on assets ratio?

Accepted Answer

A) Average total assets divided by sales 
B) Net sales divided by net income 
C) Net income divided by average total assets 
D) Average total assets divided by net income 
A) Average total assets divided by sales 
B) Net sales divided by net income 
C) Net income divided by average total assets 
D) Average total assets divided by net income

Question 16

It is possible for horizontal analysis to indicate an increase in revenues from one year to another and a decrease in net income.

Accepted Answer

A) True 
 B)False

Question 17

A general rule in choosing among alternative investments is the greater the risk taken,the

Accepted Answer

A) greater the return required. 
B) lower the potential expected. 
C) greater the price of the investment. 
D) lower the profits expected. 
A) greater the return required. 
B) lower the potential expected. 
C) greater the price of the investment. 
D) lower the profits expected.

Question 18

Holiday Corporation provided these figures for the year ended December 31,20x5: Cost of goods sold,$516,117;change in inventory,$67,483 decrease;average accounts payable,$58,209.
What is the company's payables turnover? Round your answer to one decimal place.

Accepted Answer

A) 8.3 times 
B) 7.7 times 
C) 10.1 times 
D) 7.2 times 
A) 8.3 times 
B) 7.7 times 
C) 10.1 times 
D) 7.2 times

Question 19

During the year,Dempsey Corporation's current ratio increased while its quick ratio decreased.Which of the following could help explain this situation?

Accepted Answer

A) A decrease in accounts receivable during the year 
B) An increase in accounts payable during the year 
C) The sale of short-term investments during the year 
D) An increase in inventory levels during the year 
A) A decrease in accounts receivable during the year 
B) An increase in accounts payable during the year 
C) The sale of short-term investments during the year 
D) An increase in inventory levels during the year

Question 20

A primary purpose of vertical analysis is to observe trends over a five-year period.

Accepted Answer

A) True 
 B)False

Exam 14: Financial Statement Analysis

A "big bath"

Cash flow yield is a

In general,the greater the investment risk taken,the higher the return required as compensation.

What is the best way to study the relationship of the components of financial statements?

The calculation of free cash flow contains a deduction for

Using the following information from an annual report,prepare a vertical analysis of the consolidated balance sheet at June 30,20x5.(Round percentage answers to one decimal place. )

An example of vertical analysis is

Common-size statements are useful in assessing the changes in the composition of statements over time.

A change from FIFO to LIFO in a period of rising prices will

The choice of accounting methods does not affect cash flows except for possible differences in income taxes.

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures. -What is the current ratio for this corporation? Round your answer to two decimal places.

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.

The length of the operating cycle equals the days' sales uncollected plus the

Which of the following describes the return on assets ratio?

It is possible for horizontal analysis to indicate an increase in revenues from one year to another and a decrease in net income.

A general rule in choosing among alternative investments is the greater the risk taken,the

Holiday Corporation provided these figures for the year ended December 31,20x5: Cost of goods sold,$516,117;change in inventory,$67,483 decrease;average accounts payable,$58,209. What is the company's payables turnover? Round your answer to one decimal place.

During the year,Dempsey Corporation's current ratio increased while its quick ratio decreased.Which of the following could help explain this situation?

A primary purpose of vertical analysis is to observe trends over a five-year period.

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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