Question 1

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 2

A quick ratio that is about equal to the current ratio indicates that

Accepted Answer

A) inventories represent a large portion of current assets. 
B) the company has a low inventory turnover. 
C) inventories represent a small portion of current assets. 
D) the company has a high inventory turnover. 
A) inventories represent a large portion of current assets. 
B) the company has a low inventory turnover. 
C) inventories represent a small portion of current assets. 
D) the company has a high inventory turnover.

Question 3

The following information pertains to Patterson Corporation.Assume that all balance sheet amounts represent both average and ending figures.  
  Patterson Corporation had 6,000 shares of common stock issued and outstanding.The market price of Patterson common stock on December 31,20x5,was $20.Patterson paid dividends of $0.90 per share during 20x5.
-What is the return on assets for this corporation? Round your answer to 1 decimal place.

Accepted Answer

A) 5.0 percent 
B) 10.0 percent 
C) 11.7 percent 
D) 26.7 percent 
A) 5.0 percent 
B) 10.0 percent 
C) 11.7 percent 
D) 26.7 percent

Question 4

Which of the following ratios uses the market price of a company's stock in the denominator?

Accepted Answer

A) Price/Earnings. 
B) Dividend yield 
C) Cash flow yield 
D) All of these choices. 
A) Price/Earnings. 
B) Dividend yield 
C) Cash flow yield 
D) All of these choices.

Question 5

In a common-size income statement for a retail store,the 100 percent amount is for

Accepted Answer

A) net revenues. 
B) cost of goods sold. 
C) gross profit. 
D) net income. 
A) net revenues. 
B) cost of goods sold. 
C) gross profit. 
D) net income.

Question 6

One of the best places to look for early signals of change in a company's profitability is the

Accepted Answer

A) Form 10-K. 
B) Form 10-Q. 
C) Form 8-K. 
D) annual report sent to stockholders. 
A) Form 10-K. 
B) Form 10-Q. 
C) Form 8-K. 
D) annual report sent to stockholders.

Question 7

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 8

A ratio of net income of $100,000 to sales of $1,000,000 can be stated as

Accepted Answer

A) Net income is 1/10,or 10 percent,of sales. 
B) For every dollar of sales,the company has an average net income of 10 cents. 
C) The ratio of sales to net income is 10 to 1 (10:1),or sales are 10 times net income. 
D) All of these choices. 
A) Net income is 1/10,or 10 percent,of sales. 
B) For every dollar of sales,the company has an average net income of 10 cents. 
C) The ratio of sales to net income is 10 to 1 (10:1),or sales are 10 times net income. 
D) All of these choices.

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

In a trend analysis,an index number of 139 for 20x5 sales indicates that

Accepted Answer

A) sales for 20x5 were 139 percent higher than sales for the same company in the base year. 
B) sales for 20x5 for this company were 139 percent of the sales figure of another company being used in the comparison. 
C) sales for 20x5 were 139 percent of the sales for the same company in the base year. 
D) actual sales for 20x5 exceeded budgeted sales for 20x5 by 39 percent. 
A) sales for 20x5 were 139 percent higher than sales for the same company in the base year. 
B) sales for 20x5 for this company were 139 percent of the sales figure of another company being used in the comparison. 
C) sales for 20x5 were 139 percent of the sales for the same company in the base year. 
D) actual sales for 20x5 exceeded budgeted sales for 20x5 by 39 percent.

Question 11

Which of the following is a profitability ratio?

Accepted Answer

A) Return on equity 
B) Days' inventory on hand 
C) Price/Earnings ratio 
D) Quick ratio 
A) Return on equity 
B) Days' inventory on hand 
C) Price/Earnings ratio 
D) Quick ratio

Question 12

The return on assets and the asset turnover ratios are used to analyze

Accepted Answer

A) leverage. 
B) long-term solvency. 
C) profitability. 
D) liquidity. 
A) leverage. 
B) long-term solvency. 
C) profitability. 
D) liquidity.

Question 13

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 receivable turnover for this corporation? Round your answer to one decimal place.

Accepted Answer

A) 4.0 times 
B) 3.0 times 
C) 2.4 times 
D) 0.9 times 
A) 4.0 times 
B) 3.0 times 
C) 2.4 times 
D) 0.9 times

Question 14

One reason that a common-size statement is a useful tool in financial performance evaluation is that it enables the user to

Accepted Answer

A) make better comparisons of two companies of different sizes in the same industry. 
B) determine which companies in a single industry are of the same size. 
C) judge the relative potential of two companies of similar size in different industries. 
D) determine which companies in a single industry are of the same value. 
A) make better comparisons of two companies of different sizes in the same industry. 
B) determine which companies in a single industry are of the same size. 
C) judge the relative potential of two companies of similar size in different industries. 
D) determine which companies in a single industry are of the same value.

Question 15

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 return on assets for this corporation? Round your answer to one decimal place.

Accepted Answer

A) 37.5 percent 
B) 26.7 percent 
C) 20.0 percent 
D) 15.0 percent 
A) 37.5 percent 
B) 26.7 percent 
C) 20.0 percent 
D) 15.0 percent

Question 16

Days' payable is a measure of

Accepted Answer

A) liquidity. 
B) volatility. 
C) long-term solvency. 
D) profitability. 
A) liquidity. 
B) volatility. 
C) long-term solvency. 
D) profitability.

Question 17

Areas that require accounting estimates include all of the following except

Accepted Answer

A) executive compensation. 
B) residual value of assets. 
C) amortization periods. 
D) environmental cleanup costs. 
A) executive compensation. 
B) residual value of assets. 
C) amortization periods. 
D) environmental cleanup costs.

Question 18

Which of the following best describes the payables turnover?

Accepted Answer

A) Cost of goods sold/Average accounts payable 
B) Cost of goods sold +/-Change in inventory/Average accounts payable 
C) Average accounts payable/Cost of goods sold 
D) Average accounts payable/Cost of goods sold +/- Change in inventory 
A) Cost of goods sold/Average accounts payable 
B) Cost of goods sold +/-Change in inventory/Average accounts payable 
C) Average accounts payable/Cost of goods sold 
D) Average accounts payable/Cost of goods sold +/- Change in inventory

Question 19

Use the following information to calculate the ratios requested below.Round answers to two decimal places.Show your work.

Accepted Answer

The answer of Use the following information to calculate the...

Question 20

Executive officers' compensation is typically comprised of all of the following except

Accepted Answer

A) incentive bonuses. 
B) declared dividends. 
C) stock option awards. 
D) annual base salaries. 
A) incentive bonuses. 
B) declared dividends. 
C) stock option awards. 
D) annual base salaries.

Exam 16: Financial Statement Analysis

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

A quick ratio that is about equal to the current ratio indicates that

Which of the following ratios uses the market price of a company's stock in the denominator?

In a common-size income statement for a retail store,the 100 percent amount is for

One of the best places to look for early signals of change in a company's profitability is the

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.

A ratio of net income of $100,000 to sales of $1,000,000 can be stated as

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

In a trend analysis,an index number of 139 for 20x5 sales indicates that

Which of the following is a profitability ratio?

The return on assets and the asset turnover ratios are used to analyze

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 receivable turnover for this corporation? Round your answer to one decimal place.

One reason that a common-size statement is a useful tool in financial performance evaluation is that it enables the user to

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 return on assets for this corporation? Round your answer to one decimal place.

Days' payable is a measure of

Areas that require accounting estimates include all of the following except

Which of the following best describes the payables turnover?

Use the following information to calculate the ratios requested below.Round answers to two decimal places.Show your work.

Executive officers' compensation is typically comprised of all of the following except

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

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

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

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 and Capital Budgeting

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