Question 1

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

Accepted Answer

A) True 
 B)False

Question 2

Based on the above data, what is the amount of working capital?

Accepted Answer

A)  $238,000 
B)  $128,000 
C)  $168,000 
D)  $203,000 
A)  $238,000 
B)  $128,000 
C)  $168,000 
D)  $203,000

Question 3

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

Accepted Answer

A) True 
 B)False

Question 4

In 2012 Robert Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. They had 50,000 shares of common stock outstanding during the entire year. Robert Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Robert Corporation's price-earnings ratio is

Accepted Answer

A)  10 times. 
B)  5 times. 
C)  2 times. 
D)  8 times. 
A)  10 times. 
B)  5 times. 
C)  2 times. 
D)  8 times.

Question 5

Which of the following is considered an unusual item affecting the prior period's income statement?

Accepted Answer

A)  Change in accounting principles 
B)  Fixed asset impairments 
C)  Extraordinary item 
D)  Discontinued operations 
A)  Change in accounting principles 
B)  Fixed asset impairments 
C)  Extraordinary item 
D)  Discontinued operations

Question 6

The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.  
  What is the rate earned on total assets for this company? Round your answer to one decimal point.

Accepted Answer

A)  8.5% 
B)  6.8% 
C)  10.3% 
D)  13.3% 
A)  8.5% 
B)  6.8% 
C)  10.3% 
D)  13.3%

Question 7

The relationship of $325,000 to $125,000, expressed as a ratio, is

Accepted Answer

A)  2.0 to 1 
B)  2.6 to 1 
C)  2.5 to 1 
D)  0.45 to 1 
A)  2.0 to 1 
B)  2.6 to 1 
C)  2.5 to 1 
D)  0.45 to 1

Question 8

Which of the following should be classified as an extraordinary item on the income statement?

Accepted Answer

A)  Gain on a sale of a long term investment. 
B)  Loss due to discontinued operations. 
C)  Restructuring charges. 
D)  Loss resulting from an infrequent natural disaster. 
A)  Gain on a sale of a long term investment. 
B)  Loss due to discontinued operations. 
C)  Restructuring charges. 
D)  Loss resulting from an infrequent natural disaster.

Question 9

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 10

Assume the following sales data for a company:   What is the percentage increase in sales from 2014 to 2015?

Accepted Answer

A)  100% 
B)  65% 
C)  165% 
D)  60.1% 
A)  100% 
B)  65% 
C)  165% 
D)  60.1%

Question 11

When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage.

Accepted Answer

A) True 
 B)False

Question 12

From the following data, determine for the current year the (a) rate earned on total assets, (b) rate earned on stockholders' equity, (c) rate earned on common stockholders' equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield on common stock. Assume that the current market price per share of common stock is $25. (Present key figures used in your computations.)
Round percentage values to one decimal place, dollar values to two decimal places, and other ratios to one decimal place.

Accepted Answer

(a)
 @#IMG-DLM&_TB2013_00 (b)

Question 13

Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.

Accepted Answer

A) True 
 B)False

Question 14

Based on the above data, what is the quick ratio, rounded to one decimal point?

Accepted Answer

A)  1.7 
B)  2.9 
C)  1.1 
D)  1.0 
A)  1.7 
B)  2.9 
C)  1.1 
D)  1.0

Question 15

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Accepted Answer

A) True 
 B)False

Question 16

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as

Accepted Answer

A)  solvency and leverage 
B)  solvency and profitability 
C)  solvency and liquidity 
D)  solvency and equity 
A)  solvency and leverage 
B)  solvency and profitability 
C)  solvency and liquidity 
D)  solvency and equity

Question 17

In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.

Accepted Answer

A) True 
 B)False

Question 18

The following information has been condensed from the December 31 balance sheets of Hanson Co.:
     Round your answers to two decimal place.

Accepted Answer

(a)
 @#IMG-DLM&_TB20

Question 19

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

Accepted Answer

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

Question 20

A financial statement showing each item on the statement as a percentage of one key item on the statement is called common-sized financial statements.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Statement Analysis

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

Based on the above data, what is the amount of working capital?

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

Which of the following is considered an unusual item affecting the prior period's income statement?

The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the rate earned on total assets for this company? Round your answer to one decimal point.

The relationship of $325,000 to $125,000, expressed as a ratio, is

Which of the following should be classified as an extraordinary item on the income statement?

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Assume the following sales data for a company: What is the percentage increase in sales from 2014 to 2015?

When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage.

Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.

Based on the above data, what is the quick ratio, rounded to one decimal point?

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as

In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.

The following information has been condensed from the December 31 balance sheets of Hanson Co.: Round your answers to two decimal place.

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

A financial statement showing each item on the statement as a percentage of one key item on the statement is called common-sized financial statements.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

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