Question 1

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Accepted Answer

A)  Price-earnings ratio 
B)  Dividend yield 
C)  Book value per share 
D)  Return on equity 
A)  Price-earnings ratio 
B)  Dividend yield 
C)  Book value per share 
D)  Return on equity

Question 2

Comparative income statements for Chicago Company are provided below:   
Required:
Perform a horizontal analysis of Chicago Company's income statement by computing horizontal percentages for each item. Round your answer to one decimal place (i.e. 22.5%).

Accepted Answer

The answer of Comparative income statements for Chicago Company are...

Question 3

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 4

The following balance sheet information is provided for Greene Company for 2014:   What is the company's quick (acid-test) ratio?

Accepted Answer

A)  0.7 
B)  1.4 
C)  1.3 
D)  3.8 
A)  0.7 
B)  1.4 
C)  1.3 
D)  3.8

Question 5

Benson Company received cash of $1,000,000 from issuing common stock. As a result of this transaction, the company's debt to equity ratio will:

Accepted Answer

A)  Decrease. 
B)  Increase. 
C)  Remain the same. 
D)  Cannot be determined. 
A)  Decrease. 
B)  Increase. 
C)  Remain the same. 
D)  Cannot be determined.

Question 6

Benson Company received cash of $5,000,000 by issuing 20-year bonds payable. As a result of the this transaction, the company's current ratio will:

Accepted Answer

A)  Remain the same. 
B)  Increase. 
C)  Decrease. 
D)  Cannot be determined. 
A)  Remain the same. 
B)  Increase. 
C)  Decrease. 
D)  Cannot be determined.

Question 7

Financial ratios can be used to assess which of the following aspects of a firm's performance?

Accepted Answer

A)  Liquidity 
B)  Solvency 
C)  Profitability 
D)  All of these answers are correct. 
A)  Liquidity 
B)  Solvency 
C)  Profitability 
D)  All of these answers are correct.

Question 8

The Bernard Company provided the following information from its financial records: $$\begin{array} { | l | r | l | r | } 
\hline \text { Net income } & \$ 250,000 & \text { Total stockhoklers' equity } & \$ 1,000,000 \
\hline \text { Common dividends } & \$ 15,000 & \text { Common shares outstanding, 12/31 } & 150,000 \
\hline \text { Preferred rights } & \$ 175,000 & & \
\hline
\end{array}$$ What is the company's book value per share?

Accepted Answer

A)  $0.50 
B)  $5.50 
C)  $6.67 
D)  $1.67 
A)  $0.50 
B)  $5.50 
C)  $6.67 
D)  $1.67

Question 9

A company has an obligation to provide highly detailed information on its financial statements.

Accepted Answer

A) True 
 B)False

Question 10

Select the incorrect statement regarding the information disclosed in financial statements.

Accepted Answer

A)  The costs of providing all possible information about a firm would be prohibitively high for the business. 
B)  Some information disclosed in financial statements may be irrelevant to some users. 
C)  Financial statements should be detailed enough to answer any financial-related question an investor might have. 
D)  When too much information is presented users may suffer from information overload. 
A)  The costs of providing all possible information about a firm would be prohibitively high for the business. 
B)  Some information disclosed in financial statements may be irrelevant to some users. 
C)  Financial statements should be detailed enough to answer any financial-related question an investor might have. 
D)  When too much information is presented users may suffer from information overload.

Question 11

Ratios can be used for different purposes. For example, a variety of ratios have been developed to assess a firm's liquidity. Similarly, ratios have been developed to assess solvency, profitability, and stock market strength. A sample of commonly used ratios for these purposes is provided in the table below.
Required:
In the middle column of the table, provide the formula to compute the specified ratio. In the final column, indicate the purpose (Liquidity, Solvency, Profitability, and Stock market strength) for which the ratio is most commonly used. The first item is completed as an example.

Accepted Answer

The answer of Ratios can be used for different purposes....

Question 12

Maynard Company's balance sheet and income statement are provided below:   
   
The company paid cash dividends of $2.00 per share during 2014. On December 31, 2014, the stock was listed on the stock exchange at a price of $78.25 per share.
Required:
Compute the following ratios for 2014:
(a) Accounts receivable turnover
(b) Average days to collect receivables
(c) Inventory turnover
(d) Average days to sell inventory
(e) Debt to assets ratio
(f) Debt to equity ratio
(g) Net margin
(h) Asset turnover
(i) Return on investment
(j) Dividend yield
Round your answers to one decimal place.

Accepted Answer

The answer of Maynard Company's balance sheet and income statement...

Question 13

Osgood Company provided the following income statement for 2013 and 2014:   
Required:
(a) Perform vertical analysis on Osgood's income statements for 2013 and 2014. Round your answer to one decimal place (i.e. 22.4%)
(b) Comment on the results, comparing 2013 to 2014.

Accepted Answer

(a) @#IMG-DLM& (b) The most important difference b

Question 14

Accrual accounting requires the use of many estimates, including:

Accepted Answer

A)  Uncollectible accounts expense. 
B)  Warranty costs. 
C)  Assets' useful lives. 
D)  All of these answers are correct. 
A)  Uncollectible accounts expense. 
B)  Warranty costs. 
C)  Assets' useful lives. 
D)  All of these answers are correct.

Question 15

The current ratio is one of the most common measures of solvency.

Accepted Answer

A) True 
 B)False

Question 16

As of December 31, 2013, 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, 2014, Gant issued common stock for $10,000 cash. Which of the following statement is true?

Accepted Answer

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

Question 17

Indicate whether each of the following statements about financial statement analysis is true or false.
1. Working capital is a measure of the amount of current assets a company would have left after paying its current liabilities.
2. If a transaction causes a company's working capital to increase, the transaction caused the company to become less liquid.
3. Interpretation of a company's current ratio can be difficult because it is an absolute amount.
4. The quick ratio is a more conservative variation of the current ratio.
5. The quick ratio is usually calculated by using the following equation: cash + receivables + current marketable securities/current liabilities.

Accepted Answer

1. True
2.

Question 18

Vertical analysis always involves comparing financial statement elements over a span of time.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Accepted Answer

A)  Current ratio. 
B)  Earnings per share. 
C)  Inventory turnover. 
D)  Average collection period. 
A)  Current ratio. 
B)  Earnings per share. 
C)  Inventory turnover. 
D)  Average collection period.

Question 20

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

Accepted Answer

A)  Total assets on the balance sheet. 
B)  Total cash on the balance sheet. 
C)  Total current assets on the balance sheet. 
D)  None of these answers is correct. 
A)  Total assets on the balance sheet. 
B)  Total cash on the balance sheet. 
C)  Total current assets on the balance sheet. 
D)  None of these answers is correct.

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Comparative income statements for Chicago Company are provided below: Required: Perform a horizontal analysis of Chicago Company's income statement by computing horizontal percentages for each item. Round your answer to one decimal place (i.e. 22.5%).

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

The following balance sheet information is provided for Greene Company for 2014: What is the company's quick (acid-test) ratio?

Benson Company received cash of $1,000,000 from issuing common stock. As a result of this transaction, the company's debt to equity ratio will:

Benson Company received cash of $5,000,000 by issuing 20-year bonds payable. As a result of the this transaction, the company's current ratio will:

Financial ratios can be used to assess which of the following aspects of a firm's performance?

The Bernard Company provided the following information from its financial records: Net income \ 250,000 Total stockhoklers' equity \ 1,000,000 Common dividends \ 15,000 Common shares outstanding, 12/31 150,000 Preferred rights \ 175,000 What is the company's book value per share?

A company has an obligation to provide highly detailed information on its financial statements.

Select the incorrect statement regarding the information disclosed in financial statements.

Osgood Company provided the following income statement for 2013 and 2014: Required: (a) Perform vertical analysis on Osgood's income statements for 2013 and 2014. Round your answer to one decimal place (i.e. 22.4%) (b) Comment on the results, comparing 2013 to 2014.

Accrual accounting requires the use of many estimates, including:

The current ratio is one of the most common measures of solvency.

Vertical analysis always involves comparing financial statement elements over a span of time.

All of the following are considered to be measures of a company's short-term debt-paying ability except:

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

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 9: Financial Statement Analysis

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Comparative income statements for Chicago Company are provided below: Required: Perform a horizontal analysis of Chicago Company's income statement by computing horizontal percentages for each item. Round your answer to one decimal place (i.e. 22.5%).

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

The following balance sheet information is provided for Greene Company for 2014: What is the company's quick (acid-test) ratio?

Benson Company received cash of $1,000,000 from issuing common stock. As a result of this transaction, the company's debt to equity ratio will:

Benson Company received cash of $5,000,000 by issuing 20-year bonds payable. As a result of the this transaction, the company's current ratio will:

Financial ratios can be used to assess which of the following aspects of a firm's performance?

The Bernard Company provided the following information from its financial records: Net income \ 250,000 Total stockhoklers' equity \ 1,000,000 Common dividends \ 15,000 Common shares outstanding, 12/31 150,000 Preferred rights \ 175,000 What is the company's book value per share?

A company has an obligation to provide highly detailed information on its financial statements.

Select the incorrect statement regarding the information disclosed in financial statements.

Osgood Company provided the following income statement for 2013 and 2014: Required: (a) Perform vertical analysis on Osgood's income statements for 2013 and 2014. Round your answer to one decimal place (i.e. 22.4%) (b) Comment on the results, comparing 2013 to 2014.

Accrual accounting requires the use of many estimates, including:

The current ratio is one of the most common measures of solvency.

Vertical analysis always involves comparing financial statement elements over a span of time.

All of the following are considered to be measures of a company's short-term debt-paying ability except:

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

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters