Question 1

The gross profit rate is gross profit expressed as a percentage of net sales.

Accepted Answer

A) True 
 B)False

Question 2

Percentage changes; p/e ratios and investors' expectations
Shown below are Gamma,Inc.'s earnings per share for a four-year period,along with the per-share market price of the company's stock at each year-end.The earnings in 2015 were the highest in the company's history.   (a)Compute the percentage change in earnings per share in 2013,2014,and 2015.(Place your answers in the spaces provided above.)
(b)Compute the p/e ratio of stock at the end of each of the four years.(Place your answers in the spaces provided above.)
(c)What does the p/e ratio at the end of 2015 indicate about investors' expectations of earnings per share for the coming year? Explain your reasoning.

Accepted Answer

@#IMG-DLM& (c)The p/e ratio of 8.6 is low by histo

Question 3

In a single-step income statement,all revenue items are listed,then all expense items are combined and deducted from total revenue.

Accepted Answer

A) True 
 B)False

Question 4

Comparative financial statements show side-by-side financial data for two or more companies.

Accepted Answer

A) True 
 B)False

Question 5

Working capital is the excess of current assets over current liabilities.

Accepted Answer

A) True 
 B)False

Question 6

A company cannot be increasing its market share if its net sales are declining.

Accepted Answer

A) True 
 B)False

Question 7

The ratio which measures total liabilities as a percentage of total assets is called:

Accepted Answer

A) Current ratio. 
B) Working capital. 
C) Debt ratio. 
D) Quick ratio. 
A) Current ratio. 
B) Working capital. 
C) Debt ratio. 
D) Quick ratio.

Question 8

The following information is available for the Grant Company for 2015:   Required:
What are earnings per share for the current year?
What is the P/E ratio?
What is the book value per share of common stock?
What is the dividend yield on common stock?
What is the net profit ratio?
What is the return on equity?

Accepted Answer

Earnings per share $600,000 - $2,100/50,

Question 9

Return on investment
Shown below are selected data from a recent annual report of Quality Service.(Dollar amounts are in millions.)   Compute for the year:
(a)Return on average total assets
(b)Return on average total equity

Accepted Answer

The answer of Return on investment
Shown below are selected data...

Question 10

Evaluating the adequacy of net income
Assume that Delta Corp.earns net income of $1,000,000 in the current year.Identify two important factors that investors should consider in evaluating the reasonableness of this dollar amount.Explain what investors may learn from each of these considerations.

Accepted Answer

Students are to identify two important f

Question 11

Inventory is an example of a quick asset.

Accepted Answer

A) True 
 B)False

Question 12

In evaluating the quality of a company's earnings,which of the following factors is least important?

Accepted Answer

A) The accounting methods used by management. 
B) The trend of the company's earnings over a period of years. 
C) The dollar amount of earnings per share. 
D) The stability and sources of the company's earnings. 
A) The accounting methods used by management. 
B) The trend of the company's earnings over a period of years. 
C) The dollar amount of earnings per share. 
D) The stability and sources of the company's earnings.

Question 13

Below are eight ratios.Match each equation to the correct ratio.If there is no match,use "None" as your response.   ________ (a.)Net income - p

Accepted Answer

(a.)Earnings per share (b.)A/R turnover

Question 14

Component percentages indicate the relative size of each item included in a total.Which of the following statements is true?

Accepted Answer

A) Income statement items are expressed as a percentage of net income,while balance sheet items are expressed as a percentage of total assets. 
B) Income statement items are expressed as a percentage of net sales,while balance sheet items are expressed as a percentage of total assets. 
C) Income statement items are expressed as a percentage of net income,while balance sheet items are expressed as a percentage of net assets. 
D) Both income statement and balance sheet items are expressed as a percentage of net assets. 
A) Income statement items are expressed as a percentage of net income,while balance sheet items are expressed as a percentage of total assets. 
B) Income statement items are expressed as a percentage of net sales,while balance sheet items are expressed as a percentage of total assets. 
C) Income statement items are expressed as a percentage of net income,while balance sheet items are expressed as a percentage of net assets. 
D) Both income statement and balance sheet items are expressed as a percentage of net assets.

Question 15

A rising gross profit rate most strongly suggests:

Accepted Answer

A) An increase in physical sales volume. 
B) Strong consumer demand for the company's products. 
C) Intense competition. 
D) Increased short-term solvency. 
A) An increase in physical sales volume. 
B) Strong consumer demand for the company's products. 
C) Intense competition. 
D) Increased short-term solvency.

Question 16

A company should carry the amount of working capital necessary to conduct operations,not necessarily maximize its working capital.

Accepted Answer

A) True 
 B)False

Question 17

Operating income excludes each of the following,except:

Accepted Answer

A) Interest expense. 
B) Income taxes. 
C) Depreciation. 
D) Purchase discounts lost. 
A) Interest expense. 
B) Income taxes. 
C) Depreciation. 
D) Purchase discounts lost.

Question 18

All of the following are true of operating expenses except:

Accepted Answer

A) Operating expenses are incurred for the purpose of producing revenue. 
B) Operating expenses are subdivided into the classifications of component and trend. 
C) The administrative expenses portion of operating expenses tends to remain constant from period to period. 
D) Subdividing operating expenses into different classifications helps managers and investors evaluate different aspects of the company's operations. 
A) Operating expenses are incurred for the purpose of producing revenue. 
B) Operating expenses are subdivided into the classifications of component and trend. 
C) The administrative expenses portion of operating expenses tends to remain constant from period to period. 
D) Subdividing operating expenses into different classifications helps managers and investors evaluate different aspects of the company's operations.

Question 19

Assume that net sales are increasing faster than the rate of inflation,and that the company's gross profit rate is rising.Of the following,the most logical conclusion is that:

Accepted Answer

A) The company's cost of purchasing merchandise is rising rapidly. 
B) Operating expenses are falling. 
C) Demand for the company's products is very strong. 
D) The company has achieved an increase in sales volume by reducing its sales prices. 
A) The company's cost of purchasing merchandise is rising rapidly. 
B) Operating expenses are falling. 
C) Demand for the company's products is very strong. 
D) The company has achieved an increase in sales volume by reducing its sales prices.

Question 20

When an income statement does not show gross profit or operating income it is called a consolidated statement.

Accepted Answer

A) True 
 B)False

Exam 14: Financial Statement Analysis

The gross profit rate is gross profit expressed as a percentage of net sales.

In a single-step income statement,all revenue items are listed,then all expense items are combined and deducted from total revenue.

Comparative financial statements show side-by-side financial data for two or more companies.

Working capital is the excess of current assets over current liabilities.

A company cannot be increasing its market share if its net sales are declining.

The ratio which measures total liabilities as a percentage of total assets is called:

Return on investment Shown below are selected data from a recent annual report of Quality Service.(Dollar amounts are in millions.) Compute for the year: (a)Return on average total assets (b)Return on average total equity

Evaluating the adequacy of net income Assume that Delta Corp.earns net income of $1,000,000 in the current year.Identify two important factors that investors should consider in evaluating the reasonableness of this dollar amount.Explain what investors may learn from each of these considerations.

Inventory is an example of a quick asset.

In evaluating the quality of a company's earnings,which of the following factors is least important?

Below are eight ratios.Match each equation to the correct ratio.If there is no match,use "None" as your response. ________ (a.)Net income - p

Component percentages indicate the relative size of each item included in a total.Which of the following statements is true?

A rising gross profit rate most strongly suggests:

A company should carry the amount of working capital necessary to conduct operations,not necessarily maximize its working capital.

Operating income excludes each of the following,except:

All of the following are true of operating expenses except:

Assume that net sales are increasing faster than the rate of inflation,and that the company's gross profit rate is rising.Of the following,the most logical conclusion is that:

When an income statement does not show gross profit or operating income it is called a consolidated statement.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values

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