Question 1

The owners of a corporation are not personally responsible for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 2

The lower the current ratio,the more liquid the company appears.

Accepted Answer

A) True 
 B)False

Question 3

Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time.

Accepted Answer

A) True 
 B)False

Question 4

The current ratio will be _______________ the quick ratio.

Accepted Answer

A) Less than 
B) Greater than or equal to 
C) The same as 
D) Always different than 
A) Less than 
B) Greater than or equal to 
C) The same as 
D) Always different than

Question 5

A company whose sales are growing at less than the rate of inflation may actually be selling less merchandise every year.

Accepted Answer

A) True 
 B)False

Question 6

The term,classified financial statements,

Accepted Answer

A) To the financial statements of all companies working on government projects. 
B) Only to the financial statements of defense contractors working on secret projects. 
C) To financial statements prepared for use by management,but not for distribution outside of the organization. 
D) To financial statements in which items with certain characteristics are placed together in a group in an effort to develop useful subtotals. 
A) To the financial statements of all companies working on government projects. 
B) Only to the financial statements of defense contractors working on secret projects. 
C) To financial statements prepared for use by management,but not for distribution outside of the organization. 
D) To financial statements in which items with certain characteristics are placed together in a group in an effort to develop useful subtotals.

Question 7

The trend in ratios is usually more useful than looking at a single year's ratio.

Accepted Answer

A) True 
 B)False

Question 8

The debt ratio indicates the percentage of:

Accepted Answer

A) Total assets financed by long-term mortgages. 
B) Revenue consumed by interest expense. 
C) Total assets financed by creditors. 
D) Total liabilities classified as current. 
A) Total assets financed by long-term mortgages. 
B) Revenue consumed by interest expense. 
C) Total assets financed by creditors. 
D) Total liabilities classified as current.

Question 9

If total current assets are $140,000 at the end of Year 1,increase by $50,000 by the end of Year 2,and increase by $50,000 in Year 3,the percentage increase over the preceding year is less in Year 3 than in Year 2.

Accepted Answer

A) True 
 B)False

Question 10

Multiple-step income statement
Shown below is a recent income statement for Phaeton,Inc.:   Prepare an income statement for the year in a multiple-step format.(Use the grid provided below.)

Accepted Answer

The answer of Multiple-step income statement
Shown below is a recent...

Question 11

Quick assets include which of the following?

Accepted Answer

A) Cash,marketable securities,and receivables. 
B) Cash,marketable securities,and inventories. 
C) Cash,prepaid rent,and receivables. 
D) Market securities,receivables,and inventories. 
A) Cash,marketable securities,and receivables. 
B) Cash,marketable securities,and inventories. 
C) Cash,prepaid rent,and receivables. 
D) Market securities,receivables,and inventories.

Question 12

Which of the following is a measure of short-term liquidity?

Accepted Answer

A) Quick ratio. 
B) Return on assets. 
C) Dividend yield. 
D) Debt ratio. 
A) Quick ratio. 
B) Return on assets. 
C) Dividend yield. 
D) Debt ratio.

Question 13

Short-term creditors are most likely to use the quick ratio instead of the current ratio in evaluating the solvency of a company with large,slow-moving:

Accepted Answer

A) Plant and equipment. 
B) Receivables. 
C) Inventories. 
D) Employees. 
A) Plant and equipment. 
B) Receivables. 
C) Inventories. 
D) Employees.

Question 14

The measurement that best reflects investors' expectations about future earnings is:

Accepted Answer

A) Earnings per share. 
B) Return on assets. 
C) The price-earnings ratio. 
D) Return on equity. 
A) Earnings per share. 
B) Return on assets. 
C) The price-earnings ratio. 
D) Return on equity.

Question 15

A single-step and a multiple-step income statement are different in form and in the amount of net income reported.

Accepted Answer

A) True 
 B)False

Question 16

Accounting terminology
Listed below are eight technical accounting terms introduced in this chapter:   Each of the following statements may (or may not)describe one of these technical terms.For each statement,indicate the term described,or answer "None" if the statement does not correctly describe any of the terms.
____ (a)The percentage of total assets financed by creditors.
____ (b)A measure of the effectiveness with which management utilizes a company's resources,regardless of how those resources are financed.
____ (c)A company's percentage share of total dollar sales within its industry.
____ (d)Current assets less current liabilities.
____ (e)A measure reflecting investors' expectations of future profitability.
____ (f)A measure of short-term solvency often used when a company has large inventories that cannot be quickly converted into cash.
____ (g)A ratio that helps individual stockholders relate the net income of a large corporation to their equity investment.

Accepted Answer

(a)Debt ratio,(b)Return on ass

Question 17

Percentage changes
Selected information from the financial statements of Perfectly Baked Cake Co.appears below:   (a)Compute the percentage change in each of the above items from 2014 to 2015.Use a + or - to indicate increase or decrease.   (b)Compute net income as a percentage of net sales in each year.(Round to the nearest one-tenth of 1%)

Accepted Answer

The answer of Percentage changes
Selected information from the financial statements...

Question 18

On common size income statements,each component in the income statement is represented as a percentage of:

Accepted Answer

A) Net income. 
B) Net sales. 
C) Total assets. 
D) Profit. 
A) Net income. 
B) Net sales. 
C) Total assets. 
D) Profit.

Question 19

The current ratio:

Accepted Answer

A) Is computed by dividing current assets by current liabilities. 
B) Is computed by subtracting current liabilities from current assets. 
C) Remains unchanged throughout the operating cycle. 
D) Is a measure of short-term profitability. 
A) Is computed by dividing current assets by current liabilities. 
B) Is computed by subtracting current liabilities from current assets. 
C) Remains unchanged throughout the operating cycle. 
D) Is a measure of short-term profitability.

Question 20

The operating cycle of a company:

Accepted Answer

A) Must be less than one year. 
B) Is usually greater than one year. 
C) Is the time it takes to purchase inventory,sell inventory,and collect cash from the sale. 
D) Is the time it takes to acquire a loan,pay the interest,and retire the loan by paying the creditor in full. 
A) Must be less than one year. 
B) Is usually greater than one year. 
C) Is the time it takes to purchase inventory,sell inventory,and collect cash from the sale. 
D) Is the time it takes to acquire a loan,pay the interest,and retire the loan by paying the creditor in full.

Exam 14: Financial Statement Analysis

The owners of a corporation are not personally responsible for the debts of the business.

The lower the current ratio,the more liquid the company appears.

Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time.

The current ratio will be _______________ the quick ratio.

A company whose sales are growing at less than the rate of inflation may actually be selling less merchandise every year.

The term,classified financial statements,

The trend in ratios is usually more useful than looking at a single year's ratio.

The debt ratio indicates the percentage of:

If total current assets are $140,000 at the end of Year 1,increase by $50,000 by the end of Year 2,and increase by $50,000 in Year 3,the percentage increase over the preceding year is less in Year 3 than in Year 2.

Multiple-step income statement Shown below is a recent income statement for Phaeton,Inc.: Prepare an income statement for the year in a multiple-step format.(Use the grid provided below.)

Quick assets include which of the following?

Which of the following is a measure of short-term liquidity?

Short-term creditors are most likely to use the quick ratio instead of the current ratio in evaluating the solvency of a company with large,slow-moving:

The measurement that best reflects investors' expectations about future earnings is:

A single-step and a multiple-step income statement are different in form and in the amount of net income reported.

On common size income statements,each component in the income statement is represented as a percentage of:

The current ratio:

The operating cycle of a company:

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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