Question 1

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Accepted Answer

A) True 
 B)False

Question 2

The four building blocks of financial analysis are (1) __________________, (2) ________________________, (3) ____________________ and (4) ___________________.

Accepted Answer

Liquidity and effici

Question 3

Describe the purpose of vertical financial statement analysis and how it is applied.

Accepted Answer

Vertical financial statement analysis is

Question 4

External users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

A) True 
 B)False

Question 5

Three of the most common tools of financial analysis are (1) _______________________, (2) _________________________, and (3) ____________________________.

Accepted Answer

Horizontal analysis;

Question 6

Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.

Accepted Answer

A) True 
 B)False

Question 7

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ______________________.

Accepted Answer

The answer of The income level most likely to continue...

Question 8

Comparative statements for Kool Corporation are shown below:   Calculate trend percentages for all income statement amounts shown and comment on the results. Use 2010 as the base year. Comment on the results.

Accepted Answer

The answer of Comparative statements for Kool Corporation are shown...

Question 9

In order to be classified as an extraordinary gain or loss, the item must be both (1) _________________________ and (2) _______________________.

Accepted Answer

The answer of In order to be classified as an...

Question 10

Analysis of a single financial number is often of limited value.

Accepted Answer

A) True 
 B)False

Question 11

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.
$0.75/$64.75 = 1.16%

Accepted Answer

A) True 
 B)False

Question 12

Standards for comparisons in financial statement analysis include:

Accepted Answer

A)  Intracompany standards. 
B)  Competitors' standards. 
C)  Industry standards. 
D)  Guidelines (rules of thumb). 
E)  All of these. 
A)  Intracompany standards. 
B)  Competitors' standards. 
C)  Industry standards. 
D)  Guidelines (rules of thumb). 
E)  All of these.

Question 13

A common focus of financial statement users in evaluating a company's performance includes evaluation of its (1) ____________________________, (2) ______________________, and (3) __________________________.

Accepted Answer

Past and current per

Question 14

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

Accepted Answer

A) True 
 B)False

Question 15

The dollar change for a financial statement item is calculated by:

Accepted Answer

A)  Subtracting the analysis period amount from the base period amount. 
B)  Subtracting the base period amount from the analysis period amount. 
C)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E)  Subtracting the base period amount from the analysis amount, then dividing the result by the base amount. 
A)  Subtracting the analysis period amount from the base period amount. 
B)  Subtracting the base period amount from the analysis period amount. 
C)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E)  Subtracting the base period amount from the analysis amount, then dividing the result by the base amount.

Question 16

Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.

Accepted Answer

A) True 
 B)False

Question 17

The base amount for a common-size balance sheet is usually total assets.

Accepted Answer

A) True 
 B)False

Question 18

The return on total assets ratio is a profitability measure.

Accepted Answer

A) True 
 B)False

Question 19

The current ratio and acid-test ratio are used to reflect the ____________ of a business.

Accepted Answer

The answer of The current ratio and acid-test ratio are...

Question 20

The comparison of a company's financial condition and performance to a base amount is known as:

Accepted Answer

A)  Financial reporting. 
B)  Horizontal ratios. 
C)  Investment analysis. 
D)  Risk analysis. 
E)  Vertical analysis. 
A)  Financial reporting. 
B)  Horizontal ratios. 
C)  Investment analysis. 
D)  Risk analysis. 
E)  Vertical analysis.

Exam 17: Analysis of Financial Statements

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

The four building blocks of financial analysis are (1) __________________, (2) ________________________, (3) ____________________ and (4) ___________________.

Describe the purpose of vertical financial statement analysis and how it is applied.

External users of accounting information make the strategic and operating decisions of a company.

Three of the most common tools of financial analysis are (1) _______________________, (2) _________________________, and (3) ____________________________.

Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ______________________.

Comparative statements for Kool Corporation are shown below: Calculate trend percentages for all income statement amounts shown and comment on the results. Use 2010 as the base year. Comment on the results.

In order to be classified as an extraordinary gain or loss, the item must be both (1) _________________________ and (2) _______________________.

Analysis of a single financial number is often of limited value.

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%. $0.75/$64.75 = 1.16%

Standards for comparisons in financial statement analysis include:

A common focus of financial statement users in evaluating a company's performance includes evaluation of its (1) ____________________________, (2) ______________________, and (3) __________________________.

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

The dollar change for a financial statement item is calculated by:

Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.

The base amount for a common-size balance sheet is usually total assets.

The return on total assets ratio is a profitability measure.

The current ratio and acid-test ratio are used to reflect the ____________ of a business.

The comparison of a company's financial condition and performance to a base amount is known as:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

Filters

The four building blocks of financial analysis are (1) , (2) , (3) and (4) _.

Three of the most common tools of financial analysis are (1) ___________, (2) _, and (3) ________________.

In order to be classified as an extraordinary gain or loss, the item must be both (1) ___ and (2) _.

A common focus of financial statement users in evaluating a company's performance includes evaluation of its (1) , (2) , and (3) .