Question 1

Common-size statements:

Accepted Answer

A)  Reveal changes in the relative importance of each financial statement item. 
B)  Do not emphasize the relative importance of each item. 
C)  Compare financial statements over time. 
D)  Show the dollar amount of change for financial statement items. 
E)  Reveal patterns in data across successive periods. 
A)  Reveal changes in the relative importance of each financial statement item. 
B)  Do not emphasize the relative importance of each item. 
C)  Compare financial statements over time. 
D)  Show the dollar amount of change for financial statement items. 
E)  Reveal patterns in data across successive periods.

Question 2

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Accepted Answer

A) True 
 B)False

Question 3

Comparative calendar-year financial data for a company are shown below. Calculate the following ratios for the company for 2012:
(a) accounts receivable turnover
(b) day's sales uncollected
(c) inventory turnover
(d) days' sales in inventory

Accepted Answer

The answer of Comparative calendar-year financial data for a company...

Question 4

Financial analysis only refers to the communication of relevant financial information to decision makers.

Accepted Answer

A) True 
 B)False

Question 5

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Accepted Answer

A) True 
 B)False

Question 6

All of the following statements regarding a business segment are True except:

Accepted Answer

A)  A business segment is a part of a company's operations that serves a particular product line. 
B)  A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company. 
C)  A company's gain or loss from selling or closing down a segment is reported separately. 
D)  A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are combined and reported. 
E)  A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately. 
A)  A business segment is a part of a company's operations that serves a particular product line. 
B)  A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company. 
C)  A company's gain or loss from selling or closing down a segment is reported separately. 
D)  A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are combined and reported. 
E)  A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately.

Question 7

To compute trend percents the analyst should:

Accepted Answer

A)  Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number. 
B)  Subtract the analysis period number from the base period number. 
C)  Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100. 
D)  Compare amounts across industries using Dun and Bradstreet. 
E)  All of these. 
A)  Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number. 
B)  Subtract the analysis period number from the base period number. 
C)  Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100. 
D)  Compare amounts across industries using Dun and Bradstreet. 
E)  All of these.

Question 8

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Accepted Answer

The answer of A company reported net income of $78,000...

Question 9

A financial statement analysis report usually includes:

Accepted Answer

A)  An executive summary. 
B)  An analysis overview. 
C)  Evidential matter. 
D)  Assumptions. 
E)  All of these. 
A)  An executive summary. 
B)  An analysis overview. 
C)  Evidential matter. 
D)  Assumptions. 
E)  All of these.

Question 10

What is the purpose of a good financial statement analysis report? What are the key components?

Accepted Answer

A good financial statement analysis repo

Question 11

In horizontal analysis the percent change is computed 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 analysis period 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 analysis period amount.

Question 12

Internal users of financial information:

Accepted Answer

A)  Are not directly involved in operating a company. 
B)  Are those individuals involved in managing and operating the company. 
C)  Include shareholders and lenders. 
D)  Include directors and customers. 
E)  Include suppliers, regulators, and the press. 
A)  Are not directly involved in operating a company. 
B)  Are those individuals involved in managing and operating the company. 
C)  Include shareholders and lenders. 
D)  Include directors and customers. 
E)  Include suppliers, regulators, and the press.

Question 13

The return on total assets can be calculated as profit margin times total asset turnover.

Accepted Answer

A) True 
 B)False

Question 14

The greater the times interest earned ratio, the greater the risk a company is exposed to.

Accepted Answer

A) True 
 B)False

Question 15

Net income divided by net sales is the:

Accepted Answer

A)  Return on total assets. 
B)  Profit margin. 
C)  Current ratio. 
D)  Total asset turnover. 
E)  Days' sales in inventory. 
A)  Return on total assets. 
B)  Profit margin. 
C)  Current ratio. 
D)  Total asset turnover. 
E)  Days' sales in inventory.

Question 16

The comparative income statements for Golden Company are shown below. Calculate the following ratios for 2012:
(a) profit margin.
(b) gross margin.
(c) times interest earned.

Accepted Answer

The answer of The comparative income statements for Golden Company...

Question 17

A rough guideline states that for a company with no discounts offered, days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

Accepted Answer

A) True 
 B)False

Question 18

The current year-end balance sheet data for a company are shown below. Calculate the company's:
(a) working capital.
(b) current ratio.
(c) acid-test ratio.

Accepted Answer

The answer of The current year-end balance sheet data for...

Question 19

Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.

Accepted Answer

The answer of Use the financial data shown below to...

Question 20

The background on a company, its industry, and its economic setting is usually included in which of the following sections of a financial statement analysis report?

Accepted Answer

A)  Executive summary. 
B)  Analysis overview. 
C)  Evidential conclusions. 
D)  Factor analysis. 
E)  Inferences. 
A)  Executive summary. 
B)  Analysis overview. 
C)  Evidential conclusions. 
D)  Factor analysis. 
E)  Inferences.

Exam 17: Analysis of Financial Statements

Common-size statements:

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Comparative calendar-year financial data for a company are shown below. Calculate the following ratios for the company for 2012: (a) accounts receivable turnover (b) day's sales uncollected (c) inventory turnover (d) days' sales in inventory

Financial analysis only refers to the communication of relevant financial information to decision makers.

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

All of the following statements regarding a business segment are True except:

To compute trend percents the analyst should:

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

A financial statement analysis report usually includes:

What is the purpose of a good financial statement analysis report? What are the key components?

In horizontal analysis the percent change is computed by:

Internal users of financial information:

The return on total assets can be calculated as profit margin times total asset turnover.

The greater the times interest earned ratio, the greater the risk a company is exposed to.

Net income divided by net sales is the:

The comparative income statements for Golden Company are shown below. Calculate the following ratios for 2012: (a) profit margin. (b) gross margin. (c) times interest earned.

A rough guideline states that for a company with no discounts offered, days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

The current year-end balance sheet data for a company are shown below. Calculate the company's: (a) working capital. (b) current ratio. (c) acid-test ratio.

Use the financial data shown below to calculate the following ratios for the current year: (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days' sales uncollected. (e) Inventory turnover. (f) Days' sales in inventory.

The background on a company, its industry, and its economic setting is usually included in which of the following sections of a financial statement analysis report?

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

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