Question 1

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Accepted Answer

A) True 
 B)False

Question 2

Liquidity refers to the availability of resources to meet short-term cash requirements.

Accepted Answer

A) True 
 B)False

Question 3

Horizontal analysis:

Accepted Answer

A)  Is a method used to evaluate changes in financial data across time. 
B)  Is also called vertical analysis. 
C)  Is the presentation of financial ratios. 
D)  Is a tool used to evaluate financial statement items relative to industry statistics. 
E)  Evaluates financial data across industries. 
A)  Is a method used to evaluate changes in financial data across time. 
B)  Is also called vertical analysis. 
C)  Is the presentation of financial ratios. 
D)  Is a tool used to evaluate financial statement items relative to industry statistics. 
E)  Evaluates financial data across industries.

Question 4

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 5

Ratios may be expressed as (1) _______________________, (2) _______________________, or (3) _______________________.

Accepted Answer

Percents,

Question 6

The average number of times a company's inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance, is the:

Accepted Answer

A)  Accounts receivable turnover. 
B)  Inventory turnover. 
C)  Days' sales uncollected. 
D)  Current ratio. 
E)  Price earnings ratio. 
A)  Accounts receivable turnover. 
B)  Inventory turnover. 
C)  Days' sales uncollected. 
D)  Current ratio. 
E)  Price earnings ratio.

Question 7

Refer to the following selected financial information from Hansen's, LLC. Compute the company's debt-to-equity ratio for Year 2.

Accepted Answer

A)  1.75. 
B)  2.34. 
C)  0.75. 
D)  1.34. 
E)  2.63. 
A)  1.75. 
B)  2.34. 
C)  0.75. 
D)  1.34. 
E)  2.63.

Question 8

Refer to the following selected financial information from Hansen's, LLC. Compute the company's profit margin for Year 2.

Accepted Answer

A)  14.1%. 
B)  11.7%. 
C)  9.6%. 
D)  16.7%. 
E)  33.9%. 
A)  14.1%. 
B)  11.7%. 
C)  9.6%. 
D)  16.7%. 
E)  33.9%.

Question 9

Financial reporting includes not only general purpose financial statements, but also information from stock exchange filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports, and Webcasts.

Accepted Answer

A) True 
 B)False

Question 10

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

Accepted Answer

A) True 
 B)False

Question 11

The return on ordinary shareholders' equity measures a company's success in reaching the goal of earning net income for its owners.

Accepted Answer

A) True 
 B)False

Question 12

A corporation reports the following year-end balance sheet data. Calculate the following ratios:
(a) working capital
(b) acid-test ratio
(c) current ratio
(d) debt ratio
(e) equity ratio
(f) debt-to-equity ratio

Accepted Answer

The answer of A corporation reports the following year-end balance...

Question 13

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the sales trend percent for Year 2 is:

Accepted Answer

A)  87%. 
B)  100%. 
C)  115%. 
D)  15%. 
E)  13%. 
A)  87%. 
B)  100%. 
C)  115%. 
D)  15%. 
E)  13%.

Question 14

The comparison of a company's financial condition and performance across time is known as ______________________________.

Accepted Answer

The answer of The comparison of a company's financial condition...

Question 15

What are the standards for comparisons in financial analysis? Give an example of each.

Accepted Answer

The standards are intracompany compariso

Question 16

The measurement of key relationships between financial statement items is known as ___________________________.

Accepted Answer

The answer of The measurement of key relationships between financial...

Question 17

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 18

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 19

The following selected financial information for a company was reported for the current year end. Calculate the following company ratios:
(a) Accounts receivable turnover.
(b) Inventory turnover.
(c) Days' sales uncollected.

Accepted Answer

(a) Accounts receivable turnover =
$1,00

Question 20

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

Exam 17: Analysis of Financial Statements

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Liquidity refers to the availability of resources to meet short-term cash requirements.

Horizontal analysis:

Common-size statements:

Ratios may be expressed as (1) _______________________, (2) _______________________, or (3) _______________________.

The average number of times a company's inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance, is the:

Refer to the following selected financial information from Hansen's, LLC. Compute the company's debt-to-equity ratio for Year 2.

Refer to the following selected financial information from Hansen's, LLC. Compute the company's profit margin for Year 2.

Financial reporting includes not only general purpose financial statements, but also information from stock exchange filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports, and Webcasts.

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

The return on ordinary shareholders' equity measures a company's success in reaching the goal of earning net income for its owners.

A corporation reports the following year-end balance sheet data. Calculate the following ratios: (a) working capital (b) acid-test ratio (c) current ratio (d) debt ratio (e) equity ratio (f) debt-to-equity ratio

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the sales trend percent for Year 2 is:

The comparison of a company's financial condition and performance across time is known as ______________________________.

What are the standards for comparisons in financial analysis? Give an example of each.

The measurement of key relationships between financial statement items is known as ___________________________.

In horizontal analysis the percent change is computed by:

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 following selected financial information for a company was reported for the current year end. Calculate the following company ratios: (a) Accounts receivable turnover. (b) Inventory turnover. (c) Days' sales uncollected.

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

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

Filters

Ratios may be expressed as (1) ___________, (2) _, or (3) _____________.

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