Question 1

A ratio expresses a mathematical relation between two quantities and can be expressed as a percent, rate, or proportion.

Accepted Answer

A) True 
 B)False

Question 2

Quick assets divided by current liabilities is the:

Accepted Answer

A)  Acid-test ratio. 
B)  Current ratio. 
C)  Working capital ratio. 
D)  Current liability turnover ratio. 
E)  Quick asset turnover ratio. 
A)  Acid-test ratio. 
B)  Current ratio. 
C)  Working capital ratio. 
D)  Current liability turnover ratio. 
E)  Quick asset turnover ratio.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Selected current year company information follows: Total shareholders' equity, beginning-year.. 198,935
  Total shareholders' equity, end-of-year…… 121,851
The total asset turnover is:

Accepted Answer

A)  2.24 times 
B)  2.81 times 
C)  3.64 times 
D)  4.67 times 
E)  6.28 times 
A)  2.24 times 
B)  2.81 times 
C)  3.64 times 
D)  4.67 times 
E)  6.28 times

Question 5

The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) profitability.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Identify and explain the four building blocks of financial statement analysis.

Accepted Answer

The four usual building blocks of financ

Question 8

Dividing accounts receivable, net by net sales and multiplying the result by 365 is the:

Accepted Answer

A)  Profit margin. 
B)  Days' sales uncollected. 
C)  Accounts receivable turnover ratio. 
D)  Average accounts receivable ratio. 
E)  Current ratio. 
A)  Profit margin. 
B)  Days' sales uncollected. 
C)  Accounts receivable turnover ratio. 
D)  Average accounts receivable ratio. 
E)  Current ratio.

Question 9

Use the following selected information from Farris, LLC to determine the Year 2 and Year 1 common size percents for operating expenses using Year 1 net sales as the base.

Accepted Answer

A)  36.4% for Year 2 and 41.1% for Year 1. 
B)  55.0% for Year 2 and 56.0% for Year 1. 
C)  119.4% for Year 2 and 100.0% for Year 1. 
D)  103.8% for Year 2 and 100.0% for Year 1. 
E)  20.0% for Year 2 and 23.0% for Year 1. 
A)  36.4% for Year 2 and 41.1% for Year 1. 
B)  55.0% for Year 2 and 56.0% for Year 1. 
C)  119.4% for Year 2 and 100.0% for Year 1. 
D)  103.8% for Year 2 and 100.0% for Year 1. 
E)  20.0% for Year 2 and 23.0% for Year 1.

Question 10

Calculate the percent increase or decrease for each of the following financial statement items:

Accepted Answer

The answer of Calculate the percent increase or decrease for...

Question 11

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:

Accepted Answer

A)  Inventory turnover ratio. 
B)  Profit margin. 
C)  Days' sales in inventory. 
D)  Current ratio. 
E)  Total asset turnover. 
A)  Inventory turnover ratio. 
B)  Profit margin. 
C)  Days' sales in inventory. 
D)  Current ratio. 
E)  Total asset turnover.

Question 12

Total asset turnover reflects a company's ability to use its assets to generate sales and is an important indication of operating efficiency.

Accepted Answer

A) True 
 B)False

Question 13

____________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Accepted Answer

The answer of ____________ is a method of analysis used...

Question 14

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 15

A good financial statement analysis report often includes the following sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

Accepted Answer

A) True 
 B)False

Question 16

A good financial statement analysis report usually includes the following six sections: (1) ______________________, (2) ____________________, (3) _______________, (4) __________________ (5) __________________, and (6) ____________________.

Accepted Answer

Executive summary, a

Question 17

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.

Question 18

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

Accepted Answer

A) True 
 B)False

Question 19

The ability to meet short-term obligations and to efficiently generate revenues is called:

Accepted Answer

A)  Liquidity and efficiency. 
B)  Solvency. 
C)  Profitability. 
D)  Market prospects. 
E)  Creditworthiness. 
A)  Liquidity and efficiency. 
B)  Solvency. 
C)  Profitability. 
D)  Market prospects. 
E)  Creditworthiness.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 17: Analysis of Financial Statements

A ratio expresses a mathematical relation between two quantities and can be expressed as a percent, rate, or proportion.

Quick assets divided by current liabilities is the:

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

Selected current year company information follows: Total shareholders' equity, beginning-year.. 198,935 Total shareholders' equity, end-of-year…… 121,851 The total asset turnover is:

The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) profitability.

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

Identify and explain the four building blocks of financial statement analysis.

Dividing accounts receivable, net by net sales and multiplying the result by 365 is the:

Use the following selected information from Farris, LLC to determine the Year 2 and Year 1 common size percents for operating expenses using Year 1 net sales as the base.

Calculate the percent increase or decrease for each of the following financial statement items:

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:

Total asset turnover reflects a company's ability to use its assets to generate sales and is an important indication of operating efficiency.

____________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount.

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

A good financial statement analysis report often includes the following sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

A good financial statement analysis report usually includes the following six sections: (1) ______________________, (2) ____________________, (3) _______________, (4) __________________ (5) __________________, and (6) ____________________.

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

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

The ability to meet short-term obligations and to efficiently generate revenues is called:

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

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

A good financial statement analysis report usually includes the following six sections: (1) __________, (2) , (3) _, (4) (5) , and (6) __________.