Question 1

Refer to the following selected financial information from Fennie's, LLC. Compute the company's accounts receivable turnover for Year 2.

Accepted Answer

A)  8.32. 
B)  8.62. 
C)  8.94. 
D)  5.78. 
E)  7.90. 
A)  8.32. 
B)  8.62. 
C)  8.94. 
D)  5.78. 
E)  7.90.

Question 2

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.

Question 3

Liquidity and efficiency are considered to be building blocks of financial statement analysis.

Accepted Answer

A) True 
 B)False

Question 4

Ratios, like other analysis tools, are only historically oriented.

Accepted Answer

A) True 
 B)False

Question 5

Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as:

Accepted Answer

A)  Period-to-period statements. 
B)  Controlling statements. 
C)  Successive statements. 
D)  Comparative statements. 
E)  Serial statements. 
A)  Period-to-period statements. 
B)  Controlling statements. 
C)  Successive statements. 
D)  Comparative statements. 
E)  Serial statements.

Question 6

Refer to the following selected financial information from Fennie's, LLC. Compute the company's days' sales in inventory for Year 2.

Accepted Answer

A)  43.9. 
B)  42.3. 
C)  46.2. 
D)  80.0. 
E)  113.3. 
A)  43.9. 
B)  42.3. 
C)  46.2. 
D)  80.0. 
E)  113.3.

Question 7

Refer to the following selected financial information from Hansen's, LLC. Compute the company's times interest earned for Year 2.

Accepted Answer

A)  6.9. 
B)  4.8. 
C)  5.8. 
D)  14.0. 
E)  7.9. 
A)  6.9. 
B)  4.8. 
C)  5.8. 
D)  14.0. 
E)  7.9.

Question 8

The common-size percent is computed by:

Accepted Answer

A)  Dividing the analysis amount by the base amount. 
B)  Dividing the base amount by the analysis amount. 
C)  Dividing the analysis amount by the base amount and multiplying the result by 100. 
D)  Dividing the base amount by the analysis amount and multiplying the result by 1,000. 
E)  Subtracting the base amount from the analysis amount and multiplying the result by 100. 
A)  Dividing the analysis amount by the base amount. 
B)  Dividing the base amount by the analysis amount. 
C)  Dividing the analysis amount by the base amount and multiplying the result by 100. 
D)  Dividing the base amount by the analysis amount and multiplying the result by 1,000. 
E)  Subtracting the base amount from the analysis amount and multiplying the result by 100.

Question 9

A corporation reported cash of $14,000 and total assets of $178,300. Its common-size percent for cash equals:

Accepted Answer

A)  .0785%. 
B)  7.85%. 
C)  12.73%. 
D)  1273%. 
E)  7850%. 
A)  .0785%. 
B)  7.85%. 
C)  12.73%. 
D)  1273%. 
E)  7850%.

Question 10

Intracompany analysis is based on comparisons with competitors.

Accepted Answer

A) True 
 B)False

Question 11

External users of financial information:

Accepted Answer

A)  Are those individuals involved in managing and operating the company. 
B)  Include internal auditors and consultants. 
C)  Are not directly involved in operating the company. 
D)  Make strategic decisions for a company. 
E)  Make operating decisions for a company. 
A)  Are those individuals involved in managing and operating the company. 
B)  Include internal auditors and consultants. 
C)  Are not directly involved in operating the company. 
D)  Make strategic decisions for a company. 
E)  Make operating decisions for a company.

Question 12

Vertical analysis is the comparison of a company's financial condition and performance across time.

Accepted Answer

A) True 
 B)False

Question 13

The ability to generate positive market expectations is called:

Accepted Answer

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

Question 14

Refer to the following selected financial information from Fennie's, LLC. Compute the company's current ratio for Year 2.

Accepted Answer

A)  2.26. 
B)  1.98. 
C)  2.95. 
D)  3.05. 
E)  1.88. 
A)  2.26. 
B)  1.98. 
C)  2.95. 
D)  3.05. 
E)  1.88.

Question 15

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accepted Answer

A) True 
 B)False

Question 16

Use the following selected information from Farris, LLC to determine the Year 2 and Year 1 trend percents for cost of goods sold using Year 1 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)  117.2% for Year 2 and 100.0% for Year 1. 
E)  65.1% for Year 2 and 64.6% 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)  117.2% for Year 2 and 100.0% for Year 1. 
E)  65.1% for Year 2 and 64.6% for Year 1.

Question 17

Three of the most common tools of financial analysis are:

Accepted Answer

A)  Financial reporting, ratio analysis, vertical analysis. 
B)  Ratio analysis, horizontal analysis, financial reporting. 
C)  Horizontal analysis, vertical analysis, ratio analysis. 
D)  Trend analysis, financial reporting, ratio analysis. 
E)  Vertical analysis, political analysis, horizontal analysis. 
A)  Financial reporting, ratio analysis, vertical analysis. 
B)  Ratio analysis, horizontal analysis, financial reporting. 
C)  Horizontal analysis, vertical analysis, ratio analysis. 
D)  Trend analysis, financial reporting, ratio analysis. 
E)  Vertical analysis, political analysis, horizontal analysis.

Question 18

Use the following selected information from Farris, LLC to determine the Year 2 and Year 1 common size percents for cost of goods sold 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)  117.2% for Year 2 and 100.0% for Year 1. 
E)  65.1% for Year 2 and 64.6% 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)  117.2% for Year 2 and 100.0% for Year 1. 
E)  65.1% for Year 2 and 64.6% for Year 1.

Question 19

Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

Accepted Answer

A) True 
 B)False

Question 20

Net sales divided by average total assets is the:

Accepted Answer

A)  Profit margin. 
B)  Total asset turnover. 
C)  Current ratio. 
D)  Sales return ratio. 
E)  Return on total assets. 
A)  Profit margin. 
B)  Total asset turnover. 
C)  Current ratio. 
D)  Sales return ratio. 
E)  Return on total assets.

Exam 17: Analysis of Financial Statements

Refer to the following selected financial information from Fennie's, LLC. Compute the company's accounts receivable turnover for Year 2.

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?

Liquidity and efficiency are considered to be building blocks of financial statement analysis.

Ratios, like other analysis tools, are only historically oriented.

Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as:

Refer to the following selected financial information from Fennie's, LLC. Compute the company's days' sales in inventory for Year 2.

Refer to the following selected financial information from Hansen's, LLC. Compute the company's times interest earned for Year 2.

The common-size percent is computed by:

A corporation reported cash of $14,000 and total assets of $178,300. Its common-size percent for cash equals:

Intracompany analysis is based on comparisons with competitors.

External users of financial information:

Vertical analysis is the comparison of a company's financial condition and performance across time.

The ability to generate positive market expectations is called:

Refer to the following selected financial information from Fennie's, LLC. Compute the company's current ratio for Year 2.

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Use the following selected information from Farris, LLC to determine the Year 2 and Year 1 trend percents for cost of goods sold using Year 1 as the base.

Three of the most common tools of financial analysis are:

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

Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

Net sales divided by average total assets is the:

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

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