Question 1

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 2

Ash Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for Year 3. Using Year 1 as the base year, what is the revenue trend percent for Years 2 and 3?

Accepted Answer

A)  80% for Year 2 and 90% for Year 3. 
B)  88% for Year 2 and 80% for Year 3. 
C)  88% for Year 2 and 90% for Year 3. 
D)  112.5% for Year 2 and 125% for Year 3. 
E)  125% for Year 2 and 112.5% for Year 3. 
A)  80% for Year 2 and 90% for Year 3. 
B)  88% for Year 2 and 80% for Year 3. 
C)  88% for Year 2 and 90% for Year 3. 
D)  112.5% for Year 2 and 125% for Year 3. 
E)  125% for Year 2 and 112.5% for Year 3.

Question 3

A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders' equity was $640,000. What is the company's return on common stockholders' equity?

Accepted Answer

($120,000

Question 4

The return on total assets ratio is a profitability measure.

Accepted Answer

A) True 
 B)False

Question 5

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 6

The following information is available for the Starr Corporation:
 $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 750,000 \
\hline \text { Cost of goods sold } & 450,000 \
\hline \text { Gross profit } & 300,000 \
\hline \text { Operating income } & 85,000 \
\hline \text { Net income } & 42,000 \
\hline \text { Inventory, beginning-year } & 71,200 \
\hline \text { Inventory, end-of-year } & 48,800 \
\hline
\end{array}$$ Calculate the company's inventory turnover and its days' sales in inventory.

Accepted Answer

Inventory turnover = $450,000/

Question 7

One of several ratios that reflects solvency includes the:

Accepted Answer

A)  Acid-test ratio. 
B)  Current ratio. 
C)  Times interest earned ratio. 
D)  Total asset turnover. 
E)  Days' sales in inventory. 
A)  Acid-test ratio. 
B)  Current ratio. 
C)  Times interest earned ratio. 
D)  Total asset turnover. 
E)  Days' sales in inventory.

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

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The working capital is:

Accepted Answer

A)  141%. 
B)  71%. 
C)  ($56,000). 
D)  $56,000. 
E)  41%. 
A)  141%. 
B)  71%. 
C)  ($56,000). 
D)  $56,000. 
E)  41%.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A corporation reports the following year-end balance sheet data. The company's debt-to-equity ratio equals: $\begin{array}{lrrr}
\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \
\text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \
\text { Inventory } & 60,000 & \text { Common stock } & 100,000 \
\text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \
\text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000 \
\end{array}$

Accepted Answer

A)  0.58 
B)  1.27 
C)  2.07 
D)  0.37 
E)  0.63 
A)  0.58 
B)  1.27 
C)  2.07 
D)  0.37 
E)  0.63

Question 12

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa), a meaningful percent change cannot be calculated.

Accepted Answer

A) True 
 B)False

Question 13

When no value is in the base period, no percent change is computable.

Accepted Answer

A) True 
 B)False

Question 14

Low expectations of future performance result in a low price-earnings (PE) ratio.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The building blocks of financial statement analysis do not include:

Accepted Answer

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

Question 18

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Accepted Answer

Financial

Question 19

Working capital is computed as current liabilities minus current assets.

Accepted Answer

A) True 
 B)False

Question 20

To be useful, a ratio must refer to economically important relationships, such as a sale price compared to its cost.

Accepted Answer

A) True 
 B)False

In horizontal analysis the percent change is computed by:

Ash Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for Year 3. Using Year 1 as the base year, what is the revenue trend percent for Years 2 and 3?

A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders' equity was $640,000. What is the company's return on common stockholders' equity?

The return on total assets ratio is a profitability measure.

Internal users of financial information:

One of several ratios that reflects solvency includes the:

The common-size percent is computed by:

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The working capital is:

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

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa), a meaningful percent change cannot be calculated.

When no value is in the base period, no percent change is computable.

Low expectations of future performance result in a low price-earnings (PE) ratio.

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

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

The building blocks of financial statement analysis do not include:

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Working capital is computed as current liabilities minus current assets.

To be useful, a ratio must refer to economically important relationships, such as a sale price compared to its cost.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

Filters

Exam 13: Analysis of Financial Statements

In horizontal analysis the percent change is computed by:

Ash Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for Year 3. Using Year 1 as the base year, what is the revenue trend percent for Years 2 and 3?

A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders' equity was $640,000. What is the company's return on common stockholders' equity?

The return on total assets ratio is a profitability measure.

Internal users of financial information:

One of several ratios that reflects solvency includes the:

The common-size percent is computed by:

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The working capital is:

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

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa), a meaningful percent change cannot be calculated.

When no value is in the base period, no percent change is computable.

Low expectations of future performance result in a low price-earnings (PE) ratio.

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

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

The building blocks of financial statement analysis do not include:

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Working capital is computed as current liabilities minus current assets.

To be useful, a ratio must refer to economically important relationships, such as a sale price compared to its cost.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

Filters