Question 1

For an index number,the base year is set at 100 percent.

Accepted Answer

A) True 
 B)False

Question 2

When using an index number,one sets the most recent number in a series equal to 100.

Accepted Answer

A) True 
 B)False

Question 3

Write-downs and restructurings increase current operating income and decrease future income by shifting future costs to the future periods.

Accepted Answer

A) True 
 B)False

Question 4

Consistency requires that a company use the same accounting procedures as other companies in the same industry.

Accepted Answer

A) True 
 B)False

Question 5

The calculation of free cash flow contains a deduction for

Accepted Answer

A) interest expense. 
B) depreciation. 
C) net capital expenditures. 
D) net cash flows from operating activities. 
A) interest expense. 
B) depreciation. 
C) net capital expenditures. 
D) net cash flows from operating activities.

Question 6

Which of the following describes the interest coverage ratio?

Accepted Answer

A) Income before income taxes plus interest expense divided by interest expense 
B) Income after income taxes plus interest expense divided by interest expense 
C) Income after income taxes divided by interest expense 
D) Income before income taxes minus interest expense divided by interest expense 
A) Income before income taxes plus interest expense divided by interest expense 
B) Income after income taxes plus interest expense divided by interest expense 
C) Income after income taxes divided by interest expense 
D) Income before income taxes minus interest expense divided by interest expense

Question 7

In a common-size income statement,each item is expressed as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 8

A general rule in choosing among alternative investments is the greater the risk taken,the

Accepted Answer

A) greater the return required. 
B) lower the potential expected. 
C) greater the price of the investment. 
D) lower the profits expected. 
A) greater the return required. 
B) lower the potential expected. 
C) greater the price of the investment. 
D) lower the profits expected.

Question 9

What is horizontal analysis,and why is it useful in performing financial performance measurement?

Accepted Answer

Horizontal analysis is the computation o

Question 10

The existence of diversified companies makes which of the following very difficult?

Accepted Answer

A) Comparison with industry norms 
B) The preparation of interim financial statements 
C) Use of more than one depreciation or inventory method 
D) The compilation of segment information 
A) Comparison with industry norms 
B) The preparation of interim financial statements 
C) Use of more than one depreciation or inventory method 
D) The compilation of segment information

Question 11

Liquidity ratios are an indication of a company's

Accepted Answer

A) ability to effectively employ its resources. 
B) overall debt to equity position. 
C) overall debt position. 
D) ability to pay bills when they are due and to meet unexpected needs for cash. 
A) ability to effectively employ its resources. 
B) overall debt to equity position. 
C) overall debt position. 
D) ability to pay bills when they are due and to meet unexpected needs for cash.

Question 12

Eva Gomez is considering investing money in the common stock of Casa Corporation.She has obtained the annual report of the company and calculated the ratios presented in your text.Eva knows that her calculations are accurate,but does not know if the ratios indicate favorable or unfavorable things about the company.What three standards of comparison are available to Eva? What would each of the standards tell her about her ratios?

Accepted Answer

Three commonly used standards of compari

Question 13

The interest coverage ratio and the debt to equity ratio are measures of profitability.

Accepted Answer

A) True 
 B)False

Question 14

Quality of earnings is affected by all of the following except

Accepted Answer

A) executive compensation. 
B) accounting methods. 
C) accounting estimates. 
D) one-time items. 
A) executive compensation. 
B) accounting methods. 
C) accounting estimates. 
D) one-time items.

Question 15

In conducting horizontal analysis,it is important to focus attention on the changes in

Accepted Answer

A) the composition of the statements. 
B) dollar amounts and their percentages. 
C) dollar amounts. 
D) percentages. 
A) the composition of the statements. 
B) dollar amounts and their percentages. 
C) dollar amounts. 
D) percentages.

Question 16

The most complete financial newspaper in the United States is The Wall Street Journal.

Accepted Answer

A) True 
 B)False

Question 17

It is possible for horizontal analysis to indicate an increase in revenues from one year to another and a decrease in net income.

Accepted Answer

A) True 
 B)False

Question 18

Disclosure of segment information is useful in the analysis of diversified companies.

Accepted Answer

A) True 
 B)False

Question 19

What is the best way to study the relationship of the components of financial statements?

Accepted Answer

A) Perform ratio analysis. 
B) Perform trend analysis. 
C) Perform horizontal analysis. 
D) Prepare common-size statements. 
A) Perform ratio analysis. 
B) Perform trend analysis. 
C) Perform horizontal analysis. 
D) Prepare common-size statements.

Question 20

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.

Accepted Answer

The answer of Using the income statement below,develop a common-size...

For an index number,the base year is set at 100 percent.

When using an index number,one sets the most recent number in a series equal to 100.

Write-downs and restructurings increase current operating income and decrease future income by shifting future costs to the future periods.

Consistency requires that a company use the same accounting procedures as other companies in the same industry.

The calculation of free cash flow contains a deduction for

Which of the following describes the interest coverage ratio?

In a common-size income statement,each item is expressed as a percentage of net income.

A general rule in choosing among alternative investments is the greater the risk taken,the

What is horizontal analysis,and why is it useful in performing financial performance measurement?

The existence of diversified companies makes which of the following very difficult?

Liquidity ratios are an indication of a company's

The interest coverage ratio and the debt to equity ratio are measures of profitability.

Quality of earnings is affected by all of the following except

In conducting horizontal analysis,it is important to focus attention on the changes in

The most complete financial newspaper in the United States is The Wall Street Journal.

It is possible for horizontal analysis to indicate an increase in revenues from one year to another and a decrease in net income.

Disclosure of segment information is useful in the analysis of diversified companies.

What is the best way to study the relationship of the components of financial statements?

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Accounting for Investments

Filters

Exam 16: Financial Statement Analysis

For an index number,the base year is set at 100 percent.

When using an index number,one sets the most recent number in a series equal to 100.

Write-downs and restructurings increase current operating income and decrease future income by shifting future costs to the future periods.

Consistency requires that a company use the same accounting procedures as other companies in the same industry.

The calculation of free cash flow contains a deduction for

Which of the following describes the interest coverage ratio?

In a common-size income statement,each item is expressed as a percentage of net income.

A general rule in choosing among alternative investments is the greater the risk taken,the

What is horizontal analysis,and why is it useful in performing financial performance measurement?

The existence of diversified companies makes which of the following very difficult?

Liquidity ratios are an indication of a company's

The interest coverage ratio and the debt to equity ratio are measures of profitability.

Quality of earnings is affected by all of the following except

In conducting horizontal analysis,it is important to focus attention on the changes in

The most complete financial newspaper in the United States is The Wall Street Journal.

It is possible for horizontal analysis to indicate an increase in revenues from one year to another and a decrease in net income.

Disclosure of segment information is useful in the analysis of diversified companies.

What is the best way to study the relationship of the components of financial statements?

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Accounting for Investments

Filters