Question 1

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & & \text { Asset } & & \
& \text { Liquidity } & \text { Management } & \text { Debt } & \text { Profitability } \
\hline \text { Asset turnover } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 2

An acid test (quick)ratio of 0.75 to 1 would indicate:

Accepted Answer

A) a ratio that would not allow a company to pay off all current liabilities with quick assets. 
B) for every $0.75 of short-term debt there is $1.00 of quick assets to meet short-term obligations. 
C) for every $1 of current assets there is $0.75 of short-term debt. 
D) Both A and B are correct.

Question 3

The lower the times interest earned ratio,the more likely it is that interest payments will be made.

Accepted Answer

A) True 
 B)False

Question 4

Statements that are often used to compare similar businesses are called:

Accepted Answer

A) comparative analysis. 
B) vertical analysis. 
C) horizontal analysis. 
D) common-size statements.

Question 5

Noble Company's accounts receivable turnover was 24.6 in Year 1 and 18.2 in Year 2.This change in accounts receivable turnover indicates:

Accepted Answer

A) the company is not selling its inventory as fast. 
B) the company is selling its inventory faster. 
C) the company's customers are paying faster. 
D) the company's customers are paying slower.

Question 6

A statement presenting data from two or more consecutive periods is called a:

Accepted Answer

A) comparative statement. 
B) compromising statement. 
C) common-size statement. 
D) Both A and C

Question 7

The income before taxes and interest expense of Barry Builders for the year just ended is $210,000.Their interest expense is $20,000 and their income taxes are $80,500.The number of times interest would be earned is:

Accepted Answer

A) 22.0. 
B) 10.5. 
C) 11.5. 
D) 0)5.

Question 8

If the average collection period is 35 days,this means:

Accepted Answer

A) from the date of purchase to the date of payment is 35 days. 
B) from the date of sale to the date of receipt of payment is 35 days. 
C) from the date of discount to the date of receipt of payment is 35 days. 
D) None of these answers is correct.

Question 9

Net income was $60,000 in Year 1 and $45,000 in Year 2.The percentage increase or decrease in net income was:

Accepted Answer

A) 33.33%. 
B) 133.33%. 
C) (25%). 
D) (33.33%).

Question 10

Using just a base year and one additional year is not sufficient to do a long-term trend analysis of accounts.

Accepted Answer

A) True 
 B)False

Question 11

If current assets are $60,000 and current liabilities are $10,000,the current ratio is:

Accepted Answer

A) 5:1. 
B) 6:1. 
C) 0)6:1. 
D) None of the above.

Question 12

The reasons for changes in key ratios must be analyzed before drawing conclusions.

Accepted Answer

A) True 
 B)False

Question 13

The revenue of Carol's Environmental Services for Years 1,2,and 3 are $40,000,$60,000 and $80,000,respectively.Year 1 is the base year.The trend percentage for Year 3 is:

Accepted Answer

A) 50%. 
B) 150%. 
C) 200%. 
D) 133%.

Question 14

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & & \text { Asset } & & \
& \text { Liquidity } & \text { Management } & \text { Debt } & \text { Profitability } \
\hline \text { Gross profit rate } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 15

Define two types of comparative income statements and compare the information provided by them.

Accepted Answer

The answer of Define two types of comparative income statements...

Question 16

Asset management ratios measure:

Accepted Answer

A) a company's ability to earn a profit. 
B) a company's ability to meet short-term obligations. 
C) how well a company is using debt versus equity. 
D) how effectively a company is using its assets.

Question 17

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability
-$$\begin{array} { | l | c | c | c | c | } 
\hline & & \text { Asset } & & \
& \text { Liquidity } & \text { Management } & \text { Debt } & \text { Profitability } \
\hline \text { Acid test ratio } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 18

In a common-size income statement,advertising expenses are 10%.This means that they are 10% of:

Accepted Answer

A) net income. 
B) net sales. 
C) gross profit. 
D) net profit.

Question 19

Scott Company had a current ratio of 2.57:1 in Year 1 and 2.76:1 in Year 2.This change in current ratio indicates:

Accepted Answer

A) the company's debt paying ability has improved. 
B) the company's debt paying ability has weakened. 
C) the company's customers are paying their accounts sooner. 
D) the company is able to sell its inventory faster.

Question 20

If management wishes to measure how effectively the assets were used in generating a profit,they could use the:

Accepted Answer

A) rate of return on total assets. 
B) rate of return on common stockholders' equity. 
C) return on sales. 
D) times interest earned.

Exam 22: Analyzing Financial Statements

An acid test (quick) ratio of 0.75 to 1 would indicate:

The lower the times interest earned ratio,the more likely it is that interest payments will be made.

Statements that are often used to compare similar businesses are called:

Noble Company's accounts receivable turnover was 24.6 in Year 1 and 18.2 in Year 2.This change in accounts receivable turnover indicates:

A statement presenting data from two or more consecutive periods is called a:

The income before taxes and interest expense of Barry Builders for the year just ended is $210,000.Their interest expense is $20,000 and their income taxes are $80,500.The number of times interest would be earned is:

If the average collection period is 35 days,this means:

Net income was $60,000 in Year 1 and $45,000 in Year 2.The percentage increase or decrease in net income was:

Using just a base year and one additional year is not sufficient to do a long-term trend analysis of accounts.

If current assets are $60,000 and current liabilities are $10,000,the current ratio is:

The reasons for changes in key ratios must be analyzed before drawing conclusions.

The revenue of Carol's Environmental Services for Years 1,2,and 3 are $40,000,$60,000 and $80,000,respectively.Year 1 is the base year.The trend percentage for Year 3 is:

Define two types of comparative income statements and compare the information provided by them.

Asset management ratios measure:

In a common-size income statement,advertising expenses are 10%.This means that they are 10% of:

Scott Company had a current ratio of 2.57:1 in Year 1 and 2.76:1 in Year 2.This change in current ratio indicates:

If management wishes to measure how effectively the assets were used in generating a profit,they could use the: