Question 1

The current ratio is

Accepted Answer

A)  used to evaluate a company's liquidity and short-term debt paying ability
B)  a solvency measure that indicates the margin of safety of a bondholder
C)  calculated by dividing current liabilities by current assets
D)  calculated by subtracting current liabilities from current assetsE) C) and D)
F) B) and D)

Question 2

An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.

Accepted Answer

A) True 
 B)False

Question 3

What is the dividend yield for Diane Company?

Accepted Answer

A)  7.5%
B)  0.75%
C)  13.3%
D)  1.3%E) A) and B)
F) A) and D)

Question 4

Cash and accounts receivable for Ashfall Co.are provided below:
  Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis?

Accepted Answer

Cash $4,400 increase $62,400 -...

Question 5

A balance sheet that displays only component percentages is a

Accepted Answer

A)  trend balance sheet
B)  comparative balance sheet
C)  condensed balance sheet
D)  common-sized balance sheetE) A) and B)
F) A) and C)

Question 6

Match each ratio that follows to its use items a-h.Items may be used more than once.
-quick ratio

Accepted Answer

A)  assess the profitability of the assets
B)  assess the effectiveness in the use of assets
C)  indicate the ability to meet currently maturing obligations
D)  indicate the margin of safety to creditors
E)  indicate instant debt-paying abilityF) assess the profitability of the investment by common stockholdersG) indicate future earnings prospectsH) indicate the extent to which earnings are being distributed to common stockholdersI) B) and H)
J) A) and D)

Question 7

What information is generally included in the Management Discussion and Analysis MD&A section of a corporate annual report?

Accepted Answer

The MD&A section typically includes:
Man...

Question 8

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

Accepted Answer

A)  solvency and leverage
B)  solvency and profitability
C)  solvency and liquidity
D)  solvency and equityE) All of the above
F) A) and C)

Question 9

Assume the following sales data for a company: Current year $1,025,000
Preceding year 820,000
What is the percentage increase in sales from the preceding year to the current year?

Accepted Answer

A)  100%
B)  25%
C)  125%
D)  75%E) A) and B)
F) A) and C)

Question 10

Match each ratio that follows to its use items a-h.Items may be used more than once.
-earnings per share EPS on common stock

Accepted Answer

A)  assess the profitability of the assets
B)  assess the effectiveness in the use of assets
C)  indicate the ability to meet currently maturing obligations
D)  indicate the margin of safety to creditors
E)  indicate instant debt-paying abilityF) assess the profitability of the investment by common stockholdersG) indicate future earnings prospectsH) indicate the extent to which earnings are being distributed to common stockholdersI) A) and F)
J) D) and E)

Question 11

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

Accepted Answer

A) True 
 B)False

Question 12

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

Accepted Answer

A) True 
 B)False

Question 13

A company reports the following:
Cost of goods sold $610,000
Average inventory 80,000
Determine the a inventory turnover, and b number of days' sales in inventory.Round your answer to one decimal place.

Accepted Answer

a Inventory turnover = Cost of goods sol...

Question 14

Match each ratio that follows to its use items a-h.Items may be used more than once.
-working capital

Accepted Answer

A)  assess the profitability of the assets
B)  assess the effectiveness in the use of assets
C)  indicate the ability to meet currently maturing obligations
D)  indicate the margin of safety to creditors
E)  indicate instant debt-paying abilityF) assess the profitability of the investment by common stockholdersG) indicate future earnings prospectsH) indicate the extent to which earnings are being distributed to common stockholdersI) C) and H)
J) B) and D)

Question 15

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

Accepted Answer

Ford Motor Company is an automobile manu...

Question 16

The following information pertains to Dallas Company.Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets
 Liabilities and Stockholders' Equity
 Income Statement

Accepted Answer

A)   
B)   
C)   
D)   E) A) and B)
F) A) and C)

Question 17

In computing the ratio of sales to assets, long-term investments are excluded from average total assets.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following items appear on the corporate income statement before income from continuing operations?

Accepted Answer

A)  cumulative effect of a change in accounting principle
B)  income tax expense
C)  extraordinary gain
D)  loss on discontinued operationsE) B) and C)
F) A) and B)

Question 19

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500.Current liabilities are $225,000.The current ratio is 2.5.

Accepted Answer

A) True 
 B)False

Question 20

The following information is available for Meyer Company: Dividends per share of common stock $1.80
Market price per share of common stock $30.00
Which of the following statements is correct?

Accepted Answer

A)  The dividend yield is 6.0%, which is of interest to investors seeking an increase in market price of their stocks.
B)  The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments.
C)  The dividend yield is 16.7%, which is of interest to bondholders.
D)  The dividend yield is 16.7% which is an important measure of solvency.E) None of the above
F) All of the above

Exam 14: Financial Statement Analysis

Assume the following sales data for a company: Current year $1,025,000 Preceding year 820,000 What is the percentage increase in sales from the preceding year to the current year?

Correct AnswerverifiedShow Answer

An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.

Correct AnswerverifiedShow Answer

The current ratio is

Correct AnswerverifiedShow Answer

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

Correct AnswerverifiedShow Answer

A balance sheet that displays only component percentages is a

Correct AnswerverifiedShow Answer

The following information pertains to Dallas Company.Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement

Correct AnswerverifiedShow Answer

In computing the ratio of sales to assets, long-term investments are excluded from average total assets.

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Which of the following items appear on the corporate income statement before income from continuing operations?

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Match each ratio that follows to its use items a-h.Items may be used more than once. -working capital

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A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500.Current liabilities are $225,000.The current ratio is 2.5.

Correct AnswerverifiedShow Answer

Cash and accounts receivable for Ashfall Co.are provided below: Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis?

Correct AnswerverifiedCash $4,400 increase $62,400 -...View AnswerShow Answer

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

Correct AnswerverifiedShow Answer

What information is generally included in the Management Discussion and Analysis MD&A section of a corporate annual report?

Correct AnswerverifiedThe MD&A section typically includes:Man...View AnswerShow Answer

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

Correct AnswerverifiedShow Answer

Match each ratio that follows to its use items a-h.Items may be used more than once. -earnings per share EPS on common stock

Correct AnswerverifiedShow Answer

A company reports the following: Cost of goods sold $610,000 Average inventory 80,000 Determine the a inventory turnover, and b number of days' sales in inventory.Round your answer to one decimal place.

Correct Answerverifieda Inventory turnover = Cost of goods sol...View AnswerShow Answer

The following information is available for Meyer Company: Dividends per share of common stock $1.80 Market price per share of common stock $30.00 Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Match each ratio that follows to its use items a-h.Items may be used more than once. -quick ratio

Correct AnswerverifiedShow Answer

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

Correct AnswerverifiedFord Motor Company is an automobile manu...View AnswerShow Answer

What is the dividend yield for Diane Company?

Correct AnswerverifiedShow Answer

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Cash $4,400 increase $62,400 -...
View Answer

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The MD&A section typically includes:
Man...
View Answer

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a Inventory turnover = Cost of goods sol...
View Answer

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Ford Motor Company is an automobile manu...
View Answer

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