Question 1

Match each definition that follows with the term (a-h)  it defines.
-An analysis of a company's ability to pay its current liabilities

Accepted Answer

A)  Solvency
B)  Leverage
C)  Times interest earned
D)  Horizontal analysis
E)  Vertical analysisF) Common-sized financial statementsG) Current position analysisH) Profitability analysisI) E) and G)
J) F) and H)

Question 2

The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Accepted Answer

A) True 
 B)False

Question 3

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

Accepted Answer

A) True 
 B)False

Question 4

Dividend yield on common stock is calculated as

Accepted Answer

A)  dividends on common stock, divided by shares of common stock outstanding
B)  net income minus preferred dividends, divided by shares of common stock outstanding
C)  dividends per share of common stock, divided by earnings per share
D)  dividends per share of common stock, divided by market price per share of common stockE) A) and D)
F) None of the above

Question 5

An advantage of the current ratio is that it considers the makeup of the current assets.

Accepted Answer

A) True 
 B)False

Question 6

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analyses?

Accepted Answer

When percentages are utilized rather tha...

Question 7

Which of the following is not a characteristic evaluated in ratio analysis?

Accepted Answer

A)  liquidity
B)  profitability
C)  solvency
D)  marketabilityE) A) and B)
F) A) and C)

Question 8

The following income statement information is for Sadie Company:​  Using vertical analysis of the income statement for Sadie Company,determine the gross profit margin.

Accepted Answer

A)  100%
B)  66.5%
C)  34.3%
D)  29.4%E) A) and B)
F) A) and C)

Question 9

A company reports the following:​  Determine the 
(a)return on stockholders' equity and 
(b)return on common stockholders' equity.Round your answers to one decimal place.

Accepted Answer

The answer of A company reports the following:​  Determine...

Question 10

Which of the following is the most useful in analyzing companies of different sizes?

Accepted Answer

A)  comparative statements
B)  common-sized financial statements
C)  price-level accounting
D)  audit reportE) A) and B)
F) None of the above

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

A company reports the following income statement and balance sheet information for the current year:​  Determine the return on total assets.Round your answer to one decimal place.

Accepted Answer

Return on Total Assets =
(Net Income + ...

Question 13

A financial statement showing each item on the statement as a percentage of one key item on the statement is called a common-sized financial statement.

Accepted Answer

A) True 
 B)False

Question 14

A common measure of liquidity is

Accepted Answer

A)  the asset turnover ratio
B)  dividends per share of common stock
C)  the accounts receivable turnover
D)  the profit marginE) A) and B)
F) A) and C)

Question 15

A firm selling food should have a higher inventory turnover rate than a firm selling office furniture.

Accepted Answer

A) True 
 B)False

Question 16

CorpCo gathered the following information as of the end of the current fiscal year:​​  What is CorpCo's price-earnings ratio? Round your answer to one decimal place.

Accepted Answer

CorpCo's price-earnings ratio ...

Question 17

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year,there has been an acceleration in the collection of receivables.

Accepted Answer

A) True 
 B)False

Question 18

A company reports the following:​  Calculate the company's earnings per share on common stock.

Accepted Answer

The answer of A company reports the following:​  Calculate...

Question 19

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)  presentation of earnings per share
D)  loss on discontinued operationsE) A) and D)
F) All of the above

Question 20

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

Accepted Answer

A)  Assess the profitability of the assets
B)  Assess how effectively assets are used
C)  Indicate the ability to pay current liabilities
D)  Indicate how much of the company is financed by debt and equity
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) B) and F)

Exam 17: Financial Statement Analysis

An advantage of the current ratio is that it considers the makeup of the current assets.

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A firm selling food should have a higher inventory turnover rate than a firm selling office furniture.

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The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

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A common measure of liquidity is

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

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A company reports the following income statement and balance sheet information for the current year:​ Determine the return on total assets.Round your answer to one decimal place.

Correct AnswerverifiedReturn on Total Assets = (Net Income + ...View AnswerShow Answer

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year,there has been an acceleration in the collection of receivables.

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A company reports the following:​ Determine the (a)return on stockholders' equity and (b)return on common stockholders' equity.Round your answers to one decimal place.

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

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CorpCo gathered the following information as of the end of the current fiscal year:​​ What is CorpCo's price-earnings ratio? Round your answer to one decimal place.

Correct AnswerverifiedCorpCo's price-earnings ratio ...View AnswerShow Answer

A company reports the following:​ Calculate the company's earnings per share on common stock.

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

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Which of the following is the most useful in analyzing companies of different sizes?

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What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analyses?

Correct AnswerverifiedWhen percentages are utilized rather tha...View AnswerShow Answer

Which of the following is not a characteristic evaluated in ratio analysis?

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Match each definition that follows with the term (a-h) it defines. -An analysis of a company's ability to pay its current liabilities

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A financial statement showing each item on the statement as a percentage of one key item on the statement is called a common-sized financial statement.

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The following income statement information is for Sadie Company:​ Using vertical analysis of the income statement for Sadie Company,determine the gross profit margin.

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Dividend yield on common stock is calculated as

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The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Correct AnswerverifiedShow Answer

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A company reports the following income statement and balance sheet information for the current year: Determine the return on total assets.Round your answer to one decimal place.

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Return on Total Assets =
(Net Income + ...
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A company reports the following: Determine the (a)return on stockholders' equity and (b)return on common stockholders' equity.Round your answers to one decimal place.

Correct Answer
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CorpCo gathered the following information as of the end of the current fiscal year: What is CorpCo's price-earnings ratio? Round your answer to one decimal place.

Correct Answer
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CorpCo's price-earnings ratio ...
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A company reports the following: Calculate the company's earnings per share on common stock.

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When percentages are utilized rather tha...
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The following income statement information is for Sadie Company: Using vertical analysis of the income statement for Sadie Company,determine the gross profit margin.

Correct Answer
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Correct Answer
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