Question 1

Match each item with its definition.
-Common-sized financial statements

Accepted Answer

A)  Useful for comparing one company to another or a company with industry averages
B)  Focuses on a company’s ability to generate net income
C)  The percentage analysis of the relationship of each component in a financial statement to a total within the statement.
D)  An analysis of a company’s ability to pay its current liabilities.
E)  Occurs when a company abandons a segment.F) A percentage analysis of increases and decreases in related items in comparative financial statements.G) Something that is both unusual and infrequent.H) This requires a restatement of prior period financial statements.I) A) and B)
J) B) and F)

Question 2

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

Accepted Answer

A) True 
 B)False

Question 3

A common measure of liquidity is

Accepted Answer

A)   ratio of net sales to assets.
B)   dividends per share of common stock.
C)   receivable turnover.
D)   profit margin.E) B) and D)
F) A) and D)

Question 4

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to 1.

Accepted Answer

A) True 
 B)False

Question 5

In performing a vertical analysis, the base for cost of goods sold is

Accepted Answer

A)   total selling expenses.
B)   net sales.
C)   total expenses.
D)   gross profit.E) B) and C)
F) B) and D)

Question 6

The following data are taken from the balance sheet at the end of the current year. Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Present figures used in your computations. Round ratios to the nearest tenth.

Accepted Answer

The answer of The following data are taken from the...

Question 7

Gallant Company reported net income of $2,500,000. The income statement included one extraordinary item: a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations, both after applicable income tax.
There were 100,000 shares of $10 par common stock and 40,000 shares 4% preferred stock of $100 par outstanding throughout the current year.
Required: Prepare the earnings per share section of Gallant Company's income statement.

Accepted Answer

The answer of Gallant Company reported net income of $2,500,000....

Question 8

If two companies have the same current ratio, their ability to pay short-term debt is the same.

Accepted Answer

A) True 
 B)False

Question 9

The following selected data were taken from the financial statements of the Berrol Group for December 31, 2012, 2011, and 2010:
  The 2012 net income was $242,000 and the 2011 net income was $308,000. No dividends on common stock were declared between 2010 and 2012.
Required:
(1) Determine the rate earned on total assets, the rate earned on stockholders' equity, and the rate earned on common stockholders' equity for the years 2012 and 2011. Round to one decimal place.
(2) What conclusion can be drawn from these data as to the company's profitability?

Accepted Answer

The answer of The following selected data were taken from...

Question 10

In a common size balance sheet, the 100% figure is:

Accepted Answer

A)   total property, plant and equipment.
B)   total current assets.
C)   total liabilities.
D)   total assets.E) A) and B)
F) A) and C)

Question 11

When a company changes from one acceptable accounting method to another, the change is reported

Accepted Answer

A)   in the statement of retained earnings, as a correction to the beginning balance.
B)   in the income statement, below income from continuing operations.
C)   in the income statement, above income from continuing operations
D)   through a retroactive restatement of prior period earnings.E) A) and B)
F) B) and D)

Question 12

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

Accepted Answer

A) True 
 B)False

Question 13

Based on the above data, what is the amount of quick assets?

Accepted Answer

A)   $168,000
B)   $96,000
C)   $60,000
D)   $61,000E) A) and B)
F) None of the above

Question 14

The numerator of the rate earned on total assets ratio is equal to

Accepted Answer

A)   net income
B)   net income plus tax expense
C)   net income plus interest expense
D)   net income minus preferred dividendsE) A) and D)
F) None of the above

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Horizontal analysis is a technique for evaluating financial statement data

Accepted Answer

A)   for one period of time.
B)   over a period of time.
C)   on a certain date.
D)   as it may appear in the future.E) B) and D)
F) None of the above

Question 17

An extraordinary item results from

Accepted Answer

A)   a segment of the business being sold.
B)   corporate income tax being paid.
C)   a change from one accounting method to another acceptable accounting method.
D)   a transaction or event that is unusual and occurs infrequently.E) A) and B)
F) C) and D)

Question 18

The following information is available for Dorman Company:  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) B) and D)
F) All of the above

Question 19

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

Accepted Answer

A) True 
 B)False

Question 20

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

Accepted Answer

A) True 
 B)False

Exam 14: Financial Statement Analysis

In a common size balance sheet, the 100% figure is:

Correct Answer
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A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to 1.

Correct Answer
verified

Based on the above data, what is the amount of quick assets?

Correct Answer
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An extraordinary item results from

Correct Answer
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The numerator of the rate earned on total assets ratio is equal to

Correct Answer
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A common measure of liquidity is

Correct Answer
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If two companies have the same current ratio, their ability to pay short-term debt is the same.

Correct Answer
verified

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

Correct Answer
verified

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

Correct Answer
verified

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

Correct Answer
verified

Horizontal analysis is a technique for evaluating financial statement data

Correct Answer
verified

In performing a vertical analysis, the base for cost of goods sold is

Correct Answer
verified

The following information is available for Dorman Company: Which of the following statements is correct?

Correct Answer
verified

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

Correct Answer
verified

When a company changes from one acceptable accounting method to another, the change is reported

Correct Answer
verified

Match each item with its definition. -Common-sized financial statements

Correct Answer
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The following data are taken from the balance sheet at the end of the current year. Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Present figures used in your computations. Round ratios to the nearest tenth.

Correct Answer
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Correct Answer
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If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

Correct Answer
verified

Correct Answer
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Exam 14: Financial Statement Analysis

In a common size balance sheet, the 100% figure is:

Correct AnswerverifiedShow Answer

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to 1.

Correct AnswerverifiedShow Answer

Based on the above data, what is the amount of quick assets?

Correct AnswerverifiedShow Answer

An extraordinary item results from

Correct AnswerverifiedShow Answer

The numerator of the rate earned on total assets ratio is equal to

Correct AnswerverifiedShow Answer

A common measure of liquidity is

Correct AnswerverifiedShow Answer

If two companies have the same current ratio, their ability to pay short-term debt is the same.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

Correct AnswerverifiedShow Answer

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

Correct AnswerverifiedShow Answer

Horizontal analysis is a technique for evaluating financial statement data

Correct AnswerverifiedShow Answer

In performing a vertical analysis, the base for cost of goods sold is

Correct AnswerverifiedShow Answer

The following information is available for Dorman Company: Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

Correct AnswerverifiedShow Answer

When a company changes from one acceptable accounting method to another, the change is reported

Correct AnswerverifiedShow Answer

Match each item with its definition. -Common-sized financial statements

Correct AnswerverifiedShow Answer

The following data are taken from the balance sheet at the end of the current year. Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Present figures used in your computations. Round ratios to the nearest tenth.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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