Question 1

If a company's debt ratio is much higher than the industry average, the company should be able to pay its debts in tough times.

Accepted Answer

A) True 
 B)False  False

Question 2

When comparing companies of different sizes, vertical analysis is a useful tool.

Accepted Answer

A) True 
 B)False  True

Question 3

The capital charge in EVA® is computed as:

Accepted Answer

A) Cost of capital - Notes payable - Current maturities of long-term debt - Long-term debt - Stockholders' equity. 
B) (Notes payable, beginning balance + Current maturities of long-term debt, beginning balance + Long-term debt, beginning balance + Stockholders' equity, beginning balance)× Cost of capital. 
C) Cost of capital + Current maturities of long-term debt + Loans payable + Long-term debt + Stockholders' equity. 
D) (Notes payable + Current maturities of long-term debt + Long-term debt + Stockholders' equity)÷ Cost of capital. 
A) Cost of capital - Notes payable - Current maturities of long-term debt - Long-term debt - Stockholders' equity. 
B) (Notes payable, beginning balance + Current maturities of long-term debt, beginning balance + Long-term debt, beginning balance + Stockholders' equity, beginning balance)× Cost of capital. 
C) Cost of capital + Current maturities of long-term debt + Loans payable + Long-term debt + Stockholders' equity. 
D) (Notes payable + Current maturities of long-term debt + Long-term debt + Stockholders' equity)÷ Cost of capital. B

Question 4

Hull Company reports the following data:   Based on the above data, what can be said about the Hull Company?

Accepted Answer

A) The company is controlling operating expenses. 
B) The company is doing better than the industry average. 
C) The company is losing control of operating expenses. 
D) The company is increasing sales over time. 
A) The company is controlling operating expenses. 
B) The company is doing better than the industry average. 
C) The company is losing control of operating expenses. 
D) The company is increasing sales over time.

Question 5

In performing vertical analysis, the base for inventory is:

Accepted Answer

A) total liabilities and stockholders' equity. 
B) total assets. 
C) total cash and cash equivalents. 
D) total current assets. 
A) total liabilities and stockholders' equity. 
B) total assets. 
C) total cash and cash equivalents. 
D) total current assets.

Question 6

For the period from 2017 to 2018, a company reports the following:   If sales are $7,000,000 in 2017, what are sales in 2018?

Accepted Answer

A) $2,800,000 
B) $7,000,000 
C) $9,450,000 
D) $9,800,000 
A) $2,800,000 
B) $7,000,000 
C) $9,450,000 
D) $9,800,000

Question 7

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.

Accepted Answer

A) True 
 B)False

Question 8

Horizontal analysis highlights changes in financial statement line items over time and provides a complete picture of a business.

Accepted Answer

A) True 
 B)False

Question 9

How is the cash conversion cycle computed?

Accepted Answer

A) days' inventory outstanding + days' sales outstanding - days' payable outstanding. 
B) days' inventory outstanding - days' sales outstanding - days' payable outstanding. 
C) days' inventory outstanding - days' sales outstanding + days' payable outstanding. 
D) days' inventory outstanding + days' sales outstanding + days' payable outstanding. 
A) days' inventory outstanding + days' sales outstanding - days' payable outstanding. 
B) days' inventory outstanding - days' sales outstanding - days' payable outstanding. 
C) days' inventory outstanding - days' sales outstanding + days' payable outstanding. 
D) days' inventory outstanding + days' sales outstanding + days' payable outstanding.

Question 10

What is accounts payable turnover?

Accepted Answer

A) A ratio calculated as Purchases divided by ending balance in Accounts Payable. 
B) A ratio calculated as Cost of Goods Sold divided by average Accounts Payable. 
C) A ratio calculated as Purchases divided by average Accounts Payable. 
D) B and C. 
A) A ratio calculated as Purchases divided by ending balance in Accounts Payable. 
B) A ratio calculated as Cost of Goods Sold divided by average Accounts Payable. 
C) A ratio calculated as Purchases divided by average Accounts Payable. 
D) B and C.

Question 11

Expressing cash and cash equivalents as a percentage of total assets is an example of:

Accepted Answer

A) horizontal analysis. 
B) economic value added. 
C) ratio analysis. 
D) vertical analysis. 
A) horizontal analysis. 
B) economic value added. 
C) ratio analysis. 
D) vertical analysis.

Question 12

The formula for the percentage change in a financial statement line item is the current year amount:

Accepted Answer

A) divided by the base year amount. 
B) minus the base year amount divided by the base year amount. 
C) minus the base year amount divided by current year amount. 
D) added to the base year amount divided by the base year amount. 
A) divided by the base year amount. 
B) minus the base year amount divided by the base year amount. 
C) minus the base year amount divided by current year amount. 
D) added to the base year amount divided by the base year amount.

Question 13

Financial analysis helps mainly to identify the risks of various stocks and then to remove those risks.

Accepted Answer

A) True 
 B)False

Question 14

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

Accepted Answer

A) True 
 B)False

Question 15

Usually new companies have a lower cost of capital.

Accepted Answer

A) True 
 B)False

Question 16

An efficient capital market is one in which market prices are above stated cost.

Accepted Answer

A) True 
 B)False

Question 17

The cost of capital is a weighted average of the returns demanded by the company's stockholders and lenders.

Accepted Answer

A) True 
 B)False

Question 18

In an efficient market, an investor's search for "underpriced" stock will be unsuccessful unless the investor has knowledge of relevant private information.

Accepted Answer

A) True 
 B)False

Question 19

Economic value added (EVA®)can be computed as net income before taxes minus interest expense minus capital charge.

Accepted Answer

A) True 
 B)False

Question 20

The ratio that measures the number of times that operating income can cover interest expense is the:

Accepted Answer

A) leverage. 
B) rate of return on total assets. 
C) debt ratio. 
D) times-interest-earned ratio. 
A) leverage. 
B) rate of return on total assets. 
C) debt ratio. 
D) times-interest-earned ratio.

If a company's debt ratio is much higher than the industry average, the company should be able to pay its debts in tough times.

When comparing companies of different sizes, vertical analysis is a useful tool.

The capital charge in EVA® is computed as:

Hull Company reports the following data: Based on the above data, what can be said about the Hull Company?

In performing vertical analysis, the base for inventory is:

For the period from 2017 to 2018, a company reports the following: If sales are $7,000,000 in 2017, what are sales in 2018?

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.

Horizontal analysis highlights changes in financial statement line items over time and provides a complete picture of a business.

How is the cash conversion cycle computed?

What is accounts payable turnover?

Expressing cash and cash equivalents as a percentage of total assets is an example of:

The formula for the percentage change in a financial statement line item is the current year amount:

Financial analysis helps mainly to identify the risks of various stocks and then to remove those risks.

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

Usually new companies have a lower cost of capital.

An efficient capital market is one in which market prices are above stated cost.

The cost of capital is a weighted average of the returns demanded by the company's stockholders and lenders.

In an efficient market, an investor's search for "underpriced" stock will be unsuccessful unless the investor has knowledge of relevant private information.

Economic value added (EVA®)can be computed as net income before taxes minus interest expense minus capital charge.

The ratio that measures the number of times that operating income can cover interest expense is the:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

Evaluating Performance: Earnings Quality, the Income Statement, Statement of Comprehensive Income

The Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

If a company's debt ratio is much higher than the industry average, the company should be able to pay its debts in tough times.

When comparing companies of different sizes, vertical analysis is a useful tool.

The capital charge in EVA® is computed as:

Hull Company reports the following data: Based on the above data, what can be said about the Hull Company?

In performing vertical analysis, the base for inventory is:

For the period from 2017 to 2018, a company reports the following: If sales are $7,000,000 in 2017, what are sales in 2018?

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.

Horizontal analysis highlights changes in financial statement line items over time and provides a complete picture of a business.

How is the cash conversion cycle computed?

What is accounts payable turnover?

Expressing cash and cash equivalents as a percentage of total assets is an example of:

The formula for the percentage change in a financial statement line item is the current year amount:

Financial analysis helps mainly to identify the risks of various stocks and then to remove those risks.

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

Usually new companies have a lower cost of capital.

An efficient capital market is one in which market prices are above stated cost.

The cost of capital is a weighted average of the returns demanded by the company's stockholders and lenders.

In an efficient market, an investor's search for "underpriced" stock will be unsuccessful unless the investor has knowledge of relevant private information.

Economic value added (EVA®)can be computed as net income before taxes minus interest expense minus capital charge.

The ratio that measures the number of times that operating income can cover interest expense is the:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

Evaluating Performance: Earnings Quality, the Income Statement, Statement of Comprehensive Income

The Statement of Cash Flows

Filters