Question 1

On the statement of cash flows of a healthy company, Net cash provided by operating activities is generally less than net income.

Accepted Answer

A) True 
 B)False

Question 2

A measure of a company's ability to collect cash from credit customers is the:

Accepted Answer

A) accounts receivable turnover. 
B) days' payable outstanding. 
C) inventory turnover. 
D) cash conversion cycle. 
A) accounts receivable turnover. 
B) days' payable outstanding. 
C) inventory turnover. 
D) cash conversion cycle.

Question 3

How is the percentage change (for horizontal analysis)for sales from 2016 to 2017 computed?

Accepted Answer

A) Year 2017 sales ÷ Year 2016 sales 
B) (Year 2017 sales - Year 2016 sales)÷ Year 2016 sales 
C) (Year 2017 sales - Year 2016 sales)÷ Year 2017 sales 
D) (Year 2017 sales ÷ Year 2016 sales)× 100 
A) Year 2017 sales ÷ Year 2016 sales 
B) (Year 2017 sales - Year 2016 sales)÷ Year 2016 sales 
C) (Year 2017 sales - Year 2016 sales)÷ Year 2017 sales 
D) (Year 2017 sales ÷ Year 2016 sales)× 100

Question 4

A vertical analysis of a balance sheet shows that current assets have increased from 42% to 56%. This means that:

Accepted Answer

A) current assets have increased as a percentage of total assets. 
B) the dollar amount of total assets has increased. 
C) the dollar amount of total assets has decreased. 
D) the dollar amount of long-term assets has increased. 
A) current assets have increased as a percentage of total assets. 
B) the dollar amount of total assets has increased. 
C) the dollar amount of total assets has decreased. 
D) the dollar amount of long-term assets has increased.

Question 5

If economic value added (EVA®)is negative:

Accepted Answer

A) stockholders' wealth has decreased. 
B) stockholders' wealth has increased. 
C) stockholders' wealth has stayed the same. 
D) stockholders' earnings per share have increased. 
A) stockholders' wealth has decreased. 
B) stockholders' wealth has increased. 
C) stockholders' wealth has stayed the same. 
D) stockholders' earnings per share have increased.

Question 6

If a company has sales of $150 in 2016 and $225 in 2017, the percentage change from 2016 to 2017 is 50%.

Accepted Answer

A) True 
 B)False

Question 7

On a common-size balance sheet, each line item is expressed as a percentage of:

Accepted Answer

A) current assets. 
B) operating income. 
C) total assets. 
D) net income. 
A) current assets. 
B) operating income. 
C) total assets. 
D) net income.

Question 8

Ratios that test liquidity include all of the following EXCEPT:

Accepted Answer

A) acid-test ratio. 
B) current ratio. 
C) return on assets. 
D) inventory turnover. 
A) acid-test ratio. 
B) current ratio. 
C) return on assets. 
D) inventory turnover.

Question 9

Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.

Accepted Answer

A) True 
 B)False

Question 10

XYZ Company has an inventory turnover of 20 times per year. The industry average is 5.0 times per year. What does a high inventory turnover mean?

Accepted Answer

A) The company has too much inventory on hand. 
B) The company may have obsolete inventory on hand. 
C) The company may not be keeping enough inventory on hand which can lead to lost sales. 
D) The company is having a difficult time selling the inventory. 
A) The company has too much inventory on hand. 
B) The company may have obsolete inventory on hand. 
C) The company may not be keeping enough inventory on hand which can lead to lost sales. 
D) The company is having a difficult time selling the inventory.

Question 11

Which of the following would be most helpful in the comparison of different size companies?

Accepted Answer

A) horizontal analysis 
B) comparison of their net incomes 
C) comparison of their working capital balances 
D) preparation of common-size financial statements 
A) horizontal analysis 
B) comparison of their net incomes 
C) comparison of their working capital balances 
D) preparation of common-size financial statements

Question 12

The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their accounts is the:

Accepted Answer

A) days' sales in receivables 
B) current ratio. 
C) accounts receivable turnover. 
D) acid-test ratio. 
A) days' sales in receivables 
B) current ratio. 
C) accounts receivable turnover. 
D) acid-test ratio.

Question 13

Which of the following statements is CORRECT?

Accepted Answer

A) A shortage of cash could cause a company to face bankruptcy, but lots of cash will ensure success. 
B) When analyzing the Statement of Cash Flows, investors should ignore signals of cash flow distress because the company can show improvements in future periods. 
C) If the Statement of Cash Flows shows that current assets are increasing far more than current liabilities, the company may have trouble collecting receivables or selling inventory. 
D) A sign of a healthy company is that financing activities are dominated by borrowing. 
A) A shortage of cash could cause a company to face bankruptcy, but lots of cash will ensure success. 
B) When analyzing the Statement of Cash Flows, investors should ignore signals of cash flow distress because the company can show improvements in future periods. 
C) If the Statement of Cash Flows shows that current assets are increasing far more than current liabilities, the company may have trouble collecting receivables or selling inventory. 
D) A sign of a healthy company is that financing activities are dominated by borrowing.

Question 14

On a statement of cash flows, repayment of long-term debt is considered:

Accepted Answer

A) an operating activity. 
B) an investing activity. 
C) a financing activity. 
D) a noncash investing and financing activity. 
A) an operating activity. 
B) an investing activity. 
C) a financing activity. 
D) a noncash investing and financing activity.

Question 15

Which of the following is typically used as the base in a vertical analysis of a balance sheet?

Accepted Answer

A) total liabilities 
B) total stockholders' equity 
C) total assets 
D) net sales 
A) total liabilities 
B) total stockholders' equity 
C) total assets 
D) net sales

Question 16

Sales of plant assets for several years, which represent a major source of cash, is a sign of:

Accepted Answer

A) a struggling company. 
B) reinvestment in the company. 
C) a shortage of cash. 
D) A and C. 
A) a struggling company. 
B) reinvestment in the company. 
C) a shortage of cash. 
D) A and C.

Question 17

How is the leverage ratio calculated?

Accepted Answer

A) total debt divided by total assets 
B) total assets divided by total debt 
C) average total assets divided by average common stockholders' equity 
D) average total debt divided by average total assets 
A) total debt divided by total assets 
B) total assets divided by total debt 
C) average total assets divided by average common stockholders' equity 
D) average total debt divided by average total assets

Question 18

Benchmarking compares a company to some standard set by others.

Accepted Answer

A) True 
 B)False

Question 19

The cost of capital for a start-up company:

Accepted Answer

A) is lower because the new company is untested. 
B) depends only on the market rate of interest. 
C) depends only on the state of the economy. 
D) is higher for the new company because it is more risky than an established company. 
A) is lower because the new company is untested. 
B) depends only on the market rate of interest. 
C) depends only on the state of the economy. 
D) is higher for the new company because it is more risky than an established company.

Question 20

Given the following data:   In vertical analysis, current liabilities would be expressed as: (Round your final answer to the nearest whole percent, X%.)

Accepted Answer

A) 80%. 
B) 42%. 
C) 39%. 
D) 47%. 
A) 80%. 
B) 42%. 
C) 39%. 
D) 47%.

On the statement of cash flows of a healthy company, Net cash provided by operating activities is generally less than net income.

A measure of a company's ability to collect cash from credit customers is the:

How is the percentage change (for horizontal analysis)for sales from 2016 to 2017 computed?

A vertical analysis of a balance sheet shows that current assets have increased from 42% to 56%. This means that:

If economic value added (EVA®)is negative:

If a company has sales of $150 in 2016 and $225 in 2017, the percentage change from 2016 to 2017 is 50%.

On a common-size balance sheet, each line item is expressed as a percentage of:

Ratios that test liquidity include all of the following EXCEPT:

Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.

XYZ Company has an inventory turnover of 20 times per year. The industry average is 5.0 times per year. What does a high inventory turnover mean?

Which of the following would be most helpful in the comparison of different size companies?

The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their accounts is the:

Which of the following statements is CORRECT?

On a statement of cash flows, repayment of long-term debt is considered:

Which of the following is typically used as the base in a vertical analysis of a balance sheet?

Sales of plant assets for several years, which represent a major source of cash, is a sign of:

How is the leverage ratio calculated?

Benchmarking compares a company to some standard set by others.

The cost of capital for a start-up company:

Given the following data: In vertical analysis, current liabilities would be expressed as: (Round your final answer to the nearest whole percent, X%.)

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

On the statement of cash flows of a healthy company, Net cash provided by operating activities is generally less than net income.

A measure of a company's ability to collect cash from credit customers is the:

How is the percentage change (for horizontal analysis)for sales from 2016 to 2017 computed?

A vertical analysis of a balance sheet shows that current assets have increased from 42% to 56%. This means that:

If economic value added (EVA®)is negative:

If a company has sales of $150 in 2016 and $225 in 2017, the percentage change from 2016 to 2017 is 50%.

On a common-size balance sheet, each line item is expressed as a percentage of:

Ratios that test liquidity include all of the following EXCEPT:

Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.

XYZ Company has an inventory turnover of 20 times per year. The industry average is 5.0 times per year. What does a high inventory turnover mean?

Which of the following would be most helpful in the comparison of different size companies?

The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their accounts is the:

Which of the following statements is CORRECT?

On a statement of cash flows, repayment of long-term debt is considered:

Which of the following is typically used as the base in a vertical analysis of a balance sheet?

Sales of plant assets for several years, which represent a major source of cash, is a sign of:

How is the leverage ratio calculated?

Benchmarking compares a company to some standard set by others.

The cost of capital for a start-up company:

Given the following data: In vertical analysis, current liabilities would be expressed as: (Round your final answer to the nearest whole percent, X%.)

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