Question 1

To compute the gross (profit)margin percentage, divide:

Accepted Answer

A) sales by cost of goods sold. 
B) gross (profit)margin by net sales. 
C) net income by stockholders' equity. 
D) operating income by net sales. 
A) sales by cost of goods sold. 
B) gross (profit)margin by net sales. 
C) net income by stockholders' equity. 
D) operating income by net sales.

Question 2

If days' sales in receivables are growing faster than for other companies in the industry, a cash shortage may be looming.

Accepted Answer

A) True 
 B)False

Question 3

For investment analysis, it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

Accepted Answer

A) True 
 B)False

Question 4

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

Accepted Answer

A) benchmarking. 
B) common-size statement. 
C) horizontal analysis. 
D) financial ratio analysis. 
A) benchmarking. 
B) common-size statement. 
C) horizontal analysis. 
D) financial ratio analysis.

Question 5

On a statement of cash flows (indirect method), which item is reported as a line item under cash from operating activities?

Accepted Answer

A) sale of securities 
B) purchase of fixed assets 
C) purchase of securities 
D) amortization expense 
A) sale of securities 
B) purchase of fixed assets 
C) purchase of securities 
D) amortization expense

Question 6

Net cash provided by operating activities that is consistently lower than net income may imply that:

Accepted Answer

A) a dividend has not been issued in a long time. 
B) the common stock should be split. 
C) the company may be facing a cash shortage. 
D) working capital has decreased. 
A) a dividend has not been issued in a long time. 
B) the common stock should be split. 
C) the company may be facing a cash shortage. 
D) working capital has decreased.

Question 7

What do the price-earnings ratio and dividend yield have in common?

Accepted Answer

A) Earnings per share is the denominator for both ratios. 
B) Earnings per share is the numerators for both ratios. 
C) Dividends per share is in both ratios. 
D) Market price per share is in both ratios. 
A) Earnings per share is the denominator for both ratios. 
B) Earnings per share is the numerators for both ratios. 
C) Dividends per share is in both ratios. 
D) Market price per share is in both ratios.

Question 8

How is the trend percentage for sales in 2017 computed? The base year is 2012.

Accepted Answer

A) Year 2017 sales ÷ Year 2012 sales 
B) (Year 2017 sales - Year 2012 sales)÷ Year 2012 sales 
C) (Year 2017 sales - Year 2012 sales)÷ Year 2017 sales 
D) (Year 2017 sales ÷ Year 2012 sales)× 100 
A) Year 2017 sales ÷ Year 2012 sales 
B) (Year 2017 sales - Year 2012 sales)÷ Year 2012 sales 
C) (Year 2017 sales - Year 2012 sales)÷ Year 2017 sales 
D) (Year 2017 sales ÷ Year 2012 sales)× 100

Question 9

Year to year percentage changes in line items from comparative financial statements is called:

Accepted Answer

A) benchmarking. 
B) horizontal analysis. 
C) vertical analysis. 
D) common-size financial statements. 
A) benchmarking. 
B) horizontal analysis. 
C) vertical analysis. 
D) common-size financial statements.

Question 10

On a statement of cash flows of a healthy company, net income would ordinarily be:

Accepted Answer

A) less than depreciation expense. 
B) more than depreciation expense. 
C) greater than Net cash provided by operating activities. 
D) less than Net cash provided by operating activities. 
A) less than depreciation expense. 
B) more than depreciation expense. 
C) greater than Net cash provided by operating activities. 
D) less than Net cash provided by operating activities.

Question 11

Marie's Clothing Store had an accounts receivable balance of $440,000 at the beginning of the year and a year-end balance of $600,000. Net credit sales for the year totaled $3,600,000. The average collection period of the receivables was: (Round any intermediary calculations to two decimal places and your final answer to the nearest day.)

Accepted Answer

A) 45 days. 
B) 61 days. 
C) 53 days. 
D) 8 days. 
A) 45 days. 
B) 61 days. 
C) 53 days. 
D) 8 days.

Question 12

A vertical analysis is primarily concerned with:

Accepted Answer

A) the dollar amount of the change in various financial statement line items from year to year. 
B) individual financial statement line items expressed as a percentage of a base (which represents 100%). 
C) percentage changes in the balances of line items from comparative financial statements. 
D) the change in key financial statement ratios over a specified period of time. 
A) the dollar amount of the change in various financial statement line items from year to year. 
B) individual financial statement line items expressed as a percentage of a base (which represents 100%). 
C) percentage changes in the balances of line items from comparative financial statements. 
D) the change in key financial statement ratios over a specified period of time.

Question 13

Red flags in financial statement analysis can include all of the following EXCEPT:

Accepted Answer

A) a debt ratio higher than average. 
B) a slowdown in inventory turnover. 
C) days' sales in receivables increasing. 
D) Net cash provided by operating activities exceeds net income. 
A) a debt ratio higher than average. 
B) a slowdown in inventory turnover. 
C) days' sales in receivables increasing. 
D) Net cash provided by operating activities exceeds net income.

Question 14

Which of the following is typically used as the base in a vertical analysis of an income statement?

Accepted Answer

A) gross profit 
B) operating income 
C) net income 
D) net sales 
A) gross profit 
B) operating income 
C) net income 
D) net sales

Question 15

Szidon Company reports the following data:   Using benchmarking, what can be said about Szidon Company?

Accepted Answer

A) Szidon is inferior to the key competitor because the key competitor's net income percentage is higher. 
B) Szidon is superior to the key competitor because net income is higher. 
C) There is not enough information to make any conclusions. 
D) There is conflicting information so no conclusions can be reached. 
A) Szidon is inferior to the key competitor because the key competitor's net income percentage is higher. 
B) Szidon is superior to the key competitor because net income is higher. 
C) There is not enough information to make any conclusions. 
D) There is conflicting information so no conclusions can be reached.

Question 16

Zebra Company reports the following figures for the years ending December 31, 2017 and 2016:   What are the percentage changes from 2016 to 2017 for Net Sales, Cost of Goods Sold and Gross Profit, respectively? (Round your final answers to one decimal place, X.X%)

Accepted Answer

A) 100%, 162.5%, 10.8% 
B) 100%, 0.9%, 0.4% 
C) 162.5%, 37.8%, 10.8% 
D) 37.8%, 10.8%, 162.5% 
A) 100%, 162.5%, 10.8% 
B) 100%, 0.9%, 0.4% 
C) 162.5%, 37.8%, 10.8% 
D) 37.8%, 10.8%, 162.5%

Question 17

You are the CEO of Company A and you are using an industry leader (Leader Company)for benchmarking. Company A is much smaller than Company B in terms of total assets and total sales revenue. You should compare the:

Accepted Answer

A) gross profit of Company A to the gross profit of Leader Company. 
B) net income of Company A to the net income of Leader Company. 
C) net sales of Company A to the net sales of Leader Company. 
D) net income to net sales ratio of Company A to net income to net sales ratio of Leader Company. 
A) gross profit of Company A to the gross profit of Leader Company. 
B) net income of Company A to the net income of Leader Company. 
C) net sales of Company A to the net sales of Leader Company. 
D) net income to net sales ratio of Company A to net income to net sales ratio of Leader Company.

Question 18

The balance sheet at December 31, 2017 for Zumba Company follows:
in thousands of dollars, unless otherwise specified
   Additional information follows:
1. Net income for the year ended December 31, 2017 is $2,020.
2. Cost of goods sold for the year ended December 31, 2017 is $4,400.
3. Inventory on January 1, 2017 is $1,800.
4. Accounts Receivable, net on January 1, 2017 are $4,400.
5. Total assets on January 1, 2017 are $20,000.
6. Net credit sales for the year ended December 31, 2017 are $14,600.
7. Net income before interest and taxes for the year ended December 31, 2017 is $4,800.
8. Interest expense for the year ended December 31, 2017 is $550.
9. Total stockholders' equity on January 1, 2017 is $3,500.
Compute the following ratios:
1. Current ratio
2. Quick ratio
3. Accounts receivable turnover
4. Days' inventory outstanding
5. Times interest earned
6. Return on assets
7. Return on equity

Accepted Answer

1. Current ratio = $7,900 ÷ $4,000 = 1.9

Question 19

Mussa Corporation reports the following data:   In vertical analysis, the cost of goods sold percentage is closest to: (Round your final answer to the nearest whole percentage, X%)

Accepted Answer

A) 33%. 
B) 50%. 
C) 67%. 
D) 200%. 
A) 33%. 
B) 50%. 
C) 67%. 
D) 200%.

Question 20

Common-size financial statements report only dollar amounts.

Accepted Answer

A) True 
 B)False

To compute the gross (profit)margin percentage, divide:

If days' sales in receivables are growing faster than for other companies in the industry, a cash shortage may be looming.

For investment analysis, it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

On a statement of cash flows (indirect method), which item is reported as a line item under cash from operating activities?

Net cash provided by operating activities that is consistently lower than net income may imply that:

What do the price-earnings ratio and dividend yield have in common?

How is the trend percentage for sales in 2017 computed? The base year is 2012.

Year to year percentage changes in line items from comparative financial statements is called:

On a statement of cash flows of a healthy company, net income would ordinarily be:

A vertical analysis is primarily concerned with:

Red flags in financial statement analysis can include all of the following EXCEPT:

Which of the following is typically used as the base in a vertical analysis of an income statement?

Szidon Company reports the following data: Using benchmarking, what can be said about Szidon Company?

Zebra Company reports the following figures for the years ending December 31, 2017 and 2016: What are the percentage changes from 2016 to 2017 for Net Sales, Cost of Goods Sold and Gross Profit, respectively? (Round your final answers to one decimal place, X.X%)

You are the CEO of Company A and you are using an industry leader (Leader Company)for benchmarking. Company A is much smaller than Company B in terms of total assets and total sales revenue. You should compare the:

Mussa Corporation reports the following data: In vertical analysis, the cost of goods sold percentage is closest to: (Round your final answer to the nearest whole percentage, X%)

Common-size financial statements report only dollar amounts.

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

To compute the gross (profit)margin percentage, divide:

If days' sales in receivables are growing faster than for other companies in the industry, a cash shortage may be looming.

For investment analysis, it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

On a statement of cash flows (indirect method), which item is reported as a line item under cash from operating activities?

Net cash provided by operating activities that is consistently lower than net income may imply that:

What do the price-earnings ratio and dividend yield have in common?

How is the trend percentage for sales in 2017 computed? The base year is 2012.

Year to year percentage changes in line items from comparative financial statements is called:

On a statement of cash flows of a healthy company, net income would ordinarily be:

A vertical analysis is primarily concerned with:

Red flags in financial statement analysis can include all of the following EXCEPT:

Which of the following is typically used as the base in a vertical analysis of an income statement?

Szidon Company reports the following data: Using benchmarking, what can be said about Szidon Company?

Zebra Company reports the following figures for the years ending December 31, 2017 and 2016: What are the percentage changes from 2016 to 2017 for Net Sales, Cost of Goods Sold and Gross Profit, respectively? (Round your final answers to one decimal place, X.X%)

You are the CEO of Company A and you are using an industry leader (Leader Company)for benchmarking. Company A is much smaller than Company B in terms of total assets and total sales revenue. You should compare the:

Mussa Corporation reports the following data: In vertical analysis, the cost of goods sold percentage is closest to: (Round your final answer to the nearest whole percentage, X%)

Common-size financial statements report only dollar amounts.

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