Question 1

Horizontal analysis of comparative financial statements includes the

Accepted Answer

A) development of vertically analyzed statements. 
B) calculation of liquidity ratios. 
C) calculation of dollar amount changes and percentage changes from the previous to the current year. 
D) evaluation of financial statement data that expresses each item in the current period's financial statement as a percentage of a base amount. 
A) development of vertically analyzed statements. 
B) calculation of liquidity ratios. 
C) calculation of dollar amount changes and percentage changes from the previous to the current year. 
D) evaluation of financial statement data that expresses each item in the current period's financial statement as a percentage of a base amount.

Question 2

The current ratio is

Accepted Answer

A) calculated by dividing current liabilities by current assets. 
B) used to evaluate a company's liquidity and short-term debt paying ability. 
C) used to evaluate a company's solvency and long-term debt paying ability. 
D) calculated by subtracting current liabilities from current assets. 
A) calculated by dividing current liabilities by current assets. 
B) used to evaluate a company's liquidity and short-term debt paying ability. 
C) used to evaluate a company's solvency and long-term debt paying ability. 
D) calculated by subtracting current liabilities from current assets.

Question 3

All of the following statements about vertical analysis are true except

Accepted Answer

A) Vertical analysis is also called common size analysis. 
B) Amounts on the income statement are expressed as a percentage of net sales. 
C) Vertical analysis shows the relative size of each item in the statement of financial position. 
D) Vertical analysis is also called trend analysis. 
A) Vertical analysis is also called common size analysis. 
B) Amounts on the income statement are expressed as a percentage of net sales. 
C) Vertical analysis shows the relative size of each item in the statement of financial position. 
D) Vertical analysis is also called trend analysis.

Question 4

Jasper Electrical reported net credit sales of $4,500,000 and cost of goods sold of $2,700,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $450,000 and $480,000, respectively. The receivables turnover ratio was

Accepted Answer

A) 5.8 times. 
B) 9.4 times. 
C) 9.7 times. 
D) 10.0 times. 
A) 5.8 times. 
B) 9.4 times. 
C) 9.7 times. 
D) 10.0 times.

Question 5

Use the following information to answer questions 
Green Thumb Garden Supplies reported the following information for 2012 and 2013.  
-What is the return on assets for 2013?

Accepted Answer

A) 27.1% 
B) 10.0% 
C) 9.2% 
D) 8.6% 
A) 27.1% 
B) 10.0% 
C) 9.2% 
D) 8.6%

Question 6

Many firms today are so diversified that they cannot be classified by industry.

Accepted Answer

A) True 
 B)False

Question 7

Asset turnover measures

Accepted Answer

A) how often a company replaces its assets. 
B) how efficiently a company uses its assets to generate sales. 
C) the portion of the assets that have been financed by creditors. 
D) the overall rate of return on assets. 
A) how often a company replaces its assets. 
B) how efficiently a company uses its assets to generate sales. 
C) the portion of the assets that have been financed by creditors. 
D) the overall rate of return on assets.

Question 8

Horizontal analysis can be carried out on statement of financial position data but not on income statement data.

Accepted Answer

A) True 
 B)False

Question 9

If a company has sales of $100 in 2012 (the base period) and $560 in 2013 (the analysis period), the percentage of the base period is 460%.

Accepted Answer

A) True 
 B)False

Question 10

If a company has sales of $220 in 2012 and $560 in 2013, the percentage increase in sales from 2012 to 2013 is 155%.

Accepted Answer

A) True 
 B)False

Question 11

Ideally, all changes in accounting policy are applied retrospectively, but on occasion may be reported prospectively.

Accepted Answer

A) True 
 B)False

Question 12

All of the following statements about vertical analysis are true except

Accepted Answer

A) Vertical analysis makes it easier to for intercompany comparisons. 
B) Vertical analysis is seldom performed on the income statement. 
C) Vertical analysis makes it easier to compare companies of different sizes. 
D) Vertical analysis is seldom performed on the cash flow statement. 
A) Vertical analysis makes it easier to for intercompany comparisons. 
B) Vertical analysis is seldom performed on the income statement. 
C) Vertical analysis makes it easier to compare companies of different sizes. 
D) Vertical analysis is seldom performed on the cash flow statement.

Question 13

Free cash flow is the cash available after a company pays dividends.

Accepted Answer

A) True 
 B)False

Question 14

If a company has a current ratio of 1.3:1, what effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?

Accepted Answer

The answer of If a company has a current ratio...

Question 15

When a mandatory change in accounting policy occurs

Accepted Answer

A) all prior years' financial statements must be changed to reflect the newly adopted policy. 
B) it is always accounted for prospectively. 
C) the new policy is used in reporting the results of operating activities for the current year. 
D) the cumulative effect of the change in policy should be reflected on the current income statement. 
A) all prior years' financial statements must be changed to reflect the newly adopted policy. 
B) it is always accounted for prospectively. 
C) the new policy is used in reporting the results of operating activities for the current year. 
D) the cumulative effect of the change in policy should be reflected on the current income statement.

Question 16

Ideally, all changes in accounting policy are applied

Accepted Answer

A) prospectively. 
B) retrospectively. 
C) proactively. 
D) regressively. 
A) prospectively. 
B) retrospectively. 
C) proactively. 
D) regressively.

Question 17

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

Accepted Answer

A) both decrease. 
B) both increase. 
C) increase and remain the same, respectively. 
D) remain the same and decrease, respectively. 
A) both decrease. 
B) both increase. 
C) increase and remain the same, respectively. 
D) remain the same and decrease, respectively.

Question 18

The return on assets ratio is affected by the

Accepted Answer

A) profit margin and debt to total assets ratios. 
B) profit margin and asset turnover ratios. 
C) times interest earned and debt to total assets ratios. 
D) profit margin and free cash flow. 
A) profit margin and debt to total assets ratios. 
B) profit margin and asset turnover ratios. 
C) times interest earned and debt to total assets ratios. 
D) profit margin and free cash flow.

Question 19

Comparisons of company data with industry averages provide information about a company's relative position within the industry.

Accepted Answer

A) True 
 B)False

Question 20

A weakness of the current ratio is

Accepted Answer

A) the difficulty of the calculation. 
B) that it doesn't take into account the composition of the current assets. 
C) that it is rarely used by sophisticated analysts. 
D) that it can be expressed as a percentage, as a rate, or as a proportion. 
A) the difficulty of the calculation. 
B) that it doesn't take into account the composition of the current assets. 
C) that it is rarely used by sophisticated analysts. 
D) that it can be expressed as a percentage, as a rate, or as a proportion.

Horizontal analysis of comparative financial statements includes the

The current ratio is

All of the following statements about vertical analysis are true except

Jasper Electrical reported net credit sales of $4,500,000 and cost of goods sold of $2,700,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $450,000 and $480,000, respectively. The receivables turnover ratio was

Use the following information to answer questions Green Thumb Garden Supplies reported the following information for 2012 and 2013. -What is the return on assets for 2013?

Many firms today are so diversified that they cannot be classified by industry.

Asset turnover measures

Horizontal analysis can be carried out on statement of financial position data but not on income statement data.

If a company has sales of $100 in 2012 (the base period) and $560 in 2013 (the analysis period), the percentage of the base period is 460%.

If a company has sales of $220 in 2012 and $560 in 2013, the percentage increase in sales from 2012 to 2013 is 155%.

Ideally, all changes in accounting policy are applied retrospectively, but on occasion may be reported prospectively.

All of the following statements about vertical analysis are true except

Free cash flow is the cash available after a company pays dividends.

If a company has a current ratio of 1.3:1, what effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?

When a mandatory change in accounting policy occurs

Ideally, all changes in accounting policy are applied

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

The return on assets ratio is affected by the

Comparisons of company data with industry averages provide information about a company's relative position within the industry.

A weakness of the current ratio is

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Filters

Exam 14: Performance Measurement

Horizontal analysis of comparative financial statements includes the

The current ratio is

All of the following statements about vertical analysis are true except

Jasper Electrical reported net credit sales of $4,500,000 and cost of goods sold of $2,700,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $450,000 and $480,000, respectively. The receivables turnover ratio was

Use the following information to answer questions Green Thumb Garden Supplies reported the following information for 2012 and 2013. -What is the return on assets for 2013?

Many firms today are so diversified that they cannot be classified by industry.

Asset turnover measures

Horizontal analysis can be carried out on statement of financial position data but not on income statement data.

If a company has sales of $100 in 2012 (the base period) and $560 in 2013 (the analysis period), the percentage of the base period is 460%.

If a company has sales of $220 in 2012 and $560 in 2013, the percentage increase in sales from 2012 to 2013 is 155%.

Ideally, all changes in accounting policy are applied retrospectively, but on occasion may be reported prospectively.

All of the following statements about vertical analysis are true except

Free cash flow is the cash available after a company pays dividends.

If a company has a current ratio of 1.3:1, what effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?

When a mandatory change in accounting policy occurs

Ideally, all changes in accounting policy are applied

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

The return on assets ratio is affected by the

Comparisons of company data with industry averages provide information about a company's relative position within the industry.

A weakness of the current ratio is

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Filters