Exam 14: Performance Measurement

A horizontal analysis is being conducted with year one as the base year. If year one equals $800, year two equals $840, and year three equals $896, the percentage of the base period for year three is

When the disposal of a component of an entity, the income statement should report both profit from continuing operations and profit (loss) from discontinued operations.

A liquidity ratio measures the

A common measure of long-term solvency is the

Assuming the number of units sold does not change, if a company wants to increase its profit margin it can do any of the following except

A voluntary change in accounting policy is allowed when management can show that the new policy results in

The return on common shareholders' equity is affected by both the return on assets and debt to total assets ratios.

If a company is very diversified

Best Baskets Limited (BBL) had a current ratio of 0.8:1 before borrowing $50,000 from the bank with a short-term note payable. What effect did the borrowing transaction have on BBL's current ratio?

Use the following information for questions During 2013, Pattar Corp reported after-tax profit of $450,000 and paid $75,000 in common dividends. The weighted average number of common shares issued in 2013 was 150,000. There are no preferred shares issued. At year end, Pattar's common shares are selling for $60 per share on the Toronto Stock Exchange. -Pattar's dividend yield for 2013 is

Dividend yield measures profit generated by each share, based on the market price per share.

Which of the following solvency positions would a company consider most favourable?

Sustainable income is the most likely level of profit to be obtained in the future.

If, over a three-year period, sales increased by 30%, and cost of goods sold increased by 45%,

The inventory turnover ratio measures the number of times, on average, the inventory was sold during the period.

An income statement would not include

On a statement of financial position analyzed vertically, total assets are represented by 100%.

When a company changes an accounting policy, the cumulative effect of the change is disclosed

A company has a receivables turnover ratio of 12. The average gross accounts receivable during the period is $360,000. What is the amount of net credit sales for the period?

Horizontal analysis showed a 25% increase in accounts receivable in 2013 over 2012. Vertical analysis showed accounts receivable declining from 7.5% to 6.8% over the same period. Given this information, what conclusion(s) may be reached?