Question 1

Net purchases are the cost of purchases minus purchase discounts minus purchase returns and allowances.

Accepted Answer

A) True 
 B)False  True

Question 2

In the acid test ratio, inventory and prepaid expenses are not excluded.

Accepted Answer

A) True 
 B)False  True

Question 3

Given the following:   By trend analysis (base year is 2010), sales in 2012 to the nearest percent of the base year is:

Accepted Answer

A)  117% 
B)  116% 
C)  118% 
D)  119% 
E)  None of these 
A)  117% 
B)  116% 
C)  118% 
D)  119% 
E)  None of these C

Question 4

The computer is the only tool needed in monitoring a business's financial condition.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a current asset?

Accepted Answer

A)  Cash 
B)  Building 
C)  Prepaid expense 
D)  Accounts receivable 
E)  None of these 
A)  Cash 
B)  Building 
C)  Prepaid expense 
D)  Accounts receivable 
E)  None of these

Question 6

Land does not depreciate.

Accepted Answer

A) True 
 B)False

Question 7

The company's gross profit based on the following is sales $48,000, sales returns and allowances $6,000, operating expenses $6,200, beginning inventory $900, net purchases $9,100, ending inventory $2,300.

Accepted Answer

A)  $34,000 
B)  $43,000 
C)  $34,003 
D)  $34,300 
E)  None of these 
A)  $34,000 
B)  $43,000 
C)  $34,003 
D)  $34,300 
E)  None of these

Question 8

When each asset is analyzed as a percent of total assets for a single period, this is known as:

Accepted Answer

A)  Horizontal analysis 
B)  Comparative analysis 
C)  Ratio analysis 
D)  Vertical analysis 
E)  None of these 
A)  Horizontal analysis 
B)  Comparative analysis 
C)  Ratio analysis 
D)  Vertical analysis 
E)  None of these

Question 9

A ratio of 2:2:1 means:

Accepted Answer

A)  There are six parts 
B)  2/4, 2/4, 1/4 
C)  2/5, 2/5, 1/5 
D)  2/4, 2/5, 1/4 
E)  None of these 
A)  There are six parts 
B)  2/4, 2/4, 1/4 
C)  2/5, 2/5, 1/5 
D)  2/4, 2/5, 1/4 
E)  None of these

Question 10

In using horizontal analysis, comparative reports are:

Accepted Answer

A)  Always used 
B)  Never used 
C)  Infrequently used 
D)  Often used 
E)  None of these 
A)  Always used 
B)  Never used 
C)  Infrequently used 
D)  Often used 
E)  None of these

Question 11

The cost of merchandise sold from the following data is as follows: sales $80,000, beginning inventory $5,000, purchases $21,800, purchase discounts $790, ending inventory $5,100.

Accepted Answer

A)  $21,560 
B)  $20,190 
C)  $20,910 
D)  $21,650 
E)  None of these 
A)  $21,560 
B)  $20,190 
C)  $20,910 
D)  $21,650 
E)  None of these

Question 12

Reductions in the selling price for early payment are called sales returns and allowances.

Accepted Answer

A) True 
 B)False

Question 13

Selecting a base year and expressing each amount as a percent of the base year amount is called:

Accepted Answer

A)  Trend analysis 
B)  Horizontal analysis 
C)  Vertical analysis 
D)  Ratio analysis 
E)  None of these 
A)  Trend analysis 
B)  Horizontal analysis 
C)  Vertical analysis 
D)  Ratio analysis 
E)  None of these

Question 14

Could we speed up our collections? could be one question raised about the average day's collection ratio.

Accepted Answer

A) True 
 B)False

Question 15

The return on equity ratio looks at how effectively assets are being utilized.

Accepted Answer

A) True 
 B)False

Question 16

Cost of merchandise sold equals beginning inventory:

Accepted Answer

A)  Plus net purchases plus ending inventory 
B)  Plus net purchases minus ending inventory 
C)  Minus net purchases minus ending inventory 
D)  Minus net purchases plus ending inventory 
E)  None of these 
A)  Plus net purchases plus ending inventory 
B)  Plus net purchases minus ending inventory 
C)  Minus net purchases minus ending inventory 
D)  Minus net purchases plus ending inventory 
E)  None of these

Question 17

A relationship of one number to another is a ratio.

Accepted Answer

A) True 
 B)False

Question 18

A balance sheet shows the financial condition of a business at a particular date.

Accepted Answer

A) True 
 B)False

Question 19

Vertical analysis cannot be done on a comparative statement.

Accepted Answer

A) True 
 B)False

Question 20

The balance sheet lists:

Accepted Answer

A)  Assets, liabilities, expenses 
B)  Assets, liabilities, equity 
C)  Assets, revenues, expenses 
D)  Assets, revenues, equity 
E)  None of these 
A)  Assets, liabilities, expenses 
B)  Assets, liabilities, equity 
C)  Assets, revenues, expenses 
D)  Assets, revenues, equity 
E)  None of these

Exam 13: How to Read, Analyze, and Interpret Financial Reports

Net purchases are the cost of purchases minus purchase discounts minus purchase returns and allowances.

In the acid test ratio, inventory and prepaid expenses are not excluded.

Given the following: By trend analysis (base year is 2010), sales in 2012 to the nearest percent of the base year is:

The computer is the only tool needed in monitoring a business's financial condition.

Which of the following is not a current asset?

Land does not depreciate.

The company's gross profit based on the following is sales $48,000, sales returns and allowances $6,000, operating expenses $6,200, beginning inventory $900, net purchases $9,100, ending inventory $2,300.

When each asset is analyzed as a percent of total assets for a single period, this is known as:

A ratio of 2:2:1 means:

In using horizontal analysis, comparative reports are:

The cost of merchandise sold from the following data is as follows: sales $80,000, beginning inventory $5,000, purchases $21,800, purchase discounts $790, ending inventory $5,100.

Reductions in the selling price for early payment are called sales returns and allowances.

Selecting a base year and expressing each amount as a percent of the base year amount is called:

Could we speed up our collections? could be one question raised about the average day's collection ratio.

The return on equity ratio looks at how effectively assets are being utilized.

Cost of merchandise sold equals beginning inventory:

A relationship of one number to another is a ratio.

A balance sheet shows the financial condition of a business at a particular date.

Vertical analysis cannot be done on a comparative statement.

The balance sheet lists:

Problem Solving With Math

Fractions

Decimals

Solving for the Unknown

Business Statistics

Banking and Budgeting

Payroll and Income Tax

Sales, Excise, and Property Taxes

Risk Management

Installment Buying and Revolving Charge Credit Cards

Discounts: Trade and Cash

Markups and Markdowns: Perishables and Breakeven Analysis

Depreciation

Inventory and Overhead

Simple Interest

Promissory Notes, Simple Discount Notes, and the Discount Process

The Cost of Home Ownership

Compound Interest and Present Value

Annuities and Sinking Funds

Stocks, Bonds, and Mutual Funds

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