Question 1

Horizontal analysis

Accepted Answer

A) is also called trend analysis. 
B) can be carried out on statement of financial position data but not on statement of income data. 
C) is a technique for evaluating a financial statement item in the current year with other items in the current year. 
D) uses the base year as the most current year being examined. 
A) is also called trend analysis. 
B) can be carried out on statement of financial position data but not on statement of income data. 
C) is a technique for evaluating a financial statement item in the current year with other items in the current year. 
D) uses the base year as the most current year being examined.

Question 2

Vertical analysis is a technique that expresses each item in a financial statement

Accepted Answer

A) in dollars and cents. 
B) as a percentage of the item in the previous year. 
C) as a percentage of a base amount. 
D) starting with the highest value down to the lowest value. 
A) in dollars and cents. 
B) as a percentage of the item in the previous year. 
C) as a percentage of a base amount. 
D) starting with the highest value down to the lowest value.

Question 3

An inventory turnover ratio

Accepted Answer

A) measures the number of times, on average, the inventory was sold during the period. 
B) is a measure of solvency that focuses on efficient use of inventory. 
C) that is significantly lower than the industry average usually indicates difficulty with selling that inventory and the likelihood of incurring lower than average storage costs. 
D) that is significantly higher than the industry average may indicate that a company is maintaining inventory levels that are too high. 
A) measures the number of times, on average, the inventory was sold during the period. 
B) is a measure of solvency that focuses on efficient use of inventory. 
C) that is significantly lower than the industry average usually indicates difficulty with selling that inventory and the likelihood of incurring lower than average storage costs. 
D) that is significantly higher than the industry average may indicate that a company is maintaining inventory levels that are too high.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) raise the selling price. 
B) decrease the percentage markup on cost. 
C) reduce its cost of goods sold. 
D) reduce its operating expenses. 
A) raise the selling price. 
B) decrease the percentage markup on cost. 
C) reduce its cost of goods sold. 
D) reduce its operating expenses.

Question 6

Handles Corp.reported credit sales of $6,500,000 and cost of goods sold of $3,400,000 for the year.The Accounts Receivable balances at the beginning and end of the year were $525,000 and $575,000, respectively.The receivables turnover ratio was

Accepted Answer

A) 6.2 times. 
B) 11.3 times. 
C) 11.8 times. 
D) 5.9 times. 
A) 6.2 times. 
B) 11.3 times. 
C) 11.8 times. 
D) 5.9 times.

Question 7

Free cash flow is calculated as

Accepted Answer

A) net income minus net capital expenditures minus dividends paid. 
B) net income minus dividends paid. 
C) net cash provided (used)by operating activities minus net capital expenditures minus dividends paid. 
D) net cash provided (used)by investing activities minus net capital expenditures minus dividends paid. 
A) net income minus net capital expenditures minus dividends paid. 
B) net income minus dividends paid. 
C) net cash provided (used)by operating activities minus net capital expenditures minus dividends paid. 
D) net cash provided (used)by investing activities minus net capital expenditures minus dividends paid.

Question 8

Which of the following ratios are known as market measures of profitability?

Accepted Answer

A) payout and dividend yield 
B) return on assets and debt to total assets 
C) basic earnings per share and price-earnings 
D) price-earnings and dividend yield 
A) payout and dividend yield 
B) return on assets and debt to total assets 
C) basic earnings per share and price-earnings 
D) price-earnings and dividend yield

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Liquidity ratios measure the ability of the company to survive over a long period of time.

Accepted Answer

A) True 
 B)False

Question 11

Short-term creditors are usually most interested in assessing

Accepted Answer

A) solvency. 
B) liquidity. 
C) marketability. 
D) profitability. 
A) solvency. 
B) liquidity. 
C) marketability. 
D) profitability.

Question 12

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

Accepted Answer

A) current ratio 
B) dividend yield 
C) asset turnover 
D) receivables turnover 
A) current ratio 
B) dividend yield 
C) asset turnover 
D) receivables turnover

Question 13

Comparisons of financial data made within a company are called

Accepted Answer

A) intracompany comparisons. 
B) interior comparisons. 
C) intercompany comparisons. 
D) intramural comparisons. 
A) intracompany comparisons. 
B) interior comparisons. 
C) intercompany comparisons. 
D) intramural comparisons.

Question 14

All of the following profitability ratios relate more to the needs of investors than corporations except for

Accepted Answer

A) basic earnings per share. 
B) payout ratio. 
C) profit margin. 
D) dividend yield. 
A) basic earnings per share. 
B) payout ratio. 
C) profit margin. 
D) dividend yield.

Question 15

A solvency ratio measures the net income or operating success of a company for a given period of time.

Accepted Answer

A) True 
 B)False

Question 16

Using vertical analysis on the statement of income, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Accepted Answer

A) True 
 B)False

Question 17

Afrikana Inc.had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year.Credit sales during the year were $5,920,000.The average collection period of the receivables was

Accepted Answer

A) 45 days. 
B) 52 days. 
C) 54 days. 
D) 104 days. 
A) 45 days. 
B) 52 days. 
C) 54 days. 
D) 104 days.

Question 18

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 19

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

Accepted Answer

A) True 
 B)False

Question 20

An assessment of liquidity can be done based on only one ratio, such as the current ratio or the receivables ratio.

Accepted Answer

A) True 
 B)False

Horizontal analysis

Vertical analysis is a technique that expresses each item in a financial statement

An inventory turnover ratio

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

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

Handles Corp.reported credit sales of $6,500,000 and cost of goods sold of $3,400,000 for the year.The Accounts Receivable balances at the beginning and end of the year were $525,000 and $575,000, respectively.The receivables turnover ratio was

Free cash flow is calculated as

Which of the following ratios are known as market measures of profitability?

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

Liquidity ratios measure the ability of the company to survive over a long period of time.

Short-term creditors are usually most interested in assessing

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

Comparisons of financial data made within a company are called

All of the following profitability ratios relate more to the needs of investors than corporations except for

A solvency ratio measures the net income or operating success of a company for a given period of time.

Using vertical analysis on the statement of income, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Afrikana Inc.had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year.Credit sales during the year were $5,920,000.The average collection period of the receivables was

Asset turnover measures

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

An assessment of liquidity can be done based on only one ratio, such as the current ratio or the receivables ratio.

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

Vertical analysis is a technique that expresses each item in a financial statement

An inventory turnover ratio

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

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

Handles Corp.reported credit sales of $6,500,000 and cost of goods sold of $3,400,000 for the year.The Accounts Receivable balances at the beginning and end of the year were $525,000 and $575,000, respectively.The receivables turnover ratio was

Free cash flow is calculated as

Which of the following ratios are known as market measures of profitability?

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

Liquidity ratios measure the ability of the company to survive over a long period of time.

Short-term creditors are usually most interested in assessing

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

Comparisons of financial data made within a company are called

All of the following profitability ratios relate more to the needs of investors than corporations except for

A solvency ratio measures the net income or operating success of a company for a given period of time.

Using vertical analysis on the statement of income, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Afrikana Inc.had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year.Credit sales during the year were $5,920,000.The average collection period of the receivables was

Asset turnover measures

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

An assessment of liquidity can be done based on only one ratio, such as the current ratio or the receivables ratio.

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