Question 1

If a company has sales of $100 in 2021 (the base period) and $560 in 2022 (the analysis period), the percentage of the base period is 460%.

Accepted Answer

A) True 
 B)False

Question 2

A company that is highly leveraged is one that

Accepted Answer

A) has a high basic earnings per share. 
B) contains debt financing. 
C) contains equity financing. 
D) has a high current ratio. 
A) has a high basic earnings per share. 
B) contains debt financing. 
C) contains equity financing. 
D) has a high current ratio.

Question 3

In vertical analysis

Accepted Answer

A) a base amount is required. 
B) a base amount is optional. 
C) the same base is used across all financial statements being analyzed. 
D) the results of the horizontal analysis are necessary inputs for vertical analysis. 
A) a base amount is required. 
B) a base amount is optional. 
C) the same base is used across all financial statements being analyzed. 
D) the results of the horizontal analysis are necessary inputs for vertical analysis.

Question 4

Which of the following statement of income figures would probably be the best indicator of a company's future performance?

Accepted Answer

A) total revenues 
B) gross profit 
C) net income 
D) income from continuing operations 
A) total revenues 
B) gross profit 
C) net income 
D) income from continuing operations

Question 5

Under which of the following cases would a percentage change not be calculated?

Accepted Answer

A) The trend of the amounts is decreasing but all amounts are positive. 
B) There is no amount in the base year. 
C) The trend of the amounts is decreasing but all amounts are negative. 
D) The trend of the amounts is increasing but all amounts are negative. 
A) The trend of the amounts is decreasing but all amounts are positive. 
B) There is no amount in the base year. 
C) The trend of the amounts is decreasing but all amounts are negative. 
D) The trend of the amounts is increasing but all amounts are negative.

Question 6

A high receivables turnover ratio may indicate that

Accepted Answer

A) customers are making payments quickly. 
B) a large portion of the company's sales are on credit. 
C) many customers are not paying their receivables. 
D) the company's sales have increased. 
A) customers are making payments quickly. 
B) a large portion of the company's sales are on credit. 
C) many customers are not paying their receivables. 
D) the company's sales have increased.

Question 7

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

Accepted Answer

A) that has been arranged from the highest number to the lowest number. 
B) that has been arranged from the lowest number to the highest number. 
C) to determine which items are in error. 
D) to determine the amount and/or percentage increase or decrease that has taken place. 
A) that has been arranged from the highest number to the lowest number. 
B) that has been arranged from the lowest number to the highest number. 
C) to determine which items are in error. 
D) to determine the amount and/or percentage increase or decrease that has taken place.

Question 8

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 statement of income are expressed as a percentage of 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 statement of income are expressed as a percentage of 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 9

Use the following information for questions 
During 2022, Amazing Corp.reported after-tax net income of $900,000 and paid $175,000 in common dividends.The weighted average number of common shares issued in 2022 was 200,000.There are no preferred shares issued.At year end, Amazing's common shares are selling for $81 per share on the Toronto Stock Exchange.
-Amazing's price-earnings ratio is

Accepted Answer

A) 180 times. 
B) 12 times. 
C) 18 times. 
D) 6 times. 
A) 180 times. 
B) 12 times. 
C) 18 times. 
D) 6 times.

Question 10

Earnings before interest and tax (EBIT) is a proxy for the amount available to cover interest payments.

Accepted Answer

A) True 
 B)False

Question 11

Asset turnover ratio is calculated as

Accepted Answer

A) sales divided by net income. 
B) average total assets divided by net income. 
C) sales divided by average total assets. 
D) average total assets divided by sales. 
A) sales divided by net income. 
B) average total assets divided by net income. 
C) sales divided by average total assets. 
D) average total assets divided by sales.

Question 12

Assets and liabilities of a discontinued operation that are held for sale are reported

Accepted Answer

A) separately on statement of financial position. 
B) at higher of their carrying amount or fair value. 
C) at lower of fair value or cost. 
D) separately on the statement of comprehensive income. 
A) separately on statement of financial position. 
B) at higher of their carrying amount or fair value. 
C) at lower of fair value or cost. 
D) separately on the statement of comprehensive income.

Question 13

If the average collection period is 45 days, what is the receivables turnover?

Accepted Answer

A) 8.1 times 
B) 12.0 times 
C) 18.0 times 
D) 20.0 times 
A) 8.1 times 
B) 12.0 times 
C) 18.0 times 
D) 20.0 times

Question 14

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 statement of income. 
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 statement of income. 
C) vertical analysis makes it easier to compare companies of different sizes. 
D) vertical analysis is seldom performed on the cash flow statement.

Question 15

Leveraging and return on common shareholders' equity are closely related.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Long-term creditors are usually most interested in evaluating

Accepted Answer

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

Question 18

As companies increase leverage,

Accepted Answer

A) the difference between the return on assets ratio and the return on common shareholders' equity ratio will not change. 
B) the difference between the return on assets ratio and the return on common shareholders' equity ratio will narrow. 
C) the difference between the return on assets ratio and the return on common shareholders' equity ratio will widen. 
D) there will be no difference between the return on assets ratio and the return on common shareholders' equity. 
A) the difference between the return on assets ratio and the return on common shareholders' equity ratio will not change. 
B) the difference between the return on assets ratio and the return on common shareholders' equity ratio will narrow. 
C) the difference between the return on assets ratio and the return on common shareholders' equity ratio will widen. 
D) there will be no difference between the return on assets ratio and the return on common shareholders' equity.

Question 19

Even if a company has a low debt to total assets ratio, it may have difficulty paying interest on debt if it also has a low times interest earned ratio.

Accepted Answer

A) True 
 B)False

Question 20

Shareholders are most interested in evaluating

Accepted Answer

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

If a company has sales of $100 in 2021 (the base period) and $560 in 2022 (the analysis period), the percentage of the base period is 460%.

A company that is highly leveraged is one that

In vertical analysis

Which of the following statement of income figures would probably be the best indicator of a company's future performance?

Under which of the following cases would a percentage change not be calculated?

A high receivables turnover ratio may indicate that

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

All of the following statements about vertical analysis are true except

Earnings before interest and tax (EBIT) is a proxy for the amount available to cover interest payments.

Asset turnover ratio is calculated as

Assets and liabilities of a discontinued operation that are held for sale are reported

If the average collection period is 45 days, what is the receivables turnover?

All of the following statements about vertical analysis are true except

Leveraging and return on common shareholders' equity are closely related.

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?

Long-term creditors are usually most interested in evaluating

As companies increase leverage,

Even if a company has a low debt to total assets ratio, it may have difficulty paying interest on debt if it also has a low times interest earned ratio.

Shareholders are most interested in evaluating

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

If a company has sales of $100 in 2021 (the base period) and $560 in 2022 (the analysis period), the percentage of the base period is 460%.

A company that is highly leveraged is one that

In vertical analysis

Which of the following statement of income figures would probably be the best indicator of a company's future performance?

Under which of the following cases would a percentage change not be calculated?

A high receivables turnover ratio may indicate that

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

All of the following statements about vertical analysis are true except

Earnings before interest and tax (EBIT) is a proxy for the amount available to cover interest payments.

Asset turnover ratio is calculated as

Assets and liabilities of a discontinued operation that are held for sale are reported

If the average collection period is 45 days, what is the receivables turnover?

All of the following statements about vertical analysis are true except

Leveraging and return on common shareholders' equity are closely related.

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?

Long-term creditors are usually most interested in evaluating

As companies increase leverage,

Even if a company has a low debt to total assets ratio, it may have difficulty paying interest on debt if it also has a low times interest earned ratio.

Shareholders are most interested in evaluating

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