Question 1

Which one of the following is not a characteristic generally evaluated in ratio analysis?

Accepted Answer

A)  Liquidity 
B)  Profitability 
C)  Marketability 
D)  Solvency 
A)  Liquidity 
B)  Profitability 
C)  Marketability 
D)  Solvency C

Question 2

The income statement for the Carolina Service Company for the year ended December 31, 2017, appears below.   
*Includes $25,000 of interest expense and $20,000 of income tax expense.
Additional information:
1. Common stock outstanding on January 1, 2017, was 50,000 shares. On July 1, 2017, 10,000 more shares were issued.
2. The market price of Carolina's stock was $22 at the end of 2017.
3. Cash dividends of $35,000 were paid, $5,000 of which were paid to preferred stockholders.
Instructions
Compute the following ratios for 2017:
(a) Earnings per share.
(b) Price-earnings.
(c) Times interest earned.

Accepted Answer

(a) Earnings per share   (b) Price-earnings   (c) Times interest earned

Question 3

The debt to assets ratio measures

Accepted Answer

A)  the company's profitability. 
B)  whether interest can be paid on debt in the current year. 
C)  the proportion of interest paid relative to dividends paid. 
D)  the percentage of the total assets provided by creditors. 
A)  the company's profitability. 
B)  whether interest can be paid on debt in the current year. 
C)  the proportion of interest paid relative to dividends paid. 
D)  the percentage of the total assets provided by creditors. D

Question 4

BVI Corporation had net income of $1,600,000 and paid dividends to common stockholders of $320,000 in 2017. The weighted average number of shares outstanding in 2017 was 500,000 shares. BVI Corporation's common stock is selling for $50 per share on the NASDAQ. BVI Corporation's payout ratio for 2017 is

Accepted Answer

A)  $5 per share. 
B)  20%. 
C)  32%. 
D)  5%. 
A)  $5 per share. 
B)  20%. 
C)  32%. 
D)  5%.

Question 5

Tito Corporation had net income of $2,000,000 and paid dividends to common stockholders of $300,000 in 2017. The weighted average number of shares outstanding in 2017 was 400,000 shares. Tito Corporation's common stock is selling for $50 per share on the NASDAQ. Tito Corporation's price-earnings ratio is

Accepted Answer

A)  20 times. 
B)  12 times. 
C)  10 times. 
D)  5 times. 
A)  20 times. 
B)  12 times. 
C)  10 times. 
D)  5 times.

Question 6

In a common size financial statement, which of the following is given a percentage of 100 percent?

Accepted Answer

A)  Total liabilities 
B)  Net income 
C)  Total assets 
D)  Cost of goods sold 
A)  Total liabilities 
B)  Net income 
C)  Total assets 
D)  Cost of goods sold

Question 7

Companies report most changes in accounting principle currently.

Accepted Answer

A) True 
 B)False

Question 8

Beta Corporation had net income of $325,000 and paid dividends to common stockholders of $39,000 in 2017. The weighted average number of shares outstanding in 2017 was 50,000 shares. Beta Corporation's common stock is selling for $52 per share on the New York Stock Exchange. Beta Corporation's price-earnings ratio is

Accepted Answer

A)  12.5 times. 
B)  8.0 times. 
C)  6.5 times. 
D)  9.1 times. 
A)  12.5 times. 
B)  8.0 times. 
C)  6.5 times. 
D)  9.1 times.

Question 9

Under which of the following cases may a percentage change be computed?

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

Question 10

Accounts receivable turnover is useful in assessing the profitability of receivables.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Question 13

Other comprehensive income includes all changes in stockholder's equity during a period including those changes resulting from investments by stockholder's.

Accepted Answer

A) True 
 B)False

Question 14

If the average collection period is 73 days, what is the accounts receivable turnover?

Accepted Answer

A)  5 times 
B)  20 times 
C)  10 times 
D)  6 times 
A)  5 times 
B)  20 times 
C)  10 times 
D)  6 times

Question 15

In performing a vertical analysis, the base for prepaid expenses is

Accepted Answer

A)  total current assets. 
B)  total assets. 
C)  total liabilities. 
D)  prepaid expenses in a previous year. 
A)  total current assets. 
B)  total assets. 
C)  total liabilities. 
D)  prepaid expenses in a previous year.

Question 16

The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
What is the current ratio for this company?

Accepted Answer

A)  1.17 
B)  1.25 
C)  1.67 
D)  0.75 
A)  1.17 
B)  1.25 
C)  1.67 
D)  0.75

Question 17

The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.   What is the price-earnings ratio for this company?

Accepted Answer

A)  2.4 times 
B)  2.0 times 
C)  3.4 times 
D)  6.0 times 
A)  2.4 times 
B)  2.0 times 
C)  3.4 times 
D)  6.0 times

Question 18

In a common size income statement, the 100% figure is

Accepted Answer

A)  net income. 
B)  cost of goods sold. 
C)  gross profit. 
D)  net sales. 
A)  net income. 
B)  cost of goods sold. 
C)  gross profit. 
D)  net sales.

Question 19

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $1,250,000. The average days in inventory during the year was approximately

Accepted Answer

A)  51 days. 
B)  65 days. 
C)  70 days. 
D)  87 days. 
A)  51 days. 
B)  65 days. 
C)  70 days. 
D)  87 days.

Question 20

The balance sheet for Appalachian Corporation at the end of the current year includes the following:   
Net income was $565,000 and income tax expense for the current year amounted to $285,000. Cash dividends paid on common stock were $200,000, and the common stock was selling for $28 per share at the end of the year. There were no ownership changes during the year.
Instructions
Determine each of the following:
(a) Number of times that bond interest was earned.
(b) Earnings per share for common stock.
(c) Price-earnings ratio.

Accepted Answer

The answer of The balance sheet for Appalachian Corporation at...

Exam 13: Financial Statement Analysis

Which one of the following is not a characteristic generally evaluated in ratio analysis?

The debt to assets ratio measures

In a common size financial statement, which of the following is given a percentage of 100 percent?

Companies report most changes in accounting principle currently.

Under which of the following cases may a percentage change be computed?

Accounts receivable turnover is useful in assessing the profitability of receivables.

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

In vertical analysis

Other comprehensive income includes all changes in stockholder's equity during a period including those changes resulting from investments by stockholder's.

If the average collection period is 73 days, what is the accounts receivable turnover?

In performing a vertical analysis, the base for prepaid expenses is

The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the current ratio for this company?

The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the price-earnings ratio for this company?

In a common size income statement, the 100% figure is

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $1,250,000. The average days in inventory during the year was approximately

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, and Stockholders Equity

Statement of Cash Flows

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

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