Question 1

A change in accounting principle occurs when the principle used in the current year is different from the one used by competitors in the current year.

Accepted Answer

A) True 
 B)False

Question 2

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

Accepted Answer

A) True 
 B)False

Question 3

Akers Corporation reported net income $36,000; net sales $480,000; and average assets $800,000 for 2017. What is the 2017 profit margin?

Accepted Answer

A)  4.5% 
B)  7.5% 
C)  13.3% 
D)  60.0% 
A)  4.5% 
B)  7.5% 
C)  13.3% 
D)  60.0%

Question 4

Salamagundi, Inc. has the following Income Statement (in millions):   Using vertical analysis, what percentage is assigned to gross profit?

Accepted Answer

A)  37.5% 
B)  100% 
C)  60% 
D)  62.5% 
A)  37.5% 
B)  100% 
C)  60% 
D)  62.5%

Question 5

Net sales are $2,700,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?

Accepted Answer

A)  $900,000 
B)  $1,100,000 
C)  $700,000 
D)  $800,000 
A)  $900,000 
B)  $1,100,000 
C)  $700,000 
D)  $800,000

Question 6

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $1,250,000. The inventory turnover for the year is

Accepted Answer

A)  7.4 times. 
B)  10.4 times. 
C)  3.0 times. 
D)  1.4 times. 
A)  7.4 times. 
B)  10.4 times. 
C)  3.0 times. 
D)  1.4 times.

Question 7

Return on common stockholders' equity is most closely related to

Accepted Answer

A)  gross profit rate and operating expenses to sales ratio. 
B)  profit margin and free cash flow. 
C)  times interest earned and debt to stockholders' equity ratio. 
D)  return on asset and leverage (debt to assets ratio). 
A)  gross profit rate and operating expenses to sales ratio. 
B)  profit margin and free cash flow. 
C)  times interest earned and debt to stockholders' equity ratio. 
D)  return on asset and leverage (debt to assets ratio).

Question 8

Match between columns
                        Premises: Price-earnings ratio
Return on assets
Accounts receivable turnover
Earnings per share
Payout ratio
Working capital
Current ratio
Debt to assets ratio
Free cash flow
Inventory turnover

Accepted Answer

The Answer of Liquidity ratio and Profitability ratio and Solvency is...

Question 9

A successful grocery store would probably have

Accepted Answer

A)  a low inventory turnover. 
B)  a high inventory turnover. 
C)  zero profit margin. 
D)  low volume. 
A)  a low inventory turnover. 
B)  a high inventory turnover. 
C)  zero profit margin. 
D)  low volume.

Question 10

Comparisons of data within a company are an example of the following comparative basis

Accepted Answer

A)  industry averages. 
B)  intercompany. 
C)  intracompany. 
D)  interregional. 
A)  industry averages. 
B)  intercompany. 
C)  intracompany. 
D)  interregional.

Question 11

Here is the income statement for Ginsberg, Inc.   
Additional information:
1. Common stock outstanding January 1, 2017, was 30,000 shares, and 40,000 shares were outstanding at December 31, 2017.
2. The market price of Gillman, Inc., stock was $15.86 in 2017.
3. Cash dividends of $16,000 were paid, $4,500 of which were to preferred stockholders.
Instructions
Compute the following measures for 2017.
(a) Earnings per share.
(b) Price-earnings ratio.
(c) Payout ratio.
(d) Times interest earned.

Accepted Answer

The answer of Here is the income statement for Ginsberg,...

Question 12

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 13

A company that is leveraged is one that

Accepted Answer

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

Question 14

Declining profitability and liquidity ratios are indications that a company may not survive.

Accepted Answer

A) True 
 B)False

Question 15

Danner Corporation reported net sales of $650,000, $720,000, and $780,000 in the years 2016, 2017, and 2018, respectively. If 2016 is the base year, what percentage do 2018 sales represent of the base?

Accepted Answer

A)  108% 
B)  120% 
C)  83% 
D)  20% 
A)  108% 
B)  120% 
C)  83% 
D)  20%

Question 16

Ratios are used as tools in financial analysis

Accepted Answer

A)  instead of horizontal and vertical analyses. 
B)  because they can provide information that may not be apparent from inspection of the individual components of the financial statements. 
C)  because even single ratios by themselves are quite meaningful. 
D)  because they are prescribed by GAAP. 
A)  instead of horizontal and vertical analyses. 
B)  because they can provide information that may not be apparent from inspection of the individual components of the financial statements. 
C)  because even single ratios by themselves are quite meaningful. 
D)  because they are prescribed by GAAP.

Question 17

Armada Company has these comparative balance sheet data:   
Additional information for 2017:
1. Net income was $25,000.
2. Sales on account were $450,000. Sales returns and allowances amounted to $25,000.
3. Cost of goods sold was $275,000.
4. Net cash provided by operating activities was $49,000.
5. Capital expenditures were $23,000, and cash dividends were $18,000.
Instructions
Compute the following ratios at December 31, 2017.
(a) Current. (e) Days in inventory
(b) Accounts receivable turnover. (f) Free cash flow.
(c) Average collection period.
(d) Inventory turnover.

Accepted Answer

The answer of Armada Company has these comparative balance sheet...

Question 18

Jack's by the Tracks has the following partial balance sheet:   What effect will the accumulated other comprehensive income have on comprehensive income?

Accepted Answer

A)  No effect on comprehensive income. 
B)  Increase of $800,000 in comprehensive income. 
C)  Increase of $8,800,000 in comprehensive income. 
D)  Decrease of $800,000 in comprehensive income. 
A)  No effect on comprehensive income. 
B)  Increase of $800,000 in comprehensive income. 
C)  Increase of $8,800,000 in comprehensive income. 
D)  Decrease of $800,000 in comprehensive income.

Question 19

Using these data from the comparative balance sheet of Sunta Fe Spice Company, perform horizontal analysis.

Accepted Answer

@#IMG-DLM& *(2017 A/

Question 20

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)  Inventory turnover 
C)  Asset turnover 
D)  Accounts receivable turnover 
A)  Current ratio 
B)  Inventory turnover 
C)  Asset turnover 
D)  Accounts receivable turnover

Exam 13: Financial Statement Analysis

A change in accounting principle occurs when the principle used in the current year is different from the one used by competitors in the current year.

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

Akers Corporation reported net income $36,000; net sales $480,000; and average assets $800,000 for 2017. What is the 2017 profit margin?

Salamagundi, Inc. has the following Income Statement (in millions): Using vertical analysis, what percentage is assigned to gross profit?

Net sales are $2,700,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $1,250,000. The inventory turnover for the year is

Return on common stockholders' equity is most closely related to

A successful grocery store would probably have

Comparisons of data within a company are an example of the following comparative basis

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

A company that is leveraged is one that

Declining profitability and liquidity ratios are indications that a company may not survive.

Danner Corporation reported net sales of $650,000, $720,000, and $780,000 in the years 2016, 2017, and 2018, respectively. If 2016 is the base year, what percentage do 2018 sales represent of the base?

Ratios are used as tools in financial analysis

Jack's by the Tracks has the following partial balance sheet: What effect will the accumulated other comprehensive income have on comprehensive income?

Using these data from the comparative balance sheet of Sunta Fe Spice Company, perform horizontal analysis.

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?

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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