Question 1

If a company has sales of $100 in 2017 (the base period) and $560 in 2018 (the analysis period), the percentage of the base period is 460%.

Accepted Answer

A) True 
 B)False

Question 2

Assume the following sales data for a company:   What is the percentage increase in sales from 2017 to 2018?

Accepted Answer

A)  11% 
B)  88% 
C)  12% 
D)  47% 
A)  11% 
B)  88% 
C)  12% 
D)  47%

Question 3

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, the percentage change will exceed 100%.

Accepted Answer

A) True 
 B)False

Question 4

The first step in any comprehensive analysis is to perform a horizontal and vertical analysis.

Accepted Answer

A) True 
 B)False

Question 5

A common measure of liquidity is

Accepted Answer

A)  return on assets. 
B)  receivables turnover. 
C)  profit margin. 
D)  debt to total assets. 
A)  return on assets. 
B)  receivables turnover. 
C)  profit margin. 
D)  debt to total assets.

Question 6

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 7

Horizontal analysis showed a 25% increase in accounts receivable in 2018 over 2017. Vertical analysis showed accounts receivable declining from 7.5% to 6.8% over the same period. Given this information, what conclusion(s) may be reached?

Accepted Answer

A)  The dollar amount of accounts receivable increased. 
B)  The dollar amount of accounts receivable decreased. 
C)  It cannot be determined if the dollar amount of accounts receivable increased or decreased. 
D)  This result is impossible. An error has been made in the calculations. 
A)  The dollar amount of accounts receivable increased. 
B)  The dollar amount of accounts receivable decreased. 
C)  It cannot be determined if the dollar amount of accounts receivable increased or decreased. 
D)  This result is impossible. An error has been made in the calculations.

Question 8

Vertical analysis

Accepted Answer

A)  is a technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place. 
B)  expresses each item in a financial statement as a percent of a base amount. 
C)  makes it more difficult to compare different companies. 
D)  is also called trend analysis. 
A)  is a technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place. 
B)  expresses each item in a financial statement as a percent of a base amount. 
C)  makes it more difficult to compare different companies. 
D)  is also called trend analysis.

Question 9

Use the following information for questions.
Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000.
-Which one of the following would not be considered a liquidity ratio?

Accepted Answer

A)  current ratio 
B)  inventory turnover ratio 
C)  receivables turnover ratio 
D)  return on assets ratio 
A)  current ratio 
B)  inventory turnover ratio 
C)  receivables turnover ratio 
D)  return on assets ratio

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

The current ratio is

Accepted Answer

A)  calculated by dividing current liabilities by current assets. 
B)  used to evaluate a company's liquidity and short-term debt paying ability. 
C)  used to evaluate a company's solvency and long-term debt paying ability. 
D)  calculated by subtracting current liabilities from current assets. 
A)  calculated by dividing current liabilities by current assets. 
B)  used to evaluate a company's liquidity and short-term debt paying ability. 
C)  used to evaluate a company's solvency and long-term debt paying ability. 
D)  calculated by subtracting current liabilities from current assets.

Question 13

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 14

Use the following information for questions.
Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000.
-Best Baskets Limited (BBL) had a current ratio of 0.8:1 before borrowing $50,000 from the bank with a short-term note payable. What effect did the borrowing transaction have on BBL's current ratio?

Accepted Answer

A)  The ratio remained unchanged. 
B)  The ratio decreased. 
C)  The ratio increased. 
D)  Cannot be determined. 
A)  The ratio remained unchanged. 
B)  The ratio decreased. 
C)  The ratio increased. 
D)  Cannot be determined.

Question 15

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

Question 16

If a company has sales of $220 in 2017 and $560 in 2018, the percentage increase in sales from 2017 to 2018 is 155%.

Accepted Answer

A) True 
 B)False

Question 17

Use the following information for questions.
Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000.
-A weakness of the current ratio is

Accepted Answer

A)  the difficulty of the calculation. 
B)  that it doesn't take into account the composition of the current assets. 
C)  that it is rarely used by sophisticated analysts. 
D)  that it can be expressed as a percentage, as a rate, or as a proportion. 
A)  the difficulty of the calculation. 
B)  that it doesn't take into account the composition of the current assets. 
C)  that it is rarely used by sophisticated analysts. 
D)  that it can be expressed as a percentage, as a rate, or as a proportion.

Question 18

Horizontal analysis

Accepted Answer

A)  is also called trend analysis. 
B)  can be carried out on statement of financial position data but not on income statement 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 income statement 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 19

Use the following information for questions.  
-In performing a vertical analysis, the percentage for cost of goods sold is

Accepted Answer

A)  4.4%. 
B)  40.0%. 
C)  44.4%. 
D)  400.0%. 
A)  4.4%. 
B)  40.0%. 
C)  44.4%. 
D)  400.0%.

Question 20

When preparing a vertical analysis on an income statement, net sales are represented by 100%.

Accepted Answer

A) True 
 B)False

If a company has sales of $100 in 2017 (the base period) and $560 in 2018 (the analysis period), the percentage of the base period is 460%.

Assume the following sales data for a company: What is the percentage increase in sales from 2017 to 2018?

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, the percentage change will exceed 100%.

The first step in any comprehensive analysis is to perform a horizontal and vertical analysis.

A common measure of liquidity is

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

Horizontal analysis showed a 25% increase in accounts receivable in 2018 over 2017. Vertical analysis showed accounts receivable declining from 7.5% to 6.8% over the same period. Given this information, what conclusion(s) may be reached?

Vertical analysis

Use the following information for questions. Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000. -Which one of the following would not be considered a liquidity ratio?

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

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

The current ratio is

In vertical analysis

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

If a company has sales of $220 in 2017 and $560 in 2018, the percentage increase in sales from 2017 to 2018 is 155%.

Use the following information for questions. Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000. -A weakness of the current ratio is

Horizontal analysis

Use the following information for questions. -In performing a vertical analysis, the percentage for cost of goods sold is

When preparing a vertical analysis on an income statement, net sales are represented by 100%.

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 2017 (the base period) and $560 in 2018 (the analysis period), the percentage of the base period is 460%.

Assume the following sales data for a company: What is the percentage increase in sales from 2017 to 2018?

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, the percentage change will exceed 100%.

The first step in any comprehensive analysis is to perform a horizontal and vertical analysis.

A common measure of liquidity is

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

Horizontal analysis showed a 25% increase in accounts receivable in 2018 over 2017. Vertical analysis showed accounts receivable declining from 7.5% to 6.8% over the same period. Given this information, what conclusion(s) may be reached?

Vertical analysis

Use the following information for questions. Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000. -Which one of the following would not be considered a liquidity ratio?

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

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

The current ratio is

In vertical analysis

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

If a company has sales of $220 in 2017 and $560 in 2018, the percentage increase in sales from 2017 to 2018 is 155%.

Use the following information for questions. Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000. -A weakness of the current ratio is

Horizontal analysis

Use the following information for questions. -In performing a vertical analysis, the percentage for cost of goods sold is

When preparing a vertical analysis on an income statement, net sales are represented by 100%.

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