Question 1

Horizontal analysis is also known as:

Accepted Answer

A) Liquidity analysis. 
B) Trend analysis. 
C) Revenue analysis. 
D) Variance analysis. 
A) Liquidity analysis. 
B) Trend analysis. 
C) Revenue analysis. 
D) Variance analysis.

Question 2

Select the correct statement regarding vertical analysis.

Accepted Answer

A) Vertical analysis of the income statement involves showing each item as a percentage of sales. 
B) Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets. 
C) Vertical analysis examines two or more items from the financial statements of one accounting period. 
D) All of these answer choices are correct. 
A) Vertical analysis of the income statement involves showing each item as a percentage of sales. 
B) Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets. 
C) Vertical analysis examines two or more items from the financial statements of one accounting period. 
D) All of these answer choices are correct.

Question 3

Which type of ratios measure a company's long-term debt paying ability and its financing structure?

Accepted Answer

A) Solvency 
B) Liquidity 
C) Profitability 
D) None of these answers choices are correct. 
A) Solvency 
B) Liquidity 
C) Profitability 
D) None of these answers choices are correct.

Question 4

The following partial balance sheet is provided for Groom Company:   What is the company's debt to assets ratio? (Rounded to nearest whole percent.)

Accepted Answer

A) 49% 
B) 16% 
C) 33% 
D) Cannot be determined with the information given. 
A) 49% 
B) 16% 
C) 33% 
D) Cannot be determined with the information given.

Question 5

A careless accountant splattered spaghetti sauce on Kitchen Company's balance sheet. The balance sheet with its missing amounts is provided below:
   Kitchen Company's working capital is $138,000.
Required:Compute the missing amounts. Record your answers in the following table:

Accepted Answer

@#IMG-DLM& Note: Solve in the following order: C,

Question 6

Bernard Company provided the following information from its financial records:   What is the company's book value per share?

Accepted Answer

A) $4.78 
B) $7.06 
C) $2.65 
D) $2.46 
A) $4.78 
B) $7.06 
C) $2.65 
D) $2.46

Question 7

Cost of goods sold divided by average inventory is the formula for which of these analytical measures?

Accepted Answer

A) Number of day's sales in inventory 
B) Return on investment 
C) Inventory turnover 
D) Debt to assets ratio 
A) Number of day's sales in inventory 
B) Return on investment 
C) Inventory turnover 
D) Debt to assets ratio

Question 8

Which of the following statements regarding the information disclosed in financial statements is not true?

Accepted Answer

A) The costs of providing all possible information about a firm would be prohibitively high for the business. 
B) Some information disclosed in financial statements may be irrelevant to some users. 
C) Financial statements should be detailed enough to answer any financial-related question an investor might have. 
D) When too much information is presented users may suffer from information overload. 
A) The costs of providing all possible information about a firm would be prohibitively high for the business. 
B) Some information disclosed in financial statements may be irrelevant to some users. 
C) Financial statements should be detailed enough to answer any financial-related question an investor might have. 
D) When too much information is presented users may suffer from information overload.

Question 9

The study of an individual financial statement item over several accounting periods is called:

Accepted Answer

A) Horizontal analysis. 
B) Vertical analysis. 
C) Ratio analysis. 
D) Time and motion analysis. 
A) Horizontal analysis. 
B) Vertical analysis. 
C) Ratio analysis. 
D) Time and motion analysis.

Question 10

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Accepted Answer

A) Price-earnings ratio 
B) Dividend yield 
C) Book value per share 
D) Return on equity 
A) Price-earnings ratio 
B) Dividend yield 
C) Book value per share 
D) Return on equity

Question 11

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares. Preferred dividends total $12,000. On the most recent trading day, the preferred shares sold at $50 and the common shares sold at $95. What is this company's current price-earnings ratio?

Accepted Answer

A) 19 
B) 17 
C) 20 
D) None of these answers choices are correct. 
A) 19 
B) 17 
C) 20 
D) None of these answers choices are correct.

Question 12

Which type of approach may be used when evaluating corporate results using horizontal analysis?

Accepted Answer

A) Study of absolute amounts 
B) Percentages 
C) Trends 
D) All of these answers choices are correct. 
A) Study of absolute amounts 
B) Percentages 
C) Trends 
D) All of these answers choices are correct.

Question 13

Denver Corporation and Cheyenne Company are in different industries. Denver's current ratio is 1.89, while Cheyenne's current ratio is 1.65. Therefore, is it safe to conclude that Denver's liquidity position is better than that of Cheyenne?

Accepted Answer

Answers will vary.
The acceptable (or de

Question 14

Ratios can be used for different purposes. For example, a variety of ratios have been developed to assess a firm's liquidity. Similarly, ratios have been developed to assess solvency, profitability, and stock market strength. A sample of commonly used ratios for these purposes is provided in the table below.
Required: In the middle column of the table, provide the formula to compute the specified ratio. In the final column, indicate the purpose (Liquidity, Solvency, Profitability, and Stock market strength)for which the ratio is most commonly used. The first item is completed as an example.

Accepted Answer

The answer of Ratios can be used for different purposes....

Question 15

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2, Gant sold inventory on account for $6,000. Which of the following statements is not true?

Accepted Answer

A) Gant's current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will increase. 
D) None of these answers choices are correct. 
A) Gant's current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will increase. 
D) None of these answers choices are correct.

Question 16

In vertical analysis of an income statement, each item is expressed as a percentage of:

Accepted Answer

A) Total expenses. 
B) Net income. 
C) Sales. 
D) None of these answers choices are correct. 
A) Total expenses. 
B) Net income. 
C) Sales. 
D) None of these answers choices are correct.

Question 17

The following balance sheet information is provided for Apex Company for Year 2:   What is the company's working capital?

Accepted Answer

A) $11,170 
B) $29,770 
C) $34,200 
D) $9,570 
A) $11,170 
B) $29,770 
C) $34,200 
D) $9,570

Question 18

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $29,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2 Gant paid $3,600 on accounts payable. Which of the following statements is not true?

Accepted Answer

A) Gant's quick ratio will increase and its current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will remain the same. 
D) Gant's current ratio will increase. 
A) Gant's quick ratio will increase and its current ratio will decrease. 
B) Gant's quick ratio will increase. 
C) Gant's working capital will remain the same. 
D) Gant's current ratio will increase.

Question 19

The accounts receivable turnover ratio can be used to assess a firm's solvency.

Accepted Answer

A) True 
 B)False

Question 20

The study of an individual item or account over several periods in the same financial year or over many years is known as:

Accepted Answer

A) Liquidity analysis 
B) Ratio analysis 
C) Vertical analysis 
D) Horizontal analysis 
A) Liquidity analysis 
B) Ratio analysis 
C) Vertical analysis 
D) Horizontal analysis

Horizontal analysis is also known as:

Select the correct statement regarding vertical analysis.

Which type of ratios measure a company's long-term debt paying ability and its financing structure?

The following partial balance sheet is provided for Groom Company: What is the company's debt to assets ratio? (Rounded to nearest whole percent.)

A careless accountant splattered spaghetti sauce on Kitchen Company's balance sheet. The balance sheet with its missing amounts is provided below: Kitchen Company's working capital is $138,000. Required:Compute the missing amounts. Record your answers in the following table:

Bernard Company provided the following information from its financial records: What is the company's book value per share?

Cost of goods sold divided by average inventory is the formula for which of these analytical measures?

Which of the following statements regarding the information disclosed in financial statements is not true?

The study of an individual financial statement item over several accounting periods is called:

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares. Preferred dividends total $12,000. On the most recent trading day, the preferred shares sold at $50 and the common shares sold at $95. What is this company's current price-earnings ratio?

Which type of approach may be used when evaluating corporate results using horizontal analysis?

Denver Corporation and Cheyenne Company are in different industries. Denver's current ratio is 1.89, while Cheyenne's current ratio is 1.65. Therefore, is it safe to conclude that Denver's liquidity position is better than that of Cheyenne?

In vertical analysis of an income statement, each item is expressed as a percentage of:

The following balance sheet information is provided for Apex Company for Year 2: What is the company's working capital?

The accounts receivable turnover ratio can be used to assess a firm's solvency.

The study of an individual item or account over several periods in the same financial year or over many years is known as:

An Introduction to Accounting

Accounting for Accruals

Accounting for Deferrals

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships, Partnerships, and Corporations

Statement of Cash Flows

The Double-Entry Accounting System

Filters

Exam 14: Financial Statement Analysis Available Online in Connect

Horizontal analysis is also known as:

Select the correct statement regarding vertical analysis.

Which type of ratios measure a company's long-term debt paying ability and its financing structure?

The following partial balance sheet is provided for Groom Company: What is the company's debt to assets ratio? (Rounded to nearest whole percent.)

A careless accountant splattered spaghetti sauce on Kitchen Company's balance sheet. The balance sheet with its missing amounts is provided below: Kitchen Company's working capital is $138,000. Required:Compute the missing amounts. Record your answers in the following table:

Bernard Company provided the following information from its financial records: What is the company's book value per share?

Cost of goods sold divided by average inventory is the formula for which of these analytical measures?

Which of the following statements regarding the information disclosed in financial statements is not true?

The study of an individual financial statement item over several accounting periods is called:

Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares. Preferred dividends total $12,000. On the most recent trading day, the preferred shares sold at $50 and the common shares sold at $95. What is this company's current price-earnings ratio?

Which type of approach may be used when evaluating corporate results using horizontal analysis?

Denver Corporation and Cheyenne Company are in different industries. Denver's current ratio is 1.89, while Cheyenne's current ratio is 1.65. Therefore, is it safe to conclude that Denver's liquidity position is better than that of Cheyenne?

In vertical analysis of an income statement, each item is expressed as a percentage of:

The following balance sheet information is provided for Apex Company for Year 2: What is the company's working capital?

The accounts receivable turnover ratio can be used to assess a firm's solvency.

The study of an individual item or account over several periods in the same financial year or over many years is known as:

An Introduction to Accounting

Accounting for Accruals

Accounting for Deferrals

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships, Partnerships, and Corporations

Statement of Cash Flows

The Double-Entry Accounting System

Filters