Question 1

Terms of sale can produce statistical variations among companies within the same industry.

Accepted Answer

A) True 
 B)False

Question 2

Wellston Company's net income last year was $300,000. The company has 100,000 shares of common stock and 30,000 shares of preferred stock outstanding. There was no change in the number of common or preferred shares outstanding during the year. The company declared and paid dividends last year of $1.90 per share on the common stock and $1.70 per share on the preferred stock. The earnings per share of common stock is closest to

Accepted Answer

A)  $2.49. 
B)  $1.10. 
C)  $3.51. 
D)  $3.00. 
A)  $2.49. 
B)  $1.10. 
C)  $3.51. 
D)  $3.00.

Question 3

The two major forms of common-size analysis are horizontal analysis and vertical analysis. What type of information or insights can be obtained by using these two techniques of financial statement analysis? Explain how the output of horizontal analysis and vertical analysis can be compared to industry averages and/or competitive companies.

Accepted Answer

Horizontal analysis allows an analyst to

Question 4

Figure 16-5.
The following information that was obtained from the 2014 and 2013 financial statements of James Company, Norris Corporation, and Zorro Company:
  
-Refer to Figure 16-5. Compare the three companies and answer the following:

Accepted Answer

The answer of Figure 16-5.
The following information that was obtained...

Question 5

The following ratios have been computed for Gilbert Company for 2014.
   Gilbert Company's 2014 financial statements with missing information follow:
     Required: Use the above ratios and information from the Gilbert Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.

Accepted Answer

The answer of The following ratios have been computed for...

Question 6

______________ and ____________ are the two major sources of capital.

Accepted Answer

Investors,

Question 7

Industrial statistics should be taken as absolute norms as far as standards for comparability.

Accepted Answer

A) True 
 B)False

Question 8

The measures of the ability of a company to meets its long- and short-term obligations are known as _______________.

Accepted Answer

The answer of The measures of the ability of a...

Question 9

The quick ratio differs from the current ratio in that it

Accepted Answer

A)  represents the amount of cash on hand instead of the amount of working capital. 
B)  is a stricter test of a company's ability to pay its current debts as they are due. 
C)  excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible default on payment. 
D)  is more difficult to calculate. 
A)  represents the amount of cash on hand instead of the amount of working capital. 
B)  is a stricter test of a company's ability to pay its current debts as they are due. 
C)  excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible default on payment. 
D)  is more difficult to calculate.

Question 10

Industrial figures, standards and statistics should be used with so much care that they are not a very good reference point to compare companies.

Accepted Answer

A) True 
 B)False

Question 11

ABC Company issued additional shares of stock for cash. The effect of the transaction is

Accepted Answer

A)  the earnings per share increased. 
B)  the current ratio was increased. 
C)  the debt-to-equity ratio increased. 
D)  the return on total assets increased. 
A)  the earnings per share increased. 
B)  the current ratio was increased. 
C)  the debt-to-equity ratio increased. 
D)  the return on total assets increased.

Question 12

Vertical analysis is a technique that expresses each item in a financial statement

Accepted Answer

A)  in dollars and cents. 
B)  as a percent of the item in the previous year. 
C)  as a percent of a base amount. 
D)  starting with the highest value down to the lowest value. 
A)  in dollars and cents. 
B)  as a percent of the item in the previous year. 
C)  as a percent of a base amount. 
D)  starting with the highest value down to the lowest value.

Question 13

Which profitability ratio requires the use of earnings per share in its calculation?

Accepted Answer

A)  price-earnings ratio 
B)  return on common stockholders' equity 
C)  dividend yield 
D)  return on sales 
A)  price-earnings ratio 
B)  return on common stockholders' equity 
C)  dividend yield 
D)  return on sales

Question 14

The average stockholders' equity for Holloway Co. last year was $2,000,000. Included in this figure was $200,000 par value of 8% preferred stock. If the return on common stockholders' equity was 12.5% for the year, net income was

Accepted Answer

A)  $225,000. 
B)  $250,000. 
C)  $241,000. 
D)  $234,000. 
A)  $225,000. 
B)  $250,000. 
C)  $241,000. 
D)  $234,000.

Question 15

The current ratio is a measure of the ability of a company to pay its short-term liabilities out of short-term assets.

Accepted Answer

A) True 
 B)False

Question 16

MATCHING
Match the classifications of ratios with each description.
a.
Liquidity Ratio
b.
Leverage Ratio
c.
Profitability Ratio
d.
Horizontal Analysis
e.
Trend Analysis
-Dividend payout ratio

Accepted Answer

The answer of MATCHING
Match the classifications of ratios with each...

Question 17

The income statement for Ray Company for the year ended December 31, 2013, appears below.
   *Includes $30,000 of interest expense and $18,000 of income tax expense.
Additional information:
   Required: Compute the following ratios for 2013:

Accepted Answer

The answer of The income statement for Ray Company for...

Question 18

Figure 16-4.
Condensed financial statements for Black Company appear below:
     There were 72,000 shares of common stock outstanding throughout the 2014. Dividends on common stock amounted to $320,400 and dividends on preferred stock amounted to $45,000. The market value of a share of common stock was $54 at the end of 2014. The income tax rate is 30%.
-Refer to Figure 16-4.
Required: Calculate the following profitability ratios for 2014.

Accepted Answer

The answer of Figure 16-4.
Condensed financial statements for Black Company...

Question 19

Why is liquidity important for businesses?

Accepted Answer

Liquidity is a relative measure of the n

Question 20

Fastlane Company has 50,000 shares of common stock and 20,000 shares of preferred stock outstanding. There was no change in the number of common or preferred shares outstanding during the year. Preferred stockholders received dividends this year totaling $120,000. Common stockholders received dividends totaling $200,000. If the dividend payout ratio for the year was 80%, then the net income was

Accepted Answer

A)  $400,000. 
B)  $370,000. 
C)  $160,000. 
D)  $250,000. 
A)  $400,000. 
B)  $370,000. 
C)  $160,000. 
D)  $250,000.

Terms of sale can produce statistical variations among companies within the same industry.

Figure 16-5. The following information that was obtained from the 2014 and 2013 financial statements of James Company, Norris Corporation, and Zorro Company: -Refer to Figure 16-5. Compare the three companies and answer the following:

__ and are the two major sources of capital.

Industrial statistics should be taken as absolute norms as far as standards for comparability.

The measures of the ability of a company to meets its long- and short-term obligations are known as _______________.

The quick ratio differs from the current ratio in that it

Industrial figures, standards and statistics should be used with so much care that they are not a very good reference point to compare companies.

ABC Company issued additional shares of stock for cash. The effect of the transaction is

Vertical analysis is a technique that expresses each item in a financial statement

Which profitability ratio requires the use of earnings per share in its calculation?

The average stockholders' equity for Holloway Co. last year was $2,000,000. Included in this figure was $200,000 par value of 8% preferred stock. If the return on common stockholders' equity was 12.5% for the year, net income was

The current ratio is a measure of the ability of a company to pay its short-term liabilities out of short-term assets.

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -Dividend payout ratio

The income statement for Ray Company for the year ended December 31, 2013, appears below. *Includes $30,000 of interest expense and $18,000 of income tax expense. Additional information: Required: Compute the following ratios for 2013:

Why is liquidity important for businesses?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Filters

Exam 16: Financial Statement Analysis

Terms of sale can produce statistical variations among companies within the same industry.

Figure 16-5. The following information that was obtained from the 2014 and 2013 financial statements of James Company, Norris Corporation, and Zorro Company: -Refer to Figure 16-5. Compare the three companies and answer the following:

______________ and ____________ are the two major sources of capital.

Industrial statistics should be taken as absolute norms as far as standards for comparability.

The measures of the ability of a company to meets its long- and short-term obligations are known as _______________.

The quick ratio differs from the current ratio in that it

Industrial figures, standards and statistics should be used with so much care that they are not a very good reference point to compare companies.

ABC Company issued additional shares of stock for cash. The effect of the transaction is

Vertical analysis is a technique that expresses each item in a financial statement

Which profitability ratio requires the use of earnings per share in its calculation?

The average stockholders' equity for Holloway Co. last year was $2,000,000. Included in this figure was $200,000 par value of 8% preferred stock. If the return on common stockholders' equity was 12.5% for the year, net income was

The current ratio is a measure of the ability of a company to pay its short-term liabilities out of short-term assets.

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -Dividend payout ratio

The income statement for Ray Company for the year ended December 31, 2013, appears below. *Includes $30,000 of interest expense and $18,000 of income tax expense. Additional information: Required: Compute the following ratios for 2013:

Why is liquidity important for businesses?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Filters

__ and are the two major sources of capital.