Question 1

What are three specific ratios that are especially useful for creditors and lenders?

Accepted Answer

Current ratio
Acid-test ratio

Question 2

Common-size financial statements exclude the dollar amount as a relevant variable in the analysis, which makes comparison of one period with the next more meaningful.

Accepted Answer

A) True 
 B)False

Question 3

​Starship Inc.'s gross profit ratio decreased from 36.5% in 2016 to 28.6% in 2017.What is the trend in this change?

Accepted Answer

A)  An upward trend 
B)  A downward trend 
C)  It depends on whether net sales increased or decreased during the period 
D)  Trends cannot be determined without the dollar amount of the increase provided 
A)  An upward trend 
B)  A downward trend 
C)  It depends on whether net sales increased or decreased during the period 
D)  Trends cannot be determined without the dollar amount of the increase provided

Question 4

A solvency measure that focuses specifically on the extent to which a company relies on outsiders for funds is:

Accepted Answer

A)  cash flow from operations to capital expenditures ratio 
B)  debt service coverage ratio 
C)  times interest earned ratio 
D)  debt-to-equity ratio 
A)  cash flow from operations to capital expenditures ratio 
B)  debt service coverage ratio 
C)  times interest earned ratio 
D)  debt-to-equity ratio

Question 5

The cash-to-cash operating cycle is the number of days' sales in

Accepted Answer

A)  receivables and working capital. 
B)  receivables and plant assets. 
C)  inventory and receivables. 
D)  inventory and plant assets. 
A)  receivables and working capital. 
B)  receivables and plant assets. 
C)  inventory and receivables. 
D)  inventory and plant assets.

Question 6

One measure of a company's overall long-term financial health is the debt-to-equity ratio.

Accepted Answer

A) True 
 B)False

Question 7

Below is financial data for Fawnsworth Industries' current year. $\begin{array}{lr}
\text { Net sales on account during year } & \$ 500,000 \
\text { Cost of merchandise sold during year } & 300,000 \
\text { Accounts receivable, beginning of year } & 45,000 \
\text { Accounts receivable, end of year } & 35,000 \
\text { Inventory, beginning of year } & 90,000 \
\text { Inventory, end of year } & 110,000
\end{array}$
-Refer to the data for Fawnsworth Industries. Based on this information, what is Fawnsworth's inventory turnover ratio for the current period?

Accepted Answer

A)  1.67 times 
B)  2.73 times 
C)  0.33 times 
D)  3.00 times 
A)  1.67 times 
B)  2.73 times 
C)  0.33 times 
D)  3.00 times

Question 8

Moonbeam Gift Shop's inventory turned over six times during the year.Similar gift shops have an inventory turnover equal to twelve times per year.What explains Moonbeam's state of inventory management?

Accepted Answer

A)  Moonbeam sold too much inventory during the year. 
B)  Moonbeam needs to increase sales and decrease the amount of inventory on hand. 
C)  Moonbeam is performing twice as well as its competitors. 
D)  Moonbeam should increase the amount of goods on hand to accommodate the additional inventory demand. 
A)  Moonbeam sold too much inventory during the year. 
B)  Moonbeam needs to increase sales and decrease the amount of inventory on hand. 
C)  Moonbeam is performing twice as well as its competitors. 
D)  Moonbeam should increase the amount of goods on hand to accommodate the additional inventory demand.

Question 9

Indicate the type of each ratio listed below.
-Inventory turnover ratio

Accepted Answer

A) liquidity ratio 
B) solvency ratio 
C) profitability ratio 
A) liquidity ratio 
B) solvency ratio 
C) profitability ratio

Question 10

Which of the following is not a characteristic of extraordinary items reported on the income statement?

Accepted Answer

A)  appear near the end of the income statement 
B)  reported separately from continuing operations 
C)  shown net of tax effects 
D)  is shown as a combined amount with discontinued operations 
A)  appear near the end of the income statement 
B)  reported separately from continuing operations 
C)  shown net of tax effects 
D)  is shown as a combined amount with discontinued operations

Question 11

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company?

Accepted Answer

A)  Will earnings per share be distributed to stockholders? 
B)  Will the company earn a fair return on the amount invested by the stockholders? 
C)  Will the key ratios be reported on the balance sheet? 
D)  Will cash flows from operations exceed the amount of net income for the period? 
A)  Will earnings per share be distributed to stockholders? 
B)  Will the company earn a fair return on the amount invested by the stockholders? 
C)  Will the key ratios be reported on the balance sheet? 
D)  Will cash flows from operations exceed the amount of net income for the period?

Question 12

Which of the following yields the return on assets ratio? a. (return on common stockholders' equity) $\times$ (asset turnover)
b. (return on sales) $\times$ (asset turnover)
c. (profit margin) $\times ($ return on sales $)$
d. (profit margin) $\times$ (asset turnover)

Accepted Answer

The answer of Which of the following yields the return...

Question 13

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

Accepted Answer

A)  Debt-to-equity ratio 
B)  Times interest earned ratio 
C)  Debt service coverage ratio 
D)  Earnings per share 
A)  Debt-to-equity ratio 
B)  Times interest earned ratio 
C)  Debt service coverage ratio 
D)  Earnings per share

Question 14

Which of the following will decrease working capital?

Accepted Answer

A)  collection of accounts receivable 
B)  purchase of a new computer with cash 
C)  payment of salaries payable 
D)  purchase of merchandise on credit 
A)  collection of accounts receivable 
B)  purchase of a new computer with cash 
C)  payment of salaries payable 
D)  purchase of merchandise on credit

Question 15

The selection of a particular inventory valuation method has a significant effect on certain key ratios.

Accepted Answer

A) True 
 B)False

Question 16

Squid Lips, Inc.wants to measure the relationship between profitability and the investment made by stockholders.Squid Lips should use the

Accepted Answer

A)  return on stockholders' equity ratio. 
B)  earnings per share. 
C)  profit margin. 
D)  statement of retained earnings. 
A)  return on stockholders' equity ratio. 
B)  earnings per share. 
C)  profit margin. 
D)  statement of retained earnings.

Question 17

An example of horizontal analysis is the increase in cost of goods sold by 29% from 2016 to 2017.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following profitability ratios is most useful in indicating the "quality" of a company's earnings?

Accepted Answer

A)  Price/earnings ratio 
B)  Gross profit ratio 
C)  Dividend payout ratio 
D)  Dividend yield ratio 
A)  Price/earnings ratio 
B)  Gross profit ratio 
C)  Dividend payout ratio 
D)  Dividend yield ratio

Question 19

The cash flow from operations to capital expenditures ratio measures a company's ability to

Accepted Answer

A)  use operations to finance its acquisitions of productive assets. 
B)  use cash flows from capital expenditure transactions to maintain working capital. 
C)  increase its capital expenditures as a result of profitable operations. 
D)  pay its current bills from profits made using productive assets. 
A)  use operations to finance its acquisitions of productive assets. 
B)  use cash flows from capital expenditure transactions to maintain working capital. 
C)  increase its capital expenditures as a result of profitable operations. 
D)  pay its current bills from profits made using productive assets.

Question 20

For each of the following sentences, select the phrase or group of words that best completes the statement.
-A company's bottom line stated on a per-share basis.

Accepted Answer

A) Earnings per share 
B) Dividend yield ratio 
C) Dividend payout ratio 
D) Leverage 
E) Return on assets ratio
F)Return on common stockholders' equity ratio
G)Debt-to-equity ratio
H)Price/earnings ratio 
A) Earnings per share 
B) Dividend yield ratio 
C) Dividend payout ratio 
D) Leverage 
E) Return on assets ratio
F)Return on common stockholders' equity ratio
G)Debt-to-equity ratio
H)Price/earnings ratio

What are three specific ratios that are especially useful for creditors and lenders?

Common-size financial statements exclude the dollar amount as a relevant variable in the analysis, which makes comparison of one period with the next more meaningful.

Starship Inc.'s gross profit ratio decreased from 36.5% in 2016 to 28.6% in 2017.What is the trend in this change?

A solvency measure that focuses specifically on the extent to which a company relies on outsiders for funds is:

The cash-to-cash operating cycle is the number of days' sales in

One measure of a company's overall long-term financial health is the debt-to-equity ratio.

Moonbeam Gift Shop's inventory turned over six times during the year.Similar gift shops have an inventory turnover equal to twelve times per year.What explains Moonbeam's state of inventory management?

Indicate the type of each ratio listed below. -Inventory turnover ratio

Which of the following is not a characteristic of extraordinary items reported on the income statement?

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company?

Which of the following yields the return on assets ratio? a. (return on common stockholders' equity) $\times$ (asset turnover) b. (return on sales) $\times$ (asset turnover) c. (profit margin) $\times ($ return on sales $)$ d. (profit margin) $\times$ (asset turnover)

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

Which of the following will decrease working capital?

The selection of a particular inventory valuation method has a significant effect on certain key ratios.

Squid Lips, Inc.wants to measure the relationship between profitability and the investment made by stockholders.Squid Lips should use the

An example of horizontal analysis is the increase in cost of goods sold by 29% from 2016 to 2017.

Which of the following profitability ratios is most useful in indicating the "quality" of a company's earnings?

The cash flow from operations to capital expenditures ratio measures a company's ability to

For each of the following sentences, select the phrase or group of words that best completes the statement. -A company's bottom line stated on a per-share basis.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities, Contingencies, and the True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Exploring Accounting Standards and Differences around the World

Filters

Exam 13: Financial Statement Analysis

What are three specific ratios that are especially useful for creditors and lenders?

Common-size financial statements exclude the dollar amount as a relevant variable in the analysis, which makes comparison of one period with the next more meaningful.

​Starship Inc.'s gross profit ratio decreased from 36.5% in 2016 to 28.6% in 2017.What is the trend in this change?

A solvency measure that focuses specifically on the extent to which a company relies on outsiders for funds is:

The cash-to-cash operating cycle is the number of days' sales in

One measure of a company's overall long-term financial health is the debt-to-equity ratio.

Moonbeam Gift Shop's inventory turned over six times during the year.Similar gift shops have an inventory turnover equal to twelve times per year.What explains Moonbeam's state of inventory management?

Indicate the type of each ratio listed below. -Inventory turnover ratio

Which of the following is not a characteristic of extraordinary items reported on the income statement?

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company?

Which of the following yields the return on assets ratio? a. (return on common stockholders' equity) ×\times× (asset turnover) b. (return on sales) ×\times× (asset turnover) c. (profit margin) ×(\times (×( return on sales ))) d. (profit margin) ×\times× (asset turnover)

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

Which of the following will decrease working capital?

The selection of a particular inventory valuation method has a significant effect on certain key ratios.

Squid Lips, Inc.wants to measure the relationship between profitability and the investment made by stockholders.Squid Lips should use the

An example of horizontal analysis is the increase in cost of goods sold by 29% from 2016 to 2017.

Which of the following profitability ratios is most useful in indicating the "quality" of a company's earnings?

The cash flow from operations to capital expenditures ratio measures a company's ability to

For each of the following sentences, select the phrase or group of words that best completes the statement. -A company's bottom line stated on a per-share basis.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities, Contingencies, and the True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Exploring Accounting Standards and Differences around the World

Filters

Starship Inc.'s gross profit ratio decreased from 36.5% in 2016 to 28.6% in 2017.What is the trend in this change?

Which of the following yields the return on assets ratio? a. (return on common stockholders' equity) $\times$ (asset turnover) b. (return on sales) $\times$ (asset turnover) c. (profit margin) $\times ($ return on sales $)$ d. (profit margin) $\times$ (asset turnover)