Question 1

The income number used in the rate of return on assets is income after interest expense is added back.

Accepted Answer

A) True 
 B)False

Question 2

Use the selected data from Pinecrest Company's financial statements to answer the following question. $$\begin{array} { l r r } 
& \underline { 2017 } & \underline { 2016 } \
\text { Cash } & \$ 22,000 & \$ 14,000 \
\text { Accounts receivable } & 42,000 & 16,000 \
\text { Merchandise inventory }  & 22,000 & 83,000 \
\text { Prepaid expenses }& \underline { 23,000 } & \underline { 18,000 } \
\text { Total current assets } & \underline { \mathbf { \$ 1 0 9 , 0 0 0 } } & \underline { \mathbf { \$ 1 3 1 , 0 0 0 } } \\
\text { Total current liabilities } & \$ 65,000 & \$ 72,000 \
\text { Net credit sales } & 221,000 & 326,000 \
\text { Cost of goods sold } & 168,000 & 299,000 \
\text { Net cash flow from operating activities } & 16,000 & 29,000
\end{array}$$ ​
​
-Refer to the data for Pinecrest Company. ?
The amount of working capital at the end of 2017 is

Accepted Answer

A)  $36,000 
B)  $44,000 
C)  $99,000 
D)  $174,000 
A)  $36,000 
B)  $44,000 
C)  $99,000 
D)  $174,000

Question 3

Given below are several ratios.Select the accounts or amounts that would be used in order to calculate the ratio.You will have more than one response to each ratio.Some accounts or amounts may not be used at all.
-Return on assets ratio

Accepted Answer

A)  Market price per share 
B)  Net sales 
C)  Gross profit 
D)  Average total assets 
E)  Interest expense, net of tax
F) Netincome
G) Total liabilities
H) Total assets 
A)  Market price per share 
B)  Net sales 
C)  Gross profit 
D)  Average total assets 
E)  Interest expense, net of tax
F) Netincome
G) Total liabilities
H) Total assets

Question 4

Presented below are selected data from the financial statements of Provost Corp. $\begin{array} { lr r }& \underline { 2017 } & \underline { 2016 } \
\text {Net income }& \$ 110,000 & \$ 123,000 \
\text { Cash dividends paid on common stock}& \$ 42,000 & \$ 38,000 \
\text { Market price per share of common stock at the end of the year}& \$ 16.00 & \$ 13.00 \
\text {Shares of common stock outstanding }& 140,000 & 140,000 \end{array}$ The dividend payout ratio for 2017 is

Accepted Answer

A)  1.8% 
B)  30.0% 
C)  36.3% 
D)  38.0% 
A)  1.8% 
B)  30.0% 
C)  36.3% 
D)  38.0%

Question 5

Given below are several ratios.Select the accounts or amounts that would be used in order to calculate the ratio.You will have more than one response to each ratio.Some accounts or amounts may not be used at all.
-Asset turnover ratio

Accepted Answer

A)  Market price per share 
B)  Net sales 
C)  Gross profit 
D)  Average total assets 
E)  Interest expense, net of tax
F) Netincome
G) Total liabilities
H) Total assets 
A)  Market price per share 
B)  Net sales 
C)  Gross profit 
D)  Average total assets 
E)  Interest expense, net of tax
F) Netincome
G) Total liabilities
H) Total assets

Question 6

In a vertical analysis of the balance sheet, the 100% amount is

Accepted Answer

A)  Current assets 
B)  Working capital 
C)  Total assets 
D)  Total stockholders' equity 
A)  Current assets 
B)  Working capital 
C)  Total assets 
D)  Total stockholders' equity

Question 7

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 ratio 
D)  Profit margin 
A)  Price/earnings ratio 
B)  Return on common stockholders' equity 
C)  Dividend yield ratio 
D)  Profit margin

Question 8

The FASB requires a separate note in the financial statements to show the effects of inflation so that investors are able to compare statements more accurately.

Accepted Answer

A) True 
 B)False

Question 9

Horizontal analysis is analysis

Accepted Answer

A)  of dollar changes and percentage changes over two or more years. 
B)  in which all items are presented as a percentage of one selected item on a financial statement. 
C)  in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements 
D)  of all ratios that increased or decreased over past accounting periods. 
A)  of dollar changes and percentage changes over two or more years. 
B)  in which all items are presented as a percentage of one selected item on a financial statement. 
C)  in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements 
D)  of all ratios that increased or decreased over past accounting periods.

Question 10

Presented below are selected data from the financial statements of Wizard Corp. $\begin{array} {l r r } &\underline { \mathbf { 2 0 1 7 } } & \underline { \mathbf { 2 0 1 6 } } \
 \text {Net income}&\$ 150,000 & \$ 120,000 \
\text {Cash dividends paid on preferred stock}& \$ 15,000 & \$ 15,000 \
\text {Cash dividends paid on common stock}& \$ 42,000 & \$ 38,000 \
\text {Weighted average number of preferred shares outstanding}& 20,000 & 20,000 \
\text {Weighted average number of common shares outstanding}& 105,000 & 95,000\
 \end{array}$ Earnings per share is reported on the 2017 income statement as

Accepted Answer

A)  $1.08 
B)  $1.20 
C)  $1.29 
D)  $1.43 
A)  $1.08 
B)  $1.20 
C)  $1.29 
D)  $1.43

Question 11

Trend analysis is analysis

Accepted Answer

A)  of dollar changes and percentage changes over several years. 
B)  in which all items are presented as a percentage of one selected item on a financial statement. 
C)  in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements. 
D)  of all ratios that increased or decreased over past accounting periods. 
A)  of dollar changes and percentage changes over several years. 
B)  in which all items are presented as a percentage of one selected item on a financial statement. 
C)  in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements. 
D)  of all ratios that increased or decreased over past accounting periods.

Question 12

Indicate the type of each ratio listed below.
-Dividend payout ratio

Accepted Answer

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

Question 13

For each ratio listed, select whether an increase or decrease in the ratio is generally considered to be better.
-Current ratio

Accepted Answer

A) increase 
B) decrease 
A) increase 
B) decrease

Question 14

Use the selected data from Pinecrest Company's financial statements to answer the following question. $$\begin{array} { l r r } 
& \underline { 2017 } & \underline { 2016 } \
\text { Cash } & \$ 22,000 & \$ 14,000 \
\text { Accounts receivable } & 42,000 & 16,000 \
\text { Merchandise inventory }  & 22,000 & 83,000 \
\text { Prepaid expenses }& \underline { 23,000 } & \underline { 18,000 } \
\text { Total current assets } & \underline { \mathbf { \$ 1 0 9 , 0 0 0 } } & \underline { \mathbf { \$ 1 3 1 , 0 0 0 } } \\
\text { Total current liabilities } & \$ 65,000 & \$ 72,000 \
\text { Net credit sales } & 221,000 & 326,000 \
\text { Cost of goods sold } & 168,000 & 299,000 \
\text { Net cash flow from operating activities } & 16,000 & 29,000
\end{array}$$ ​
​
-Refer to the data for Pinecrest Company. ?
Which of the following statements is true?

Accepted Answer

A)  Net income must be at least $36,000 for 2017. 
B)  Net income must be less than $36,000 for 2017. 
C)  Cash flows from operating activities is twice as large as net income for 2017. 
D)  The amount of net income for 2017 cannot be determined based on the data provided. 
A)  Net income must be at least $36,000 for 2017. 
B)  Net income must be less than $36,000 for 2017. 
C)  Cash flows from operating activities is twice as large as net income for 2017. 
D)  The amount of net income for 2017 cannot be determined based on the data provided.

Question 15

Following are selected data from the financial statements of Mother Nature Supplies: $\begin{array} { r r }
& \underline { \mathbf { 2 0 1 7 } } & \underline { \mathbf { 2 0 1 6 } } \ 
\text {Accounts receivable}&\$ 60,000 & \$ 38,000 \
\text {Merchandise inventory}& 12,000 & 16,000 \ 
\text {Total assets}&450,000 & 380,000 \ 
\text {Net sales}&380,000 & 270,000 \ 
\text {Cost of goods sold}&160,000 & 210,000 \end{array}$
-Refer to the data for Mother Nature Supplies. ?
Which of the following would result from a horizontal analysis of its balance sheet?

Accepted Answer

A)  Accounts receivable increased $22,000 or 57.9% during 2017. 
B)  Accounts receivable is five times larger than Merchandise inventory in 2017. 
C)  Accounts receivable is 13.3% of total assets for 2017. 
D)  Merchandise inventory is 2.7% of total assets for 2017. 
A)  Accounts receivable increased $22,000 or 57.9% during 2017. 
B)  Accounts receivable is five times larger than Merchandise inventory in 2017. 
C)  Accounts receivable is 13.3% of total assets for 2017. 
D)  Merchandise inventory is 2.7% of total assets for 2017.

Question 16

Use the selected data from Pinecrest Company's financial statements to answer the following question. $$\begin{array} { l r r } 
& \underline { 2017 } & \underline { 2016 } \
\text { Cash } & \$ 22,000 & \$ 14,000 \
\text { Accounts receivable } & 42,000 & 16,000 \
\text { Merchandise inventory }  & 22,000 & 83,000 \
\text { Prepaid expenses }& \underline { 23,000 } & \underline { 18,000 } \
\text { Total current assets } & \underline { \mathbf { \$ 1 0 9 , 0 0 0 } } & \underline { \mathbf { \$ 1 3 1 , 0 0 0 } } \\
\text { Total current liabilities } & \$ 65,000 & \$ 72,000 \
\text { Net credit sales } & 221,000 & 326,000 \
\text { Cost of goods sold } & 168,000 & 299,000 \
\text { Net cash flow from operating activities } & 16,000 & 29,000
\end{array}$$ ​
​
-Refer to the data for Pinecrest Company. ?
Competitors in Pinecrest Company's industry have an average accounts receivable turnover of 10.8 times.Pinecrest reported accounts receivable at December 31, 2017, of $42,000 and has normal credit terms requiring payment within 30 days.Pinecrest's accounts receivable turnover for 2017 is:?

Accepted Answer

A)  probably indicating that the company probably has stricter credit terms and policies than the industry as a whole, which may repel potential buyers. 
B)  of no value to bankers and other creditors. 
C)  less efficient in its collection policies in 2017 than the industry as a whole. 
D)  less than the industry, which means that its customers are paying on their accounts in a more timely manner than are customers reflected by the industry average. 
A)  probably indicating that the company probably has stricter credit terms and policies than the industry as a whole, which may repel potential buyers. 
B)  of no value to bankers and other creditors. 
C)  less efficient in its collection policies in 2017 than the industry as a whole. 
D)  less than the industry, which means that its customers are paying on their accounts in a more timely manner than are customers reflected by the industry average.

Question 17

Indicate the type of each ratio listed below.
-Price/earnings ratio

Accepted Answer

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

Question 18

Turnover ratios differ from the current and quick ratios in that they

Accepted Answer

A)  are based on working capital instead of cash. 
B)  are based on a point of time instead of a period of time. 
C)  are activity ratios. 
D)  measure the profitability of a company instead of its liquidity. 
A)  are based on working capital instead of cash. 
B)  are based on a point of time instead of a period of time. 
C)  are activity ratios. 
D)  measure the profitability of a company instead of its liquidity.

Question 19

Because net income is on an after-tax basis, interest in the return on assets ratio must be placed on a before-tax basis.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true regarding valuation amounts on the balance sheet?

Accepted Answer

A)  Stockholders' equity reflects the amount the stockholders would receive upon liquidation. 
B)  Assets are recorded at current cost. 
C)  Stockholders' equity reflects the current market value of the stock 
D)  There are a variety of assumptions used in determining amounts reported on the balance sheet. 
A)  Stockholders' equity reflects the amount the stockholders would receive upon liquidation. 
B)  Assets are recorded at current cost. 
C)  Stockholders' equity reflects the current market value of the stock 
D)  There are a variety of assumptions used in determining amounts reported on the balance sheet.

The income number used in the rate of return on assets is income after interest expense is added back.

Given below are several ratios.Select the accounts or amounts that would be used in order to calculate the ratio.You will have more than one response to each ratio.Some accounts or amounts may not be used at all. -Return on assets ratio

Given below are several ratios.Select the accounts or amounts that would be used in order to calculate the ratio.You will have more than one response to each ratio.Some accounts or amounts may not be used at all. -Asset turnover ratio

In a vertical analysis of the balance sheet, the 100% amount is

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

The FASB requires a separate note in the financial statements to show the effects of inflation so that investors are able to compare statements more accurately.

Horizontal analysis is analysis

Trend analysis is analysis

Indicate the type of each ratio listed below. -Dividend payout ratio

For each ratio listed, select whether an increase or decrease in the ratio is generally considered to be better. -Current ratio

Indicate the type of each ratio listed below. -Price/earnings ratio

Turnover ratios differ from the current and quick ratios in that they

Because net income is on an after-tax basis, interest in the return on assets ratio must be placed on a before-tax basis.

Which of the following statements is true regarding valuation amounts on the balance sheet?

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

The income number used in the rate of return on assets is income after interest expense is added back.

Given below are several ratios.Select the accounts or amounts that would be used in order to calculate the ratio.You will have more than one response to each ratio.Some accounts or amounts may not be used at all. -Return on assets ratio

Given below are several ratios.Select the accounts or amounts that would be used in order to calculate the ratio.You will have more than one response to each ratio.Some accounts or amounts may not be used at all. -Asset turnover ratio

In a vertical analysis of the balance sheet, the 100% amount is

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

The FASB requires a separate note in the financial statements to show the effects of inflation so that investors are able to compare statements more accurately.

Horizontal analysis is analysis

Trend analysis is analysis

Indicate the type of each ratio listed below. -Dividend payout ratio

For each ratio listed, select whether an increase or decrease in the ratio is generally considered to be better. -Current ratio

Indicate the type of each ratio listed below. -Price/earnings ratio

Turnover ratios differ from the current and quick ratios in that they

Because net income is on an after-tax basis, interest in the return on assets ratio must be placed on a before-tax basis.

Which of the following statements is true regarding valuation amounts on the balance sheet?

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