Question 1

The current ratio is used to get information about a company's

Accepted Answer

A)  Profitability 
B)  Liquidity 
C)  Interest rates 
D)  Total assets 
A)  Profitability 
B)  Liquidity 
C)  Interest rates 
D)  Total assets

Question 2

In general, a high current ratio would be a signal of low liquidity risk.

Accepted Answer

A) True 
 B)False

Question 3

The text discusses various factors that relate to the risk of a company facing financial distress or bankruptcy. Which of the following might be in indicator of risk, based on the discussion in the text?

Accepted Answer

A)  The company has a high inventory turnover. 
B)  Most of the company's assets are fixed assets and intangible assets that would take considerable time to sell. 
C)  The company's sales are relatively stable over time. 
D)  The company is large, with a variety of different product lines. 
A)  The company has a high inventory turnover. 
B)  Most of the company's assets are fixed assets and intangible assets that would take considerable time to sell. 
C)  The company's sales are relatively stable over time. 
D)  The company is large, with a variety of different product lines.

Question 4

The appropriate section of a cash flow statement to show the money spent by a company to buy a new factory is the financing section.

Accepted Answer

A) True 
 B)False

Question 5

The Allen Corp. in 2016 had total revenues = $10 million, variable costs = $3 million, operating income of $5 million, and net income = $2 million. The operating leverage effect is

Accepted Answer

A)  1.4 
B)  2.6 
C)  3.5 
D)  6.5 
A)  1.4 
B)  2.6 
C)  3.5 
D)  6.5

Question 6

"Financial leverage" arises due to the presence of fixed financing costs (such as interest expense) at a company.

Accepted Answer

A) True 
 B)False

Question 7

It would be easiest to see the percentage growth in a company's 2015 accounts receivable by looking at a

Accepted Answer

A)  Common size balance sheet 
B)  Common size income statement 
C)  Percentage change balance sheet 
D)  Percentage change income statement 
A)  Common size balance sheet 
B)  Common size income statement 
C)  Percentage change balance sheet 
D)  Percentage change income statement

Question 8

One benefit of ratio analysis is that it allows analysts to compare companies of different sizes.

Accepted Answer

A) True 
 B)False

Question 9

A company currently allows its customers to take 30 days to pay their accounts receivable. Almost all of its customers pay in around 30 days. If a company changes its policy, and allows customers to wait 60 days before paying, it is likely that in future years

Accepted Answer

A)  Accounts receivable turnover will increase from about 12 to about 24. 
B)  Accounts receivable turnover will decrease from about 12 to about 6. 
C)  Accounts receivable turnover will increase from around 6 to about 12. 
D)  Accounts receivable turnover will decrease from around 6 to around 3. 
A)  Accounts receivable turnover will increase from about 12 to about 24. 
B)  Accounts receivable turnover will decrease from about 12 to about 6. 
C)  Accounts receivable turnover will increase from around 6 to about 12. 
D)  Accounts receivable turnover will decrease from around 6 to around 3.

Question 10

_____ A company now has a profit margin for ROA of 4%. Its asset turnover is 5. Compute the Return on assets.

Accepted Answer

Return on Assets (ROA) is a financial ra

Question 11

"Financial leverage" is the term for the effect of fixed operating costs on the relation between changes in revenues and changes in net income.

Accepted Answer

A) True 
 B)False

Question 12

It is always bad news for a company when its selling expenses increase as a percentage of sales.

Accepted Answer

A) True 
 B)False

Question 13

In general, when fixed operating costs become a larger percentage of a company's operating costs, the operating leverage effect

Accepted Answer

A)  Decreases 
B)  Stays the same 
C)  Increases 
A)  Decreases 
B)  Stays the same 
C)  Increases

Question 14

The asset turnover used in analyzing return on common equity is the same as the asset turnover used in analyzing return on assets.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following might be an indication that a company has more obsolete ("out of date") products than it did in the previous year?

Accepted Answer

A)  The number of days of inventory on hand is decreasing. 
B)  The inventory turnover ratio is increasing. 
C)  The inventory turnover ratio is decreasing. 
D)  None of the above 
A)  The number of days of inventory on hand is decreasing. 
B)  The inventory turnover ratio is increasing. 
C)  The inventory turnover ratio is decreasing. 
D)  None of the above

Question 16

On a statement of cash flows prepared using the indirect method, an increase in accounts payable will be shown as something that increases operating cash flows.

Accepted Answer

A) True 
 B)False

Question 17

A commonly used ratio to judge company profitability is

Accepted Answer

A)  The current ratio 
B)  The debt to equity ratio 
C)  Times interest earned 
D)  Return on assets 
A)  The current ratio 
B)  The debt to equity ratio 
C)  Times interest earned 
D)  Return on assets

Question 18

Assume that during the year, the Cui Company had net income of $100,000. One of the expenses that was included in the computation of net income was depreciation expense of $3,000. The company also had a gain on the sale of investment property of $4,000. Based on this information, net operating cash flows for the year equal

Accepted Answer

A)  93000 
B)  99000 
C)  101000 
D)  107000 
A)  93000 
B)  99000 
C)  101000 
D)  107000

Question 19

Most American businesses are publicly traded.

Accepted Answer

A) True 
 B)False

Question 20

Reasons that a private company might decide to prepare financial statements include all of the following, except:

Accepted Answer

A)  The company's lenders require the company to send them financial statements. 
B)  The company has several owners, who wish to monitor their ownership interests. 
C)  All U.S. companies must file annual audited financial statements with the U.S. government each year. 
D)  The company has profit-sharing plans that require it to base payments on financial statement information. 
A)  The company's lenders require the company to send them financial statements. 
B)  The company has several owners, who wish to monitor their ownership interests. 
C)  All U.S. companies must file annual audited financial statements with the U.S. government each year. 
D)  The company has profit-sharing plans that require it to base payments on financial statement information.

The current ratio is used to get information about a company's

In general, a high current ratio would be a signal of low liquidity risk.

The text discusses various factors that relate to the risk of a company facing financial distress or bankruptcy. Which of the following might be in indicator of risk, based on the discussion in the text?

The appropriate section of a cash flow statement to show the money spent by a company to buy a new factory is the financing section.

The Allen Corp. in 2016 had total revenues = $10 million, variable costs = $3 million, operating income of $5 million, and net income = $2 million. The operating leverage effect is

"Financial leverage" arises due to the presence of fixed financing costs (such as interest expense) at a company.

It would be easiest to see the percentage growth in a company's 2015 accounts receivable by looking at a

One benefit of ratio analysis is that it allows analysts to compare companies of different sizes.

A company currently allows its customers to take 30 days to pay their accounts receivable. Almost all of its customers pay in around 30 days. If a company changes its policy, and allows customers to wait 60 days before paying, it is likely that in future years

_____ A company now has a profit margin for ROA of 4%. Its asset turnover is 5. Compute the Return on assets.

"Financial leverage" is the term for the effect of fixed operating costs on the relation between changes in revenues and changes in net income.

It is always bad news for a company when its selling expenses increase as a percentage of sales.

In general, when fixed operating costs become a larger percentage of a company's operating costs, the operating leverage effect

The asset turnover used in analyzing return on common equity is the same as the asset turnover used in analyzing return on assets.

Which of the following might be an indication that a company has more obsolete ("out of date") products than it did in the previous year?

On a statement of cash flows prepared using the indirect method, an increase in accounts payable will be shown as something that increases operating cash flows.

A commonly used ratio to judge company profitability is

Most American businesses are publicly traded.

Reasons that a private company might decide to prepare financial statements include all of the following, except:

How Accounting Works

Selecting Your Business Structure

Choosing Accounting Software

Accounting for Inventory

Doing Business Day to Day

Tackling the General Ledger

Reconciling Bank and Credit Card Statements

Setting up New Team Members

Understanding Insurance

Other Benefits and Reimbursements

Payroll Taxes

Appendix

Filters

Exam 4: Managing Your Accounts

The current ratio is used to get information about a company's

In general, a high current ratio would be a signal of low liquidity risk.

The text discusses various factors that relate to the risk of a company facing financial distress or bankruptcy. Which of the following might be in indicator of risk, based on the discussion in the text?

The appropriate section of a cash flow statement to show the money spent by a company to buy a new factory is the financing section.

The Allen Corp. in 2016 had total revenues = $10 million, variable costs = $3 million, operating income of $5 million, and net income = $2 million. The operating leverage effect is

"Financial leverage" arises due to the presence of fixed financing costs (such as interest expense) at a company.

It would be easiest to see the percentage growth in a company's 2015 accounts receivable by looking at a

One benefit of ratio analysis is that it allows analysts to compare companies of different sizes.

A company currently allows its customers to take 30 days to pay their accounts receivable. Almost all of its customers pay in around 30 days. If a company changes its policy, and allows customers to wait 60 days before paying, it is likely that in future years

_____ A company now has a profit margin for ROA of 4%. Its asset turnover is 5. Compute the Return on assets.

"Financial leverage" is the term for the effect of fixed operating costs on the relation between changes in revenues and changes in net income.

It is always bad news for a company when its selling expenses increase as a percentage of sales.

In general, when fixed operating costs become a larger percentage of a company's operating costs, the operating leverage effect

The asset turnover used in analyzing return on common equity is the same as the asset turnover used in analyzing return on assets.

Which of the following might be an indication that a company has more obsolete ("out of date") products than it did in the previous year?

On a statement of cash flows prepared using the indirect method, an increase in accounts payable will be shown as something that increases operating cash flows.

A commonly used ratio to judge company profitability is

Most American businesses are publicly traded.

Reasons that a private company might decide to prepare financial statements include all of the following, except:

How Accounting Works

Selecting Your Business Structure

Choosing Accounting Software

Accounting for Inventory

Doing Business Day to Day

Tackling the General Ledger

Reconciling Bank and Credit Card Statements

Setting up New Team Members

Understanding Insurance

Other Benefits and Reimbursements

Payroll Taxes

Appendix

Filters