Question 1

If net income is rising,but net sales revenue and the gross profit percentage remain the same,then:

Accepted Answer

A) operating expenses are falling. 
B) operating expenses are rising. 
C) cost of goods sold is falling. 
D) cost of goods sold is rising. 
A) operating expenses are falling. 
B) operating expenses are rising. 
C) cost of goods sold is falling. 
D) cost of goods sold is rising.

Question 2

An increase in the gross profit percentage indicates that:

Accepted Answer

A) cost of goods sold as a percentage of sales has decreased. 
B) cost of goods sold as a percentage of sales has increased. 
C) operating expenses as a percentage of sales have increased. 
D) operating expenses as a percentage of sales have decreased. 
A) cost of goods sold as a percentage of sales has decreased. 
B) cost of goods sold as a percentage of sales has increased. 
C) operating expenses as a percentage of sales have increased. 
D) operating expenses as a percentage of sales have decreased.

Question 3

To analyze changes in a company's net income over the last ten years,you should perform:

Accepted Answer

A) horizontal analysis. 
B) vertical analysis. 
C) cross-section analysis. 
D) ratio analysis. 
A) horizontal analysis. 
B) vertical analysis. 
C) cross-section analysis. 
D) ratio analysis.

Question 4

The full disclosure principle refers to:

Accepted Answer

A) Financial reports should disclose only material transactions related to a company's business activities. 
B) Financial reports should disclose every transaction related to a company's business activities. 
C) Financial reports should present all information needed to properly interpret results of a company's business activities. 
D) Financial reports should disclose all future transactions related to a company's business activities. 
A) Financial reports should disclose only material transactions related to a company's business activities. 
B) Financial reports should disclose every transaction related to a company's business activities. 
C) Financial reports should present all information needed to properly interpret results of a company's business activities. 
D) Financial reports should disclose all future transactions related to a company's business activities.

Question 5

The general goal of horizontal analyses is to identify significant trends.

Accepted Answer

A) True 
 B)False

Question 6

The lower the receivables turnover,the slower accounts receivable are being collected.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a profitability ratio?

Accepted Answer

A) Return on equity (RO
E)  
B) Earnings per share 
C) Fixed asset turnover 
D) Days to sell 
A) Return on equity (RO
E)  
B) Earnings per share 
C) Fixed asset turnover 
D) Days to sell

Question 8

A decrease in receivables turnover ratio is indicative of:

Accepted Answer

A) an increase in sales revenue. 
B) slower-selling inventory. 
C) an increase in accounts receivable. 
D) a decline in cost of goods sold. 
A) an increase in sales revenue. 
B) slower-selling inventory. 
C) an increase in accounts receivable. 
D) a decline in cost of goods sold.

Question 9

Match each term with the appropriate definition.Not all definitions will be used.
-Going-Concern Assumption

Accepted Answer

A) Also known as time-series analysis. 
B) The ability of a company to meet its short-run financial obligations. 
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance. 
D) A measure of current earnings performance. 
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F)A type of analysis that focuses on relationships within a single financial statement.
G)A result from comparing a company's results to other companies in the industry.
H)The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I)A measure of long-run survivability.
J)The standard that expenses should be recognized when incurred.
K)The characteristic that financial information needs to be valuable to decision makers.
L)The standard that takes for granted a company's near term financial survival. 
A) Also known as time-series analysis. 
B) The ability of a company to meet its short-run financial obligations. 
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance. 
D) A measure of current earnings performance. 
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F)A type of analysis that focuses on relationships within a single financial statement.
G)A result from comparing a company's results to other companies in the industry.
H)The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I)A measure of long-run survivability.
J)The standard that expenses should be recognized when incurred.
K)The characteristic that financial information needs to be valuable to decision makers.
L)The standard that takes for granted a company's near term financial survival.

Question 10

The following information is taken from the financial statements of Clybourn Company for the current year: $\begin{array}{lr}
\text { Current Assets } & \$ 32,000 \
\text { Total Assets } & 1,424,000 \
\text { Cost of Goods Sold } & 1,040,000 \
\text { Gross Profit } & 320,000 \
\text { Net Income } & 192,000
\end{array}$ On a common size income statement for the year,what is the percentage that would be shown next to the dollar amount of sales revenue?

Accepted Answer

A) 100% 
B) 14% 
C) 60% 
D) Cannot be determined 
A) 100% 
B) 14% 
C) 60% 
D) Cannot be determined

Question 11

Match each term with the appropriate definition.Not all definitions will be used.
-Vertical Analysis

Accepted Answer

A) Also known as time-series analysis. 
B) The ability of a company to meet its short-run financial obligations. 
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance. 
D) A measure of current earnings performance. 
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F)A type of analysis that focuses on relationships within a single financial statement.
G)A result from comparing a company's results to other companies in the industry.
H)The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I)A measure of long-run survivability.
J)The standard that expenses should be recognized when incurred.
K)The characteristic that financial information needs to be valuable to decision makers.
L)The standard that takes for granted a company's near term financial survival. 
A) Also known as time-series analysis. 
B) The ability of a company to meet its short-run financial obligations. 
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance. 
D) A measure of current earnings performance. 
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F)A type of analysis that focuses on relationships within a single financial statement.
G)A result from comparing a company's results to other companies in the industry.
H)The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I)A measure of long-run survivability.
J)The standard that expenses should be recognized when incurred.
K)The characteristic that financial information needs to be valuable to decision makers.
L)The standard that takes for granted a company's near term financial survival.

Question 12

Which of the following ratios is used to evaluate a company's liquidity?

Accepted Answer

A) Debt-to-assets ratio 
B) Fixed asset turnover ratio 
C) Return on equity ratio 
D) Current ratio 
A) Debt-to-assets ratio 
B) Fixed asset turnover ratio 
C) Return on equity ratio 
D) Current ratio

Question 13

If the debt-to-assets ratio is 0.73,it means that 73% of the company's financing has been provided by stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 14

Melrose Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,net income of $95,360,and preferred dividends of $8,000 during the current year.At the beginning of the year,402,400 shares of common stock were outstanding,and,at the end of the year,429,600 shares of common stock were outstanding.A total of 1,000 preferred shares were outstanding throughout the year.The company's earnings per share for the current year is closest to:

Accepted Answer

A) $1.50. 
B) $0.84. 
C) $0.21. 
D) $0.87. 
A) $1.50. 
B) $0.84. 
C) $0.21. 
D) $0.87.

Question 15

Which of the following actions would likely increase the Return on Equity (ROE)?

Accepted Answer

A) An increase in the cost of goods sold 
B) The purchase of treasury stock 
C) Issuing shares of preferred stock 
D) An increase in the income tax rate 
A) An increase in the cost of goods sold 
B) The purchase of treasury stock 
C) Issuing shares of preferred stock 
D) An increase in the income tax rate

Question 16

Which of these are solvency ratios?

Accepted Answer

A) Debt-to-assets 
B) Current ratio 
C) Return on equity 
D) Net profit margin 
A) Debt-to-assets 
B) Current ratio 
C) Return on equity 
D) Net profit margin

Question 17

Stockton Co.prepared its income statement containing the information below.Using vertical analysis,what percentages would apply to cost of sales,gross profit,and interest expense,respectively? $\begin{array}{lr}
\text { Net Sales Revenue } & \$ 508,000 \
\text { Cost of Sales } & 328,000 \
\text { Gross Profit } & 180,000 \
\text { Operating and Other Expenses } & 65,200 \
\text { Interest Expense } & 20,400 \
\text { Income Tax Expense } & 25,600 \
\text { Net Income } & \$ 68,800
\end{array}$ $\begin{array}{lrrr}
&\text { Cost of Sales}&\text {Gross Profit }&\text {Interest Expense }\
\text { A) } & 182.2 \% & 100.6 \% & 14.2 \% \
\text { B) } & 476.7 \% & 261.6 \% & 37.2 \% \
\text { C) } & 100.0 \% & 54.9 \% & 7.8 \% \
\text { D) } & 64.6 \% & 35.4 \% & 4.0 \%
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 18

Which of the measures below is used to assess profitability?

Accepted Answer

A) Current ratio 
B) Debt-to-assets ratio 
C) Asset turnover 
D) Receivables turnover 
A) Current ratio 
B) Debt-to-assets ratio 
C) Asset turnover 
D) Receivables turnover

Question 19

Which of these ratios measure liquidity?

Accepted Answer

A) Receivables turnover 
B) Net profit margin 
C) Debt-to-assets ratio 
D) Fixed asset turnover 
A) Receivables turnover 
B) Net profit margin 
C) Debt-to-assets ratio 
D) Fixed asset turnover

Question 20

A current ratio of less than one is not so much of a concern when the company has a:

Accepted Answer

A) low fixed asset turnover ratio. 
B) high days to collect number. 
C) high inventory turnover ratio. 
D) high debt-to-equity ratio. 
A) low fixed asset turnover ratio. 
B) high days to collect number. 
C) high inventory turnover ratio. 
D) high debt-to-equity ratio.

If net income is rising,but net sales revenue and the gross profit percentage remain the same,then:

An increase in the gross profit percentage indicates that:

To analyze changes in a company's net income over the last ten years,you should perform:

The full disclosure principle refers to:

The general goal of horizontal analyses is to identify significant trends.

The lower the receivables turnover,the slower accounts receivable are being collected.

Which of the following is not a profitability ratio?

A decrease in receivables turnover ratio is indicative of:

Match each term with the appropriate definition.Not all definitions will be used. -Going-Concern Assumption

Match each term with the appropriate definition.Not all definitions will be used. -Vertical Analysis

Which of the following ratios is used to evaluate a company's liquidity?

If the debt-to-assets ratio is 0.73,it means that 73% of the company's financing has been provided by stockholders' equity.

Which of the following actions would likely increase the Return on Equity (ROE)?

Which of these are solvency ratios?

Which of the measures below is used to assess profitability?

Which of these ratios measure liquidity?

A current ratio of less than one is not so much of a concern when the company has a:

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Filters

Exam 13: Measuring and Evaluating Financial Performance

If net income is rising,but net sales revenue and the gross profit percentage remain the same,then:

An increase in the gross profit percentage indicates that:

To analyze changes in a company's net income over the last ten years,you should perform:

The full disclosure principle refers to:

The general goal of horizontal analyses is to identify significant trends.

The lower the receivables turnover,the slower accounts receivable are being collected.

Which of the following is not a profitability ratio?

A decrease in receivables turnover ratio is indicative of:

Match each term with the appropriate definition.Not all definitions will be used. -Going-Concern Assumption

Match each term with the appropriate definition.Not all definitions will be used. -Vertical Analysis

Which of the following ratios is used to evaluate a company's liquidity?

If the debt-to-assets ratio is 0.73,it means that 73% of the company's financing has been provided by stockholders' equity.

Which of the following actions would likely increase the Return on Equity (ROE)?

Which of these are solvency ratios?

Which of the measures below is used to assess profitability?

Which of these ratios measure liquidity?

A current ratio of less than one is not so much of a concern when the company has a:

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Filters