Question 1

In which of the following company attributes would a long-term bond holder be most interested?

Accepted Answer

A) Quality of earnings 
B) Solvency 
C) Profitability 
D) Liquidity 
A) Quality of earnings 
B) Solvency 
C) Profitability 
D) Liquidity

Question 2

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover.

Accepted Answer

A) True 
 B)False

Question 3

The comparative financial statements of Seward,Inc.include the following data: $\begin{array}{lrr}
&\text { Curyent Year}&\text {  Prior Year }\
\text { Income Statement }\
\text { Net Sales Revenue } & \mathbf{2 3 4 , 0 0 0} & \mathbf{1 8 0 , 0 0 0} \
\text { Cost of Goods Sold } & 99,000 & 84,600 \
\text { Operating Expenses } & 70,200 & 57,600 \
\text { Interest Expense } & 6,300 & 6,300 \
\text { Income Tax Expense } & 9,000 & 7,200 \
\text { Net Income } & 49,500 & 24,300\
 \text {Balance Sheet }\
\text { Current Assets } & \mathbf{2 0 7 , 0 0 0} & \mathbf{1 7 1 , 0 0 0} \
\text { Plant, Property and Equipment, Net } & 176,400 & 189,000 \
\text { Current Liabilities } & 81,000 & 68,400 \
\text { Long-Term Liabilities } & 77,400 & 77,400 \
\text { Stockholders' Equity } & 225,000 & 214,200 \
\text { Total Liabilities \& Stockholders' Equity } & 383,400 & 360,000
\end{array}$ Which of the following would be shown on Seward's horizontal analysis when calculating percentage changes from the prior year to the current year?

Accepted Answer

A) An increase in sales revenue of 23% 
B) An increase in gross profit of 41.5% 
C) An increase in interest expense of 100% 
D) An increase in net income of 57% 
A) An increase in sales revenue of 23% 
B) An increase in gross profit of 41.5% 
C) An increase in interest expense of 100% 
D) An increase in net income of 57%

Question 4

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 balance sheet what is the percentage that would be shown next to the dollar amount of current assets?

Accepted Answer

A) 100% 
B) 44% 
C) 30% 
D) 33% 
A) 100% 
B) 44% 
C) 30% 
D) 33%

Question 5

The fixed asset turnover ratio is a profitability ratio.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about trend analysis is correct?

Accepted Answer

A) Time-series analysis is an example of trend analysis. 
B) Trend data are always in dollars. 
C) Trend analysis is also known as vertical analysis. 
D) Common-size analysis is an example of trend analysis. 
A) Time-series analysis is an example of trend analysis. 
B) Trend data are always in dollars. 
C) Trend analysis is also known as vertical analysis. 
D) Common-size analysis is an example of trend analysis.

Question 7

Match each term with the appropriate definition.Not all definitions will be used.
-Discontinued Operations

Accepted Answer

A) The practice of reporting information in percentages rather than monetary amounts. 
B) A nonrecurring item on the income statement that reflects gains and losses associated with extraordinary events. 
C) Another name for a trend analysis. 
D) An increase in an asset or a decrease in a liability that results from peripheral activities. 
E) A section of the annual report that can be used in interpreting the results of financial statement analysis.
F)The ratio calculated by dividing the price of a share of stock by the earnings per share.
G)After-tax earnings adjusted for gains and losses that may disappear before they are realized.
H)A nonrecurring item associated with abandoning or selling an operation.
I)The practice of reporting accounting data in the national monetary unit.
J)Also known as ratio analysis.
K)The ratio calculated by dividing the net income by the number of common shares outstanding.
L)The earnings of a company after taxes. 
A) The practice of reporting information in percentages rather than monetary amounts. 
B) A nonrecurring item on the income statement that reflects gains and losses associated with extraordinary events. 
C) Another name for a trend analysis. 
D) An increase in an asset or a decrease in a liability that results from peripheral activities. 
E) A section of the annual report that can be used in interpreting the results of financial statement analysis.
F)The ratio calculated by dividing the price of a share of stock by the earnings per share.
G)After-tax earnings adjusted for gains and losses that may disappear before they are realized.
H)A nonrecurring item associated with abandoning or selling an operation.
I)The practice of reporting accounting data in the national monetary unit.
J)Also known as ratio analysis.
K)The ratio calculated by dividing the net income by the number of common shares outstanding.
L)The earnings of a company after taxes.

Question 8

Company A uses the FIFO inventory method and Company B uses the LIFO method.If prices are rising and there are no other significant differences between the companies,which of the following is correct?

Accepted Answer

A) Company A will report a higher current ratio and lower earnings per share than Company B. 
B) Company A will report a higher current ratio and higher earnings per share than Company B. 
C) Company A will report a lower current ratio and higher earnings per share than Company B. 
D) Company A will report a lower current ratio and lower earnings per shares than Company B. 
A) Company A will report a higher current ratio and lower earnings per share than Company B. 
B) Company A will report a higher current ratio and higher earnings per share than Company B. 
C) Company A will report a lower current ratio and higher earnings per share than Company B. 
D) Company A will report a lower current ratio and lower earnings per shares than Company B.

Question 9

Cleveland Co.'s price/earnings ratio is 15.3.Its closest competitor,Walt,Inc.has a Price/Earnings ratio of 9.4.Which of the following would not be a valid conclusion to draw from a comparison of the two companies' Price/Earnings ratios?

Accepted Answer

A) Cleveland Co.'s stock is overpriced. 
B) Investors believe Cleveland Co.has a brighter future than Walt,Inc. 
C) Cleveland has been more profitable than Walt,Inc. 
D) The stock price of Cleveland Co.has been bid up due to rumors of a merger. 
A) Cleveland Co.'s stock is overpriced. 
B) Investors believe Cleveland Co.has a brighter future than Walt,Inc. 
C) Cleveland has been more profitable than Walt,Inc. 
D) The stock price of Cleveland Co.has been bid up due to rumors of a merger.

Question 10

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Accepted Answer

A) Net profit margin ratio 
B) Current ratio 
C) Inventory turnover ratio 
D) Fixed asset turnover ratio 
A) Net profit margin ratio 
B) Current ratio 
C) Inventory turnover ratio 
D) Fixed asset turnover ratio

Question 11

Hussain,Inc.'s income statement and other financial information for the current year is presented below.
 
Required:
Part a.Perform vertical analysis of the income statement.(Round to the nearest whole percentage. )
Part b.Calculate the debt-to-assets ratio.(Round to two decimal places. )
Part c.Calculate the times interest earned ratio.(Round to two decimal places. )
Part d.Evaluate the company's solvency.

Accepted Answer

Part a
@#IMG-DLM&
Part b
Debt to Assets = Total li

Question 12

Which of these is not one of the categories of ratio analysis?

Accepted Answer

A) Profitability 
B) Liquidity 
C) Solvency 
D) Probability 
A) Profitability 
B) Liquidity 
C) Solvency 
D) Probability

Question 13

Roscoe Company's comparative balance sheet show total assets of $693,000 and $630,000,for the current and prior years,respectively.The percentage change to be reported in the horizontal analysis is an increase of:

Accepted Answer

A) 10%. 
B) 9%. 
C) 5%. 
D) 4%. 
A) 10%. 
B) 9%. 
C) 5%. 
D) 4%.

Question 14

The debt-to-assets ratio is the:

Accepted Answer

A) ratio of current liabilities to current assets. 
B) ratio of long term liabilities to fixed assets. 
C) ratio of total liabilities to total assets. 
D) proportion of short-term liabilities to total liabilities. 
A) ratio of current liabilities to current assets. 
B) ratio of long term liabilities to fixed assets. 
C) ratio of total liabilities to total assets. 
D) proportion of short-term liabilities to total liabilities.

Question 15

Which of the following is calculated by dividing net sales revenue by average net receivables?

Accepted Answer

A) Days to sell ratio 
B) Current ratio 
C) Profit margin 
D) Receivables turnover ratio 
A) Days to sell ratio 
B) Current ratio 
C) Profit margin 
D) Receivables turnover ratio

Question 16

Match each term with the appropriate definition.Not all definitions will be used.
-Common-Size Financial Statements

Accepted Answer

A) The practice of reporting information in percentages rather than monetary amounts. 
B) A nonrecurring item on the income statement that reflects gains and losses associated with extraordinary events. 
C) Another name for a trend analysis. 
D) An increase in an asset or a decrease in a liability that results from peripheral activities. 
E) A section of the annual report that can be used in interpreting the results of financial statement analysis.
F)The ratio calculated by dividing the price of a share of stock by the earnings per share.
G)After-tax earnings adjusted for gains and losses that may disappear before they are realized.
H)A nonrecurring item associated with abandoning or selling an operation.
I)The practice of reporting accounting data in the national monetary unit.
J)Also known as ratio analysis.
K)The ratio calculated by dividing the net income by the number of common shares outstanding.
L)The earnings of a company after taxes. 
A) The practice of reporting information in percentages rather than monetary amounts. 
B) A nonrecurring item on the income statement that reflects gains and losses associated with extraordinary events. 
C) Another name for a trend analysis. 
D) An increase in an asset or a decrease in a liability that results from peripheral activities. 
E) A section of the annual report that can be used in interpreting the results of financial statement analysis.
F)The ratio calculated by dividing the price of a share of stock by the earnings per share.
G)After-tax earnings adjusted for gains and losses that may disappear before they are realized.
H)A nonrecurring item associated with abandoning or selling an operation.
I)The practice of reporting accounting data in the national monetary unit.
J)Also known as ratio analysis.
K)The ratio calculated by dividing the net income by the number of common shares outstanding.
L)The earnings of a company after taxes.

Question 17

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

Accepted Answer

A) Company A: Receivable turnover of 5;inventory turnover of 2 
B) Company B: Receivable turnover of 2;inventory turnover of 5 
C) Company C: Receivable turnover of 10;inventory turnover of 10 
D) Company D: Receivable turnover of 1;inventory turnover of 1 
A) Company A: Receivable turnover of 5;inventory turnover of 2 
B) Company B: Receivable turnover of 2;inventory turnover of 5 
C) Company C: Receivable turnover of 10;inventory turnover of 10 
D) Company D: Receivable turnover of 1;inventory turnover of 1

Question 18

How competitors calculate depreciation is most likely to affect comparisons between competitors if property,plant and equipment:

Accepted Answer

A) makes up a large percentage of assets and average useful lives are fairly different. 
B) makes up a small percentage of assets and assets are financed in a different way. 
C) makes up a small percentage of assets and average useful lives are fairly similar. 
D) is primarily leased in the industry,not purchased. 
A) makes up a large percentage of assets and average useful lives are fairly different. 
B) makes up a small percentage of assets and assets are financed in a different way. 
C) makes up a small percentage of assets and average useful lives are fairly similar. 
D) is primarily leased in the industry,not purchased.

Question 19

According to the full disclosure principle,financial reports should present detailed information about every transaction.

Accepted Answer

A) True 
 B)False

Question 20

Mercedes,Co.has the following quarterly financial information.
 
Required:
Part a.Calculate the gross profit percentage for each quarter.
Part b.Calculate the net profit margin for each quarter.
Part c.Calculate the EPS for each quarter.
Part d.Calculate the Price/Earnings ratio at the end of the year.
Part e.Evaluate the company's profitability.
Round all ratios to two decimal places.

Accepted Answer

@#IMG-DLM&
Part d
Price/Earnings ratio = Stock pri

In which of the following company attributes would a long-term bond holder be most interested?

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover.

The fixed asset turnover ratio is a profitability ratio.

Which of the following statements about trend analysis is correct?

Match each term with the appropriate definition.Not all definitions will be used. -Discontinued Operations

Company A uses the FIFO inventory method and Company B uses the LIFO method.If prices are rising and there are no other significant differences between the companies,which of the following is correct?

Cleveland Co.'s price/earnings ratio is 15.3.Its closest competitor,Walt,Inc.has a Price/Earnings ratio of 9.4.Which of the following would not be a valid conclusion to draw from a comparison of the two companies' Price/Earnings ratios?

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Which of these is not one of the categories of ratio analysis?

Roscoe Company's comparative balance sheet show total assets of $693,000 and $630,000,for the current and prior years,respectively.The percentage change to be reported in the horizontal analysis is an increase of:

The debt-to-assets ratio is the:

Which of the following is calculated by dividing net sales revenue by average net receivables?

Match each term with the appropriate definition.Not all definitions will be used. -Common-Size Financial Statements

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

How competitors calculate depreciation is most likely to affect comparisons between competitors if property,plant and equipment:

According to the full disclosure principle,financial reports should present detailed information about every transaction.

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

In which of the following company attributes would a long-term bond holder be most interested?

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover.

The fixed asset turnover ratio is a profitability ratio.

Which of the following statements about trend analysis is correct?

Match each term with the appropriate definition.Not all definitions will be used. -Discontinued Operations

Company A uses the FIFO inventory method and Company B uses the LIFO method.If prices are rising and there are no other significant differences between the companies,which of the following is correct?

Cleveland Co.'s price/earnings ratio is 15.3.Its closest competitor,Walt,Inc.has a Price/Earnings ratio of 9.4.Which of the following would not be a valid conclusion to draw from a comparison of the two companies' Price/Earnings ratios?

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Which of these is not one of the categories of ratio analysis?

Roscoe Company's comparative balance sheet show total assets of $693,000 and $630,000,for the current and prior years,respectively.The percentage change to be reported in the horizontal analysis is an increase of:

The debt-to-assets ratio is the:

Which of the following is calculated by dividing net sales revenue by average net receivables?

Match each term with the appropriate definition.Not all definitions will be used. -Common-Size Financial Statements

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

How competitors calculate depreciation is most likely to affect comparisons between competitors if property,plant and equipment:

According to the full disclosure principle,financial reports should present detailed information about every transaction.

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