Question 1

The conceptual framework for financial accounting and reporting consists of which three main components?

Accepted Answer

A) Goals,Concepts,and Exceptions. 
B) Objective,Codes,and Guidelines. 
C) Objective,Elements,and Concepts. 
D) Concepts,Principles,and Practices. 
A) Goals,Concepts,and Exceptions. 
B) Objective,Codes,and Guidelines. 
C) Objective,Elements,and Concepts. 
D) Concepts,Principles,and Practices.

Question 2

Fullerton Co.has the following information from its accounting records: $\begin{array}{lr}
\text { Current assets } & \$ 80,000 \
\text { Total assets } & 200,000 \
\text { Current liabilities } & 40,000 \
\text { Total liabilities } & 120,000
\end{array}$ If Fullerton uses cash of $10,000 to pay a current liability,its:

Accepted Answer

A) current ratio increases and its debt-to-assets ratio increases. 
B) current ratio increases and its debt-to-assets ratio decreases. 
C) current ratio decreases and its debt-to-assets ratio increases. 
D) current ratio decreases and its debt-to-assets ratio decreases. 
A) current ratio increases and its debt-to-assets ratio increases. 
B) current ratio increases and its debt-to-assets ratio decreases. 
C) current ratio decreases and its debt-to-assets ratio increases. 
D) current ratio decreases and its debt-to-assets ratio decreases.

Question 3

Which ratio is used to evaluate how well a company is managing its property,plant,and equipment?

Accepted Answer

A) Receivables turnover 
B) Inventory turnover 
C) Fixed asset turnover 
D) Debt-to-assets ratio 
A) Receivables turnover 
B) Inventory turnover 
C) Fixed asset turnover 
D) Debt-to-assets ratio

Question 4

Solvency ratio data are primarily concerned with the ability of a company to:

Accepted Answer

A) produce profits. 
B) maintain long-term survival and repay its debt. 
C) manage its cash flow. 
D) provide income for stockholders. 
A) produce profits. 
B) maintain long-term survival and repay its debt. 
C) manage its cash flow. 
D) provide income for stockholders.

Question 5

Assume the following sales data for a company: $\begin{array}{lll}
\text { Year 1 } & \$, 200,000 \
\text { Year 2 } & 5,880,000 \
\text { Year 3 } & 5,250,000
\end{array}$ By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

Accepted Answer

A) 40.0% and (10.7%) 
B) 28.6% and (12.0%) 
C) 40.0% and (15.0%) 
D) 32.0% and (10.7%) 
A) 40.0% and (10.7%) 
B) 28.6% and (12.0%) 
C) 40.0% and (15.0%) 
D) 32.0% and (10.7%)

Question 6

Which of the following ratios is calculated by dividing current assets by current liabilities?

Accepted Answer

A) Quick ratio 
B) Solvency ratio 
C) Debt ratio 
D) Current ratio 
A) Quick ratio 
B) Solvency ratio 
C) Debt ratio 
D) Current ratio

Question 7

Trend data can be measured in dollar amounts or percentages.

Accepted Answer

A) True 
 B)False

Question 8

Match each term with the appropriate definition.Not all definitions will be used.
-Earnings Per Share

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 9

Which of the following measures would assist in assessing the solvency of a company?

Accepted Answer

A) Debt-to-assets and times interest earned 
B) Fixed asset turnover and EPS 
C) Return on equity and debt-to-assets 
D) Current ratio and times interest earned 
A) Debt-to-assets and times interest earned 
B) Fixed asset turnover and EPS 
C) Return on equity and debt-to-assets 
D) Current ratio and times interest earned

Question 10

Larabee Company's stock sells for $20 per share.The company has $160 million in earnings and 500 million outstanding shares.The Price/Earnings ratio for the company is closest to:

Accepted Answer

A) 62.5. 
B) 200. 
C) 0.31. 
D) 6.4. 
A) 62.5. 
B) 200. 
C) 0.31. 
D) 6.4.

Question 11

Listed below are the current ratios of four different companies.Based on these current ratios,which company is in the most liquid position?

Accepted Answer

A) 2.0 
B) 1.8 
C) 2.5 
D) 2.1 
A) 2.0 
B) 1.8 
C) 2.5 
D) 2.1

Question 12

A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

Accepted Answer

A) The debt-to-assets ratio will be unchanged. 
B) The debt-to-assets ratio will increase. 
C) The debt-to-assets ratio will decrease. 
D) The debt-to-assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition. 
A) The debt-to-assets ratio will be unchanged. 
B) The debt-to-assets ratio will increase. 
C) The debt-to-assets ratio will decrease. 
D) The debt-to-assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.

Question 13

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 this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

Accepted Answer

A) 76% 
B) 24% 
C) 31% 
D) 18% 
A) 76% 
B) 24% 
C) 31% 
D) 18%

Question 14

Company A has a receivables turnover of 8.0.Company B has a receivables turnover of 10.0.Which of the following statements is correct?

Accepted Answer

A) Company A collects its receivables faster than Company B. 
B) Company B collects its receivables faster than Company A. 
C) Company A makes more sales on account than Company B. 
D) Company B makes more sales on account than Company A. 
A) Company A collects its receivables faster than Company B. 
B) Company B collects its receivables faster than Company A. 
C) Company A makes more sales on account than Company B. 
D) Company B makes more sales on account than Company A.

Question 15

Which of the following statements about the Price/Earnings ratio is not correct?

Accepted Answer

A) The Price/Earnings ratio indicates how much investors are willing to pay for a share of a company's stock as a multiple of current earnings. 
B) A high Price/Earnings ratio may mean that investors have pushed the price of the stock up in anticipation of higher future net income. 
C) If EPS decreases and there is no change in the market price of the stock,the Price/Earnings ratio will decrease. 
D) If the market price of the stock increases and there is no change in EPS,the Price/Earnings ratio will increase. 
A) The Price/Earnings ratio indicates how much investors are willing to pay for a share of a company's stock as a multiple of current earnings. 
B) A high Price/Earnings ratio may mean that investors have pushed the price of the stock up in anticipation of higher future net income. 
C) If EPS decreases and there is no change in the market price of the stock,the Price/Earnings ratio will decrease. 
D) If the market price of the stock increases and there is no change in EPS,the Price/Earnings ratio will increase.

Question 16

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Accepted Answer

A) Anheuser Busch's net profit margin. 
B) the Fortune 500's net profit margin. 
C) Pepsico's net profit margin. 
D) the average net profit margin for the soft drink manufacturing industry. 
A) Anheuser Busch's net profit margin. 
B) the Fortune 500's net profit margin. 
C) Pepsico's net profit margin. 
D) the average net profit margin for the soft drink manufacturing industry.

Question 17

The financial information below presents selected information from the financial statements of Pelican Company.Sales revenue during the current year was $13,700,300 and cost of goods sold was $8,905,195.All of Pelican's sales are made on account and are due within 30 days.
$\begin{array} { l r r } 
& \text { Prior Year } & \text { Current Year } \
\cline { 2 - 4 } \text { Cash and cash equivalents } & \$ 552,330 & \$ 599,780 \
\text { Accounts receivable } & 4,550,000 & 3,800,000 \
\text { Inventory } & 920,360 & 1,223,440 \
\text { Total current assets } & 8,700,030 & 8,480,100 \
\text { Total assets } & 11,100,020 & 10,980,000 \
\text { Total current liabilitics } & 7,200,300 & 7,476,000 \
\text { Total liabilities } & 8,449,900 & 8,240,700
\end{array}$
Required:
Part a.Current ratios as of the end of the current and prior year.
Part b.Calculate the receivables turnover ratio for the current year.
Part c.Calculate the days to collect for the current year.
Part d.Calculate the inventory turnover ratio for the current year.
Part d.Calculate the days to sell for the current year.
Part e.Evaluate the company's liquidity position at the end of the current year.Cite any additional information not given in the problem that would be helpful in evaluating the company's liquidity.
Round all ratios to two decimal places.

Accepted Answer

Part a
Current ratio = Current assets ÷

Question 18

Match between columns
                        Premises: Inventory turnover ratio
Fixed asset turnover ratio
Earnings per share
Return on equity
Gross profit margin
Debt-to-assets ratio
Price/earnings ratio
Current ratio
Receivables turnover ratio
Times interest earned ratio

Accepted Answer

The Answer of Solvency and Liquidity and Profitability is...

Question 19

Special items reported as part of comprehensive income,but not included in net income,might include:

Accepted Answer

A) gains or losses on foreign currency exchanges. 
B) interest expense. 
C) income and losses from discontinued operations. 
D) income tax expense. 
A) gains or losses on foreign currency exchanges. 
B) interest expense. 
C) income and losses from discontinued operations. 
D) income tax expense.

Question 20

Which of the following is a liquidity ratio?

Accepted Answer

A) Inventory turnover 
B) Price/Earnings ratio 
C) Net profit margin 
D) Times interest earned 
A) Inventory turnover 
B) Price/Earnings ratio 
C) Net profit margin 
D) Times interest earned

The conceptual framework for financial accounting and reporting consists of which three main components?

Fullerton Co.has the following information from its accounting records: Current assets \ 80,000 Total assets 200,000 Current liabilities 40,000 Total liabilities 120,000 If Fullerton uses cash of $10,000 to pay a current liability,its:

Which ratio is used to evaluate how well a company is managing its property,plant,and equipment?

Solvency ratio data are primarily concerned with the ability of a company to:

Assume the following sales data for a company: Year 1 200,000 Year 2 5,880,000 Year 3 5,250,000 By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

Which of the following ratios is calculated by dividing current assets by current liabilities?

Trend data can be measured in dollar amounts or percentages.

Match each term with the appropriate definition.Not all definitions will be used. -Earnings Per Share

Which of the following measures would assist in assessing the solvency of a company?

Larabee Company's stock sells for $20 per share.The company has $160 million in earnings and 500 million outstanding shares.The Price/Earnings ratio for the company is closest to:

Listed below are the current ratios of four different companies.Based on these current ratios,which company is in the most liquid position?

A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

Company A has a receivables turnover of 8.0.Company B has a receivables turnover of 10.0.Which of the following statements is correct?

Which of the following statements about the Price/Earnings ratio is not correct?

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Special items reported as part of comprehensive income,but not included in net income,might include:

Which of the following is a liquidity ratio?

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

The conceptual framework for financial accounting and reporting consists of which three main components?

Fullerton Co.has the following information from its accounting records: Current assets \ 80,000 Total assets 200,000 Current liabilities 40,000 Total liabilities 120,000 If Fullerton uses cash of $10,000 to pay a current liability,its:

Which ratio is used to evaluate how well a company is managing its property,plant,and equipment?

Solvency ratio data are primarily concerned with the ability of a company to:

Assume the following sales data for a company: Year 1 200,000 Year 2 5,880,000 Year 3 5,250,000 By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

Which of the following ratios is calculated by dividing current assets by current liabilities?

Trend data can be measured in dollar amounts or percentages.

Match each term with the appropriate definition.Not all definitions will be used. -Earnings Per Share

Which of the following measures would assist in assessing the solvency of a company?

Larabee Company's stock sells for $20 per share.The company has $160 million in earnings and 500 million outstanding shares.The Price/Earnings ratio for the company is closest to:

Listed below are the current ratios of four different companies.Based on these current ratios,which company is in the most liquid position?

A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

Company A has a receivables turnover of 8.0.Company B has a receivables turnover of 10.0.Which of the following statements is correct?

Which of the following statements about the Price/Earnings ratio is not correct?

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Special items reported as part of comprehensive income,but not included in net income,might include:

Which of the following is a liquidity ratio?

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