Question 1

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

Accepted Answer

A) True 
 B)False  True

Question 2

The following information is available for the McCartney Corporation:
   Calculate the company's inventory turnover and its days' sales in inventory.

Accepted Answer

Days' sales in inventory = ($48,800/$450,000)* 365 = 39.6 days

Question 3

Industry standards for financial statement analysis:

Accepted Answer

A) Are based on a company's prior performance. 
B) Are set by the government. 
C) Are set by the financial performance and condition of the company's industry. 
D) Are based on rules of thumb. 
E) Compare a company's income with the prior year's income. 
A) Are based on a company's prior performance. 
B) Are set by the government. 
C) Are set by the financial performance and condition of the company's industry. 
D) Are based on rules of thumb. 
E) Compare a company's income with the prior year's income. C

Question 4

A financial statement analysis report usually includes:

Accepted Answer

A) An executive summary. 
B) An analysis overview. 
C) Evidential matter. 
D) Assumptions. 
E) All of the mentioned items are included in a financial statement analysis report. 
A) An executive summary. 
B) An analysis overview. 
C) Evidential matter. 
D) Assumptions. 
E) All of the mentioned items are included in a financial statement analysis report.

Question 5

The comparison of a company's financial condition and performance to a base amount is known as:

Accepted Answer

A) Financial reporting. 
B) Horizontal ratios. 
C) Investment analysis. 
D) Risk analysis. 
E) Vertical analysis. 
A) Financial reporting. 
B) Horizontal ratios. 
C) Investment analysis. 
D) Risk analysis. 
E) Vertical analysis.

Question 6

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:

Accepted Answer

A) Inventory turnover ratio. 
B) Profit margin. 
C) Days' sales in inventory. 
D) Current ratio. 
E) Total asset turnover. 
A) Inventory turnover ratio. 
B) Profit margin. 
C) Days' sales in inventory. 
D) Current ratio. 
E) Total asset turnover.

Question 7

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

Accepted Answer

A) True 
 B)False

Question 8

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year.At year-end,the price per share of the company's stock was $49.40.What is the company's year-end price-earnings ratio?

Accepted Answer

Earnings per share = $78,000/1

Question 9

Which of the following items is not likely an extraordinary item?

Accepted Answer

A) Loss from an unexpected union strike. 
B) Condemnation of property by the city government. 
C) Loss of use of property due to a new and unexpected environmental regulation. 
D) Loss due to an earthquake in Florida. 
E) Expropriation of property by a foreign government. 
A) Loss from an unexpected union strike. 
B) Condemnation of property by the city government. 
C) Loss of use of property due to a new and unexpected environmental regulation. 
D) Loss due to an earthquake in Florida. 
E) Expropriation of property by a foreign government.

Question 10

Intra-company analysis is based on comparisons with competitors.

Accepted Answer

A) True 
 B)False

Question 11

The return on common stockholder's equity measures a company's success in reaching the goal of earning net income for its owners.

Accepted Answer

A) True 
 B)False

Question 12

Selected current year company information follows:
  The total asset turnover is:

Accepted Answer

A) 2.24 times 
B) 2.81 times 
C) 3.64 times 
D) 4.67 times 
E) 6.28 times 
A) 2.24 times 
B) 2.81 times 
C) 3.64 times 
D) 4.67 times 
E) 6.28 times

Question 13

The building blocks of financial statement analysis include (1)liquidity,(2)salability,(3)solvency,and (4)profitability.

Accepted Answer

A) True 
 B)False

Question 14

Common-size statements:

Accepted Answer

A) Reveal changes in the relative importance of each financial statement item. 
B) Do not emphasize the relative importance of each item. 
C) Compare financial statements over time. 
D) Show the dollar amount of change for financial statement items. 
E) Reveal patterns in data across successive periods. 
A) Reveal changes in the relative importance of each financial statement item. 
B) Do not emphasize the relative importance of each item. 
C) Compare financial statements over time. 
D) Show the dollar amount of change for financial statement items. 
E) Reveal patterns in data across successive periods.

Question 15

Financial reporting refers to:

Accepted Answer

A) The application of analytical tools to general-purpose financial statements. 
B) The communication of financial information useful for decision making. 
C) Financial statements only. 
D) Ratio analysis. 
E) Profitability. 
A) The application of analytical tools to general-purpose financial statements. 
B) The communication of financial information useful for decision making. 
C) Financial statements only. 
D) Ratio analysis. 
E) Profitability.

Question 16

The comparison of a company's financial condition and performance to a base amount is known as _________________.

Accepted Answer

The answer of The comparison of a company's financial condition...

Question 17

Comparative horizontal analysis is used to reveal patterns in data covering successive periods.

Accepted Answer

A) True 
 B)False

Question 18

Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.

Accepted Answer

A) True 
 B)False

Question 19

Use the following information from the current year financial statements of a company to calculate the ratios below:
(a)Current ratio.
(b)Accounts receivable turnover.(Assume the prior year's accounts receivable balance was $100,000.)
(c)Days' sales uncollected.
(d)Inventory turnover.(Assume the prior year's inventory was $50,200.)
(e)Times interest earned ratio.
(f)Return on common stockholders' equity.(Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.)
(g)Earnings per share (assuming the corporation has a simple capital structure,with only common stock outstanding).
(h)Price earnings ratio.(Assume the company's stock is selling for $26 per share.)
(i)Divided yield ratio.(Assume that the company paid $1.25 per share in cash dividends.)

Accepted Answer

(a)
 @#IMG-DLM& Current ratio = $239,100/$96,000 =

Question 20

Annual cash dividends per share divided by market price per share is the:

Accepted Answer

A) Price-earnings ratio 
B) Price-dividends ratio. 
C) Profit margin. 
D) Dividend yield ratio. 
E) Earnings per share. 
A) Price-earnings ratio 
B) Price-dividends ratio. 
C) Profit margin. 
D) Dividend yield ratio. 
E) Earnings per share.

Exam 17: Analysis of Financial Statements

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

The following information is available for the McCartney Corporation: Calculate the company's inventory turnover and its days' sales in inventory.

Industry standards for financial statement analysis:

A financial statement analysis report usually includes:

The comparison of a company's financial condition and performance to a base amount is known as:

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year.At year-end,the price per share of the company's stock was $49.40.What is the company's year-end price-earnings ratio?

Which of the following items is not likely an extraordinary item?

Intra-company analysis is based on comparisons with competitors.

The return on common stockholder's equity measures a company's success in reaching the goal of earning net income for its owners.

Selected current year company information follows: The total asset turnover is:

The building blocks of financial statement analysis include (1)liquidity,(2)salability,(3)solvency,and (4)profitability.

Common-size statements:

Financial reporting refers to:

The comparison of a company's financial condition and performance to a base amount is known as _________________.

Comparative horizontal analysis is used to reveal patterns in data covering successive periods.

Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.

Annual cash dividends per share divided by market price per share is the:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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