Question 1

A manufacturing firm will most likely have the heaviest investment in which type of assets?

Accepted Answer

A) Cash 
B) Inventory 
C) Accounts receivable 
D) Investments 
E) Plant,property,and equipment 
A) Cash 
B) Inventory 
C) Accounts receivable 
D) Investments 
E) Plant,property,and equipment E

Question 2

The ideal way to compare income statement figures,such as sales,to balance sheet figures,such as receivables,is to use a measure of the average for the balance sheet figures.

Accepted Answer

A) True 
 B)False  True

Question 3

A service firm will usually have a low amount of inventory,consisting primarily of supplies.

Accepted Answer

A) True 
 B)False  True

Question 4

Suppose you are comparing two firms in the steel industry.One firm is large and the other is small.Which type of numbers would be most meaningful for statement analysis?

Accepted Answer

A) Absolute numbers would be most meaningful for both the large and small firm. 
B) Absolute numbers would be most meaningful in the large firm;relative numbers would be most meaningful in the small firm. 
C) Relative numbers would be most meaningful for the large firm;absolute numbers would be most meaningful for the small firm. 
D) Relative numbers would be most meaningful for both the large and small firm,especially for interfirm comparisons. 
E) It is not meaningful to compare a large firm with a small firm. 
A) Absolute numbers would be most meaningful for both the large and small firm. 
B) Absolute numbers would be most meaningful in the large firm;relative numbers would be most meaningful in the small firm. 
C) Relative numbers would be most meaningful for the large firm;absolute numbers would be most meaningful for the small firm. 
D) Relative numbers would be most meaningful for both the large and small firm,especially for interfirm comparisons. 
E) It is not meaningful to compare a large firm with a small firm.

Question 5

Which of the following would not be a user of financial statements?

Accepted Answer

A) Management 
B) Bankers 
C) Employee unions 
D) Investment analysts 
E) All of the answers are users. 
A) Management 
B) Bankers 
C) Employee unions 
D) Investment analysts 
E) All of the answers are users.

Question 6

Liquidity ratios measure the degree of protection of long-term suppliers of funds.

Accepted Answer

A) True 
 B)False

Question 7

Management is a user of financial analysis.Which of the following comments does not represent a fair statement as to the management perspective?

Accepted Answer

A) Management is interested in the view of investors. 
B) Management is interested in the view of creditors. 
C) Management is interested in the financial structure of the entity. 
D) Management is interested in the asset structure of the entity. 
E) Management is always interested in maximum profitability. 
A) Management is interested in the view of investors. 
B) Management is interested in the view of creditors. 
C) Management is interested in the financial structure of the entity. 
D) Management is interested in the asset structure of the entity. 
E) Management is always interested in maximum profitability.

Question 8

A retailing firm has which type of inventory?

Accepted Answer

A) Raw materials 
B) Work in process 
C) Merchandise 
D) Raw materials and merchandise 
E) Raw materials,work in process,and merchandise 
A) Raw materials 
B) Work in process 
C) Merchandise 
D) Raw materials and merchandise 
E) Raw materials,work in process,and merchandise

Question 9

For NAICS,each country can add additional detailed industries,provided the additional detail aggregates to the NAICS level.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a source of industry statistics?

Accepted Answer

A) Annual Statement Studies 
B) Mergent Dividend Record 
C) Value Line 
D) Standard and Poor's Industry Surveys 
E) The Department of Commerce Financial Report 
A) Annual Statement Studies 
B) Mergent Dividend Record 
C) Value Line 
D) Standard and Poor's Industry Surveys 
E) The Department of Commerce Financial Report

Question 11

Different accounting methods can cause some ratios to differ substantially.

Accepted Answer

A) True 
 B)False

Question 12

Based on the terms of the credit and the purpose,the objectives of financial statement analysis by creditors will vary.

Accepted Answer

A) True 
 B)False

Question 13

Annual Statement Studies reported the following figures for manufacturers of screw machine products for the ratio of current assets to current debt.The following figures are for a particular industry's current ratio: 1.6;1.3;1.2.Which best describes these three numbers?

Accepted Answer

A) One third of each of the companies experienced each of the ratios. 
B) The average ratio was 1.3.The best firm had 1.6;The worst had 1.2. 
C) The median was 1.3.1.6 is the figure for the upper quartile;1.2 is the figure for the lower quartile. 
D) The median was 1.3.1.6 is the figure for the lower quartile;1.2 is the figure for the upper quartile. 
E) None of the answers are correct. 
A) One third of each of the companies experienced each of the ratios. 
B) The average ratio was 1.3.The best firm had 1.6;The worst had 1.2. 
C) The median was 1.3.1.6 is the figure for the upper quartile;1.2 is the figure for the lower quartile. 
D) The median was 1.3.1.6 is the figure for the lower quartile;1.2 is the figure for the upper quartile. 
E) None of the answers are correct.

Question 14

When performing year-to-year change analysis,a meaningful percent change cannot be computed when one number is positive and the other number is negative.

Accepted Answer

A) True 
 B)False

Question 15

A given ratio is always computed the same way,no matter what the source.

Accepted Answer

A) True 
 B)False

Question 16

In vertical common-size analysis,the dollar figure for an account is expressed in terms of that same account figure for a selected base year.

Accepted Answer

A) True 
 B)False

Question 17

Which of these statements is false?

Accepted Answer

A) A ratio can be computed from any pair of numbers. 
B) Given the large quantity of variables included in financial statements,a very long list of meaningful ratios can be derived. 
C) Comparing ratios computed from income statement and balance sheet numbers can create difficulties due to the timing of the financial statements. 
D) Financial ratios are usually expressed in percent or times. 
E) In vertical analysis,a figure from this year's statement is compared with a base selected from the prior statement. 
A) A ratio can be computed from any pair of numbers. 
B) Given the large quantity of variables included in financial statements,a very long list of meaningful ratios can be derived. 
C) Comparing ratios computed from income statement and balance sheet numbers can create difficulties due to the timing of the financial statements. 
D) Financial ratios are usually expressed in percent or times. 
E) In vertical analysis,a figure from this year's statement is compared with a base selected from the prior statement.

Question 18

Absolute figures usually have more meaning than ratio comparisons.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following does not represent a problem with financial analysis?

Accepted Answer

A) Financial statement analysis is an art;it requires judgment decisions on the part of the analyst. 
B) Financial analysis can be used to detect apparent liquidity problems. 
C) There are as many ratios for financial analysis as there are pairs of figures. 
D) Some industry ratio formulas vary from source to source. 
E) Adequate detailed disclosure of how the industry ratios are computed is often lacking. 
A) Financial statement analysis is an art;it requires judgment decisions on the part of the analyst. 
B) Financial analysis can be used to detect apparent liquidity problems. 
C) There are as many ratios for financial analysis as there are pairs of figures. 
D) Some industry ratio formulas vary from source to source. 
E) Adequate detailed disclosure of how the industry ratios are computed is often lacking.

Question 20

Absolute figures and ratios are close to being meaningless unless compared to another figure.

Accepted Answer

A) True 
 B)False

A manufacturing firm will most likely have the heaviest investment in which type of assets?

The ideal way to compare income statement figures,such as sales,to balance sheet figures,such as receivables,is to use a measure of the average for the balance sheet figures.

A service firm will usually have a low amount of inventory,consisting primarily of supplies.

Suppose you are comparing two firms in the steel industry.One firm is large and the other is small.Which type of numbers would be most meaningful for statement analysis?

Which of the following would not be a user of financial statements?

Liquidity ratios measure the degree of protection of long-term suppliers of funds.

Management is a user of financial analysis.Which of the following comments does not represent a fair statement as to the management perspective?

A retailing firm has which type of inventory?

For NAICS,each country can add additional detailed industries,provided the additional detail aggregates to the NAICS level.

Which of the following is not a source of industry statistics?

Different accounting methods can cause some ratios to differ substantially.

Based on the terms of the credit and the purpose,the objectives of financial statement analysis by creditors will vary.

Annual Statement Studies reported the following figures for manufacturers of screw machine products for the ratio of current assets to current debt.The following figures are for a particular industry's current ratio: 1.6;1.3;1.2.Which best describes these three numbers?

When performing year-to-year change analysis,a meaningful percent change cannot be computed when one number is positive and the other number is negative.

A given ratio is always computed the same way,no matter what the source.

In vertical common-size analysis,the dollar figure for an account is expressed in terms of that same account figure for a selected base year.

Which of these statements is false?

Absolute figures usually have more meaning than ratio comparisons.

Which of the following does not represent a problem with financial analysis?

Absolute figures and ratios are close to being meaningless unless compared to another figure.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 5: Basics of Analysis

A manufacturing firm will most likely have the heaviest investment in which type of assets?

The ideal way to compare income statement figures,such as sales,to balance sheet figures,such as receivables,is to use a measure of the average for the balance sheet figures.

A service firm will usually have a low amount of inventory,consisting primarily of supplies.

Suppose you are comparing two firms in the steel industry.One firm is large and the other is small.Which type of numbers would be most meaningful for statement analysis?

Which of the following would not be a user of financial statements?

Liquidity ratios measure the degree of protection of long-term suppliers of funds.

Management is a user of financial analysis.Which of the following comments does not represent a fair statement as to the management perspective?

A retailing firm has which type of inventory?

For NAICS,each country can add additional detailed industries,provided the additional detail aggregates to the NAICS level.

Which of the following is not a source of industry statistics?

Different accounting methods can cause some ratios to differ substantially.

Based on the terms of the credit and the purpose,the objectives of financial statement analysis by creditors will vary.

Annual Statement Studies reported the following figures for manufacturers of screw machine products for the ratio of current assets to current debt.The following figures are for a particular industry's current ratio: 1.6;1.3;1.2.Which best describes these three numbers?

When performing year-to-year change analysis,a meaningful percent change cannot be computed when one number is positive and the other number is negative.

A given ratio is always computed the same way,no matter what the source.

In vertical common-size analysis,the dollar figure for an account is expressed in terms of that same account figure for a selected base year.

Which of these statements is false?

Absolute figures usually have more meaning than ratio comparisons.

Which of the following does not represent a problem with financial analysis?

Absolute figures and ratios are close to being meaningless unless compared to another figure.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters