Question 1

Investors and creditors generally evaluate a company by using one year's data.

Accepted Answer

A) True 
 B)False  False

Question 2

The Arlington Company wishes to compare its performance with industry averages. Please refer to the data below:
   Please prepare common-sized income statement using the format below. (Round all amounts to the nearest tenth of a percent.)

Accepted Answer

The answer of The Arlington Company wishes to compare its...

Question 3

If an analyst wishes to see how gross profit of a company has changed from one year to the next, vertical analysis would be the best approach.

Accepted Answer

A) True 
 B)False  False

Question 4

Peartree Company provides the following data:   What is Peartree's debt-to-equity ratio at year-end 2014?

Accepted Answer

A) 0.60 
B) 0.92 
C) 1.33 
D) 0.67 
A) 0.60 
B) 0.92 
C) 1.33 
D) 0.67

Question 5

Days in inventory is a ratio measure that addresses:

Accepted Answer

A) how well a company is positioned to pay its current liabilities. 
B) how quickly a company can collect its receivables. 
C) how profitable a company is. 
D) how quickly a company can sell its inventory. 
A) how well a company is positioned to pay its current liabilities. 
B) how quickly a company can collect its receivables. 
C) how profitable a company is. 
D) how quickly a company can sell its inventory.

Question 6

Please refer to the partial balance sheet data provided below:   Which of the following accurately describes the 3.6% figure shown for total current liabilities in 2014?

Accepted Answer

A) In 2014, total current liabilities increased as a percentage of total liabilities and stockholders' equity over the prior year. 
B) In 2014, total current liabilities was equal to 3.6% of total liabilities. 
C) In 2014, total current liabilities was equal to 3.6% of total liabilities and stockholders' equity. 
D) In 2014, total current liabilities decreased as a percentage of net sales revenue. 
A) In 2014, total current liabilities increased as a percentage of total liabilities and stockholders' equity over the prior year. 
B) In 2014, total current liabilities was equal to 3.6% of total liabilities. 
C) In 2014, total current liabilities was equal to 3.6% of total liabilities and stockholders' equity. 
D) In 2014, total current liabilities decreased as a percentage of net sales revenue.

Question 7

A company reported the following amounts of net income:   Which of the following is the percentage change in net income from 2012 to 2013?

Accepted Answer

A) 2.00% 
B) 10.00% 
C) 8.33% 
D) 7.69% 
A) 2.00% 
B) 10.00% 
C) 8.33% 
D) 7.69%

Question 8

Please refer to the vertical analysis of a section of a balance sheet, shown below:   Which of the following statements accurately describes the 13.9% shown for Inventory in 2014?

Accepted Answer

A) In 2014, inventory grew 13.9% over the previous year. 
B) In 2014, inventory is equal to 13.9% of total assets. 
C) In 2014, inventory was equal to 13.9% of the cash balance. 
D) Inventory declined as a percentage of total assets over the 2-year period. 
A) In 2014, inventory grew 13.9% over the previous year. 
B) In 2014, inventory is equal to 13.9% of total assets. 
C) In 2014, inventory was equal to 13.9% of the cash balance. 
D) Inventory declined as a percentage of total assets over the 2-year period.

Question 9

The rate of return on common stockholders' equity is used for which kind of evaluation?

Accepted Answer

A) The ability of a company to pay its current liabilities 
B) The ability of a company to pay its long-term liabilities 
C) The overall profitability of a company 
D) Evaluating stock in a company from an investor's perspective 
A) The ability of a company to pay its current liabilities 
B) The ability of a company to pay its long-term liabilities 
C) The overall profitability of a company 
D) Evaluating stock in a company from an investor's perspective

Question 10

The ratio of the market price of a share of stock to the dividends paid per share is called the earnings per share.

Accepted Answer

A) True 
 B)False

Question 11

Pathways Company provides the following historical data:
   Using the year 2010 as a base year, provide a trend analysis using the following format:

Accepted Answer

The answer of Pathways Company provides the following historical data:
...

Question 12

Which of the following is the definition of benchmarking?

Accepted Answer

A) Benchmarking is the study of percentage changes in financial statement line items year to year. 
B) Benchmarking is the analysis of a financial statement that shows each item as a percentage of net sales or total assets. 
C) Benchmarking is the practice of comparing a company with other companies in that industry. 
D) Benchmarking is the comparison of two companies using horizontal analysis. 
A) Benchmarking is the study of percentage changes in financial statement line items year to year. 
B) Benchmarking is the analysis of a financial statement that shows each item as a percentage of net sales or total assets. 
C) Benchmarking is the practice of comparing a company with other companies in that industry. 
D) Benchmarking is the comparison of two companies using horizontal analysis.

Question 13

Oglethorpe Company reports the following information from the vertical analysis of their balance sheet:   Which of the following statements could be logically concluded from the above data?

Accepted Answer

A) The company's current ratio declined. 
B) The company's current assets declined in proportion to its total assets. 
C) The company's ability to pay current liabilities declined. 
D) The company's total current assets declined by 0.4%. 
A) The company's current ratio declined. 
B) The company's current assets declined in proportion to its total assets. 
C) The company's ability to pay current liabilities declined. 
D) The company's total current assets declined by 0.4%.

Question 14

The Arlington Company prepared a common-size income statement to compare its results with its key competitor, Bardo Company. Please refer to the following data:
   Based on this data, an analyst could conclude that Arlington's performance is not as good as Bardo's because it has much higher sales and marketing expenses.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following factors might suggest that a company is having difficulty selling its inventory?

Accepted Answer

A) An increase in receivables 
B) A buildup of inventory balances 
C) An increase in total debt 
D) An increase in interest expense 
A) An increase in receivables 
B) A buildup of inventory balances 
C) An increase in total debt 
D) An increase in interest expense

Question 16

Peartree Company provides the following data:
   Additional information:
   How much is the asset turnover for 2014? 
A)7.27
B)1.22
C)1.55
D)7.07

Accepted Answer

The answer of Peartree Company provides the following data:
 ...

Question 17

Arlington Company wishes to compare itself to a key competitor, but that company is much larger in size than Arlington. Please refer to the following income statement information:
   Please prepare a common-size income statement for the two companies using the following format.
(Round all amounts to the nearest tenth of a percent.)

Accepted Answer

The answer of Arlington Company wishes to compare itself to...

Question 18

Partridge Company provides the following information for the year 2014:
   How much was the dividend payout for one share of common stock? 
A)1.67
B)3.33
C)0.30
D)3.95

Accepted Answer

The answer of Partridge Company provides the following information for...

Question 19

If an analyst wishes to see how a company's net income as a percentage of net sales has changed from one year to the next, a vertical analysis would be the most appropriate approach.

Accepted Answer

A) True 
 B)False

Question 20

If an analyst wishes to see how a company's operating expenses as a percentage of net sales have changed from one year to the next, which of the following types of financial statement analysis would be used?

Accepted Answer

A) Vertical analysis 
B) Horizontal analysis 
C) Ratio analysis 
D) Common-size financial statement analysis 
A) Vertical analysis 
B) Horizontal analysis 
C) Ratio analysis 
D) Common-size financial statement analysis

Exam 15: Financial Statement Analysis

Investors and creditors generally evaluate a company by using one year's data.

The Arlington Company wishes to compare its performance with industry averages. Please refer to the data below: Please prepare common-sized income statement using the format below. (Round all amounts to the nearest tenth of a percent.)

If an analyst wishes to see how gross profit of a company has changed from one year to the next, vertical analysis would be the best approach.

Peartree Company provides the following data: What is Peartree's debt-to-equity ratio at year-end 2014?

Days in inventory is a ratio measure that addresses:

Please refer to the partial balance sheet data provided below: Which of the following accurately describes the 3.6% figure shown for total current liabilities in 2014?

A company reported the following amounts of net income: Which of the following is the percentage change in net income from 2012 to 2013?

Please refer to the vertical analysis of a section of a balance sheet, shown below: Which of the following statements accurately describes the 13.9% shown for Inventory in 2014?

The rate of return on common stockholders' equity is used for which kind of evaluation?

The ratio of the market price of a share of stock to the dividends paid per share is called the earnings per share.

Pathways Company provides the following historical data: Using the year 2010 as a base year, provide a trend analysis using the following format:

Which of the following is the definition of benchmarking?

Oglethorpe Company reports the following information from the vertical analysis of their balance sheet: Which of the following statements could be logically concluded from the above data?

Which of the following factors might suggest that a company is having difficulty selling its inventory?

Peartree Company provides the following data: Additional information: How much is the asset turnover for 2014? A)7.27 B)1.22 C)1.55 D)7.07

Partridge Company provides the following information for the year 2014: How much was the dividend payout for one share of common stock? A)1.67 B)3.33 C)0.30 D)3.95

If an analyst wishes to see how a company's net income as a percentage of net sales has changed from one year to the next, a vertical analysis would be the most appropriate approach.

If an analyst wishes to see how a company's operating expenses as a percentage of net sales have changed from one year to the next, which of the following types of financial statement analysis would be used?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, Bonds Payable, and Classification of Liabilities on the Balance Sheet

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters