Question 1

Benchmarks involves comparing one company to itself over time or to another company or industry average.

Accepted Answer

A) True 
 B)False

Question 2

Liquidity measures the ability of a company to meet its current financial obligations.

Accepted Answer

A) True 
 B)False

Question 3

Gains and losses due to changes in foreign currency rates are not included in net income.

Accepted Answer

A) True 
 B)False

Question 4

$\begin{array}{llcc}
  \text { Net sales reverule } &\$900,000  \
 \text { Expenses } &\$500,000\
 \text { Interest } &\$10,000\
 \text { Income tax expense } &\$90,000\
 \text {Net cash from operations  } &\$290,000\
 \text { Fixed Assets end of currert year } &\$600,000\
 \text { 
Liabilities end of current year } &\$100,000\
 \text { Stockholders ${ } ^ { ' }$ equity end of curent year } &\$500,000\
 \text { Fixed Assets end of previous year } &\$590,000\
 \text { Stockholders ${ } ^ { ' }$ equity end of previous year } &\$490,000\
 \text { 
Common stock outstanding} &40,000  \text {shares}\
 \text {Curent market price of stock  } &\$15 \text { share}\
\end{array}$

-According to the above Table.Calculate the return on equity ratio for the current year.

Accepted Answer

A) 66.66% 
B) 60.61% 
C) 50.42% 
D) 80.81% 
A) 66.66% 
B) 60.61% 
C) 50.42% 
D) 80.81%

Question 5

The times interest earned ratio indicates how many times the company's interest expense was covered by its

Accepted Answer

A) sales revenue. 
B) operating results. 
C) financing results. 
D) investing results. 
A) sales revenue. 
B) operating results. 
C) financing results. 
D) investing results.

Question 6

The P/E ratio for the last 12 months for the company below is most likely to be calculated as which of the following? $\begin{array}{|l|r|r|r|r|}
\hline \text { Four most recent quarters } & Q 1 & Q 2 & Q 3 & Q 4 \
\hline \text { EPS } & \$ 0.36 & \$ 0.42 & \$ 0.43 & \$ 0.39 \
\hline \text { Share Price } & \$ 42 & \$ 56 & \$ 62 & \$ 40 \
\hline
\end{array}$

Accepted Answer

A) 26.6 
B) 31.25 
C) 0.01 
D) 25.0 
A) 26.6 
B) 31.25 
C) 0.01 
D) 25.0

Question 7

Which of the following are the constraints on how broadly accounting rules can be applied?

Accepted Answer

A) Industry practices constraint and cost-benefit constraint. 
B) Disclosure principle constraint and cost-benefit constraint. 
C) Industry practices constraint and disclosure principle constraint. 
D) Cost-benefit constraint and disclosure principle constraint. 
A) Industry practices constraint and cost-benefit constraint. 
B) Disclosure principle constraint and cost-benefit constraint. 
C) Industry practices constraint and disclosure principle constraint. 
D) Cost-benefit constraint and disclosure principle constraint.

Question 8

The debt-to-assets ratio is the:

Accepted Answer

A) ratio of current liabilities to current assets. 
B) same calculation as the current ratio,but with total assets instead of short-term assets. 
C) ratio of total liabilities to total assets. 
D) proportion of total liabilities financed by creditors. 
A) ratio of current liabilities to current assets. 
B) same calculation as the current ratio,but with total assets instead of short-term assets. 
C) ratio of total liabilities to total assets. 
D) proportion of total liabilities financed by creditors.

Question 9

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

Accepted Answer

A) Debt-to-assets ratio 
B) Fixed asset turnover ratio 
C) Return on equity ratio 
D) None of the answers assess solvency 
A) Debt-to-assets ratio 
B) Fixed asset turnover ratio 
C) Return on equity ratio 
D) None of the answers assess solvency

Question 10

A company originally issues 180,000 shares at a price of $22; one year later the share price is $40 and the number of outstanding shares is unchanged.During the year,the company had net income of $230,400.The P/E ratio at the end of the year is:

Accepted Answer

A) 0.0002. 
B) 24.22. 
C) 31.25. 
D) 0.0001. 
A) 0.0002. 
B) 24.22. 
C) 31.25. 
D) 0.0001.

Question 11

The going-concern assumption states that the:

Accepted Answer

A) company will always maximize the profit for shareholders. 
B) company is not expected to go out of business in the near future. 
C) company is a separate concern from the shareholders. 
D) company's results will be reported in a consistent manner from period to period. 
A) company will always maximize the profit for shareholders. 
B) company is not expected to go out of business in the near future. 
C) company is a separate concern from the shareholders. 
D) company's results will be reported in a consistent manner from period to period.

Question 12

Nonrecurring items such as discontinued operations and extraordinary events are presented above the income tax expense line on the income statement because they are subject to income taxes just like any other sources of income.

Accepted Answer

A) True 
 B)False

Question 13

The times interest earned ratio is a measure of liquidity.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following analysis techniques does $\bold{not}$ examine significant sustained changes over time?

Accepted Answer

A) Trend analyses 
B) Horizontal analyses 
C) Time-series analyses 
D) Vertical analyses 
A) Trend analyses 
B) Horizontal analyses 
C) Time-series analyses 
D) Vertical analyses

Question 15

The full disclosure principle requires every transaction to be explained in detail:

Accepted Answer

A) True 
 B)False

Question 16

Company X has net sales revenue of $1,250,000,cost of goods sold of $760,000,and all other expenses of $290,000.The beginning balance of shareholders' equity is $400,000 and the beginning balance of fixed assets is $361,000.The ending balance of shareholders' equity is $600,000 and the ending balance of fixed assets is $389,000.What is the Return On Equity of the company?

Accepted Answer

A) 0.53 
B) 2.50 
C) 3.33 
D) 0.40 
A) 0.53 
B) 2.50 
C) 3.33 
D) 0.40

Question 17

Horizontal analysis is analogous with time-series analysis.

Accepted Answer

A) True 
 B)False

Question 18

When a company is growing overall,it is not difficult to tell from the dollar amounts whether the proportions within each financial statement category are changing.

Accepted Answer

A) True 
 B)False

Question 19

An increase in gross profit percentage indicates that:

Accepted Answer

A) cost of goods sold as a percentage of sales has decreased. 
B) cost of goods sold as a percentage of sales has increased. 
C) operating expenses as a percentage of sales have increased. 
D) operating expenses as a percentage of sales have decreased. 
A) cost of goods sold as a percentage of sales has decreased. 
B) cost of goods sold as a percentage of sales has increased. 
C) operating expenses as a percentage of sales have increased. 
D) operating expenses as a percentage of sales have decreased.

Question 20

A company has a current ratio of 2.0 and current assets of $550,000.What is its current liabilities balance?

Accepted Answer

A) 2.0 
B) $275,000 
C) $550,000 
D) $1,100,000 
A) 2.0 
B) $275,000 
C) $550,000 
D) $1,100,000

Benchmarks involves comparing one company to itself over time or to another company or industry average.

Liquidity measures the ability of a company to meet its current financial obligations.

Gains and losses due to changes in foreign currency rates are not included in net income.

The times interest earned ratio indicates how many times the company's interest expense was covered by its

The P/E ratio for the last 12 months for the company below is most likely to be calculated as which of the following? Four most recent quarters Q1 Q2 Q3 Q4 EPS \ 0.36 \ 0.42 \ 0.43 \ 0.39 Share Price \ 42 \ 56 \ 62 \ 40

Which of the following are the constraints on how broadly accounting rules can be applied?

The debt-to-assets ratio is the:

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

A company originally issues 180,000 shares at a price of $22; one year later the share price is $40 and the number of outstanding shares is unchanged.During the year,the company had net income of $230,400.The P/E ratio at the end of the year is:

The going-concern assumption states that the:

Nonrecurring items such as discontinued operations and extraordinary events are presented above the income tax expense line on the income statement because they are subject to income taxes just like any other sources of income.

The times interest earned ratio is a measure of liquidity.

Which of the following analysis techniques does $\bold{not}$ examine significant sustained changes over time?

The full disclosure principle requires every transaction to be explained in detail:

Horizontal analysis is analogous with time-series analysis.

When a company is growing overall,it is not difficult to tell from the dollar amounts whether the proportions within each financial statement category are changing.

An increase in gross profit percentage indicates that:

A company has a current ratio of 2.0 and current assets of $550,000.What is its current liabilities balance?

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 Multi-Step Income Statement

Inventory and Cost of Goods Sold

Receivables, bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Shareholders Equity

Statement of Cash Flows

Filters

Exam 13: Measuring and Evaluating Financial Performance

Benchmarks involves comparing one company to itself over time or to another company or industry average.

Liquidity measures the ability of a company to meet its current financial obligations.

Gains and losses due to changes in foreign currency rates are not included in net income.

The times interest earned ratio indicates how many times the company's interest expense was covered by its

The P/E ratio for the last 12 months for the company below is most likely to be calculated as which of the following? Four most recent quarters Q1 Q2 Q3 Q4 EPS \ 0.36 \ 0.42 \ 0.43 \ 0.39 Share Price \ 42 \ 56 \ 62 \ 40

Which of the following are the constraints on how broadly accounting rules can be applied?

The debt-to-assets ratio is the:

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

A company originally issues 180,000 shares at a price of $22; one year later the share price is $40 and the number of outstanding shares is unchanged.During the year,the company had net income of $230,400.The P/E ratio at the end of the year is:

The going-concern assumption states that the:

Nonrecurring items such as discontinued operations and extraordinary events are presented above the income tax expense line on the income statement because they are subject to income taxes just like any other sources of income.

The times interest earned ratio is a measure of liquidity.

Which of the following analysis techniques does not\bold{not}not examine significant sustained changes over time?

The full disclosure principle requires every transaction to be explained in detail:

Horizontal analysis is analogous with time-series analysis.

When a company is growing overall,it is not difficult to tell from the dollar amounts whether the proportions within each financial statement category are changing.

An increase in gross profit percentage indicates that:

A company has a current ratio of 2.0 and current assets of $550,000.What is its current liabilities balance?

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 Multi-Step Income Statement

Inventory and Cost of Goods Sold

Receivables, bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Shareholders Equity

Statement of Cash Flows

Filters

Which of the following analysis techniques does $\bold{not}$ examine significant sustained changes over time?