Question 1

How is the leverage ratio calculated?

Accepted Answer

A) Total debt divided by total assets. 
B) Total assets divided by total debt. 
C) Average total assets divided by average common stockholders' equity. 
D) Average total debt divided by average total assets. 
A) Total debt divided by total assets. 
B) Total assets divided by total debt. 
C) Average total assets divided by average common stockholders' equity. 
D) Average total debt divided by average total assets. C

Question 2

You are using a leading competitor,Company B,for benchmarking your company,Company A.When benchmarking,the gross margin of Company A is expressed as a percentage of:

Accepted Answer

A) the net sales of Companies A and B. 
B) Company B's net sales. 
C) Company A's net income. 
D) Company A's net sales. 
A) the net sales of Companies A and B. 
B) Company B's net sales. 
C) Company A's net income. 
D) Company A's net sales. D

Question 3

In 2014,the Zenon Company reported that property,plant and equipment were equal to 17% of total assets.In 2014,current assets were equal to 83% of total assets.In 2015 the company reported that property,plant and equipment were equal to 27% of total assets.In 2015,current assets were equal to 73% of total assets.What conclusion can be reached from this information?

Accepted Answer

A) In 2015,the company is downsizing. 
B) In 2015,property,plant and equipment as a proportion of total assets increased. 
C) In 2015,the company is investing in the future. 
D) B and C 
A) In 2015,the company is downsizing. 
B) In 2015,property,plant and equipment as a proportion of total assets increased. 
C) In 2015,the company is investing in the future. 
D) B and C D

Question 4

A type of analysis that indicates the direction a business is taking is:

Accepted Answer

A) benchmarking. 
B) economic value added analysis. 
C) vertical analysis. 
D) trend percentages. 
A) benchmarking. 
B) economic value added analysis. 
C) vertical analysis. 
D) trend percentages.

Question 5

The balance sheet at December 31,2015 for Zumba Company follows:
   Additional information follows:
1.Net income for the year ended December 31,2015 is $2,020.
2.Cost of goods sold for the year ended December 31,2015 is $4,400.
3.Inventory on January 1,2015 is $1,800.
4.Accounts Receivable,net on January 1,2015 is $4,400.
5.Total assets on January 1,2015 is $20,000.
6.Net credit sales for the year ended December 31,2015 is $14,600.
7.Net income before interest and taxes for the year ended December 31,2015 is $4,800.
8.Interest expense for the year ended December 31,2015 is $550.
9.Total stockholders' equity on January 1,2015 is $3,500.
Compute the following ratios:
1.Current ratio
2.Quick ratio
3.Accounts receivable turnover
4.Days' inventory outstanding
5.Times interest earned
6.Return on assets
7.Return on equity

Accepted Answer

1.Current ratio = $7,900 ÷ $4,000 = 1.98

Question 6

A company reports the following information from the statement of cash flows:   Which line item provides a signal that the company may have cash flow problems?

Accepted Answer

A) net cash provided by operating activities 
B) net income 
C) net cash used by investing activities 
D) net cash used by financing activities 
A) net cash provided by operating activities 
B) net income 
C) net cash used by investing activities 
D) net cash used by financing activities

Question 7

For investment analysis,it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

Accepted Answer

A) True 
 B)False

Question 8

Usually new companies have a lower cost of capital.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would be most helpful in the comparison of different size companies?

Accepted Answer

A) Horizontal analysis 
B) Comparison of their net incomes 
C) Comparison of their working capital balances 
D) Preparation of common-size financial statements 
A) Horizontal analysis 
B) Comparison of their net incomes 
C) Comparison of their working capital balances 
D) Preparation of common-size financial statements

Question 10

Ratios that test liquidity include all of the following EXCEPT:

Accepted Answer

A) acid-test ratio. 
B) current ratio. 
C) return on assets. 
D) inventory turnover. 
A) acid-test ratio. 
B) current ratio. 
C) return on assets. 
D) inventory turnover.

Question 11

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.

Accepted Answer

A) True 
 B)False

Question 12

On a statement of cash flows,which of the following is a sign of a healthy company?

Accepted Answer

A) Investing activities include more sales of long-term assets than purchases. 
B) Financing activities are dominated by borrowing. 
C) Operating activities are the major source of cash. 
D) Net Cash Provided by Operating Activities is less than net income. 
A) Investing activities include more sales of long-term assets than purchases. 
B) Financing activities are dominated by borrowing. 
C) Operating activities are the major source of cash. 
D) Net Cash Provided by Operating Activities is less than net income.

Question 13

A measure of a company's ability to collect cash from credit customers is the:

Accepted Answer

A) accounts receivable turnover. 
B) days' payable outstanding. 
C) inventory turnover. 
D) cash conversion cycle. 
A) accounts receivable turnover. 
B) days' payable outstanding. 
C) inventory turnover. 
D) cash conversion cycle.

Question 14

Zemanowski Company reports the following sales figures(in millions):   What is the trend percentage in 2010 if 2008 is the base year?

Accepted Answer

A) 98% 
B) 102% 
C) 103% 
D) 105% 
A) 98% 
B) 102% 
C) 103% 
D) 105%

Question 15

Economic value added (EVA)is computed as:

Accepted Answer

A) net income before taxes + long-term debt + interest expense. 
B) net income before taxes + interest expense - capital charge. 
C) net income before taxes - interest expense + capital charge. 
D) net income before taxes - long-term debt + interest expense. 
A) net income before taxes + long-term debt + interest expense. 
B) net income before taxes + interest expense - capital charge. 
C) net income before taxes - interest expense + capital charge. 
D) net income before taxes - long-term debt + interest expense.

Question 16

The capital charge in EVA is computed as:

Accepted Answer

A) Cost of capital - Notes payable - Current maturities of long-term debt - Long-term debt - Stockholders' equity. 
B) (Notes payable,beginning balance + Current maturities of long-term debt,beginning balance + Long-term debt,beginning balance + Stockholders' equity,beginning balance)× Cost of capital. 
C) Cost of capital + Current maturities of long-term debt + Loans payable + Long-term debt + Stockholders' equity. 
D) (Notes payable + Current maturities of long-term debt + Long-term debt + Stockholders' equity)÷ Cost of capital. 
A) Cost of capital - Notes payable - Current maturities of long-term debt - Long-term debt - Stockholders' equity. 
B) (Notes payable,beginning balance + Current maturities of long-term debt,beginning balance + Long-term debt,beginning balance + Stockholders' equity,beginning balance)× Cost of capital. 
C) Cost of capital + Current maturities of long-term debt + Loans payable + Long-term debt + Stockholders' equity. 
D) (Notes payable + Current maturities of long-term debt + Long-term debt + Stockholders' equity)÷ Cost of capital.

Question 17

When comparing companies of different sizes,vertical analysis is a useful tool.

Accepted Answer

A) True 
 B)False

Question 18

The amount of a company's net income earned for each share of its outstanding common stock is termed the:

Accepted Answer

A) return on equity. 
B) price/earnings ratio. 
C) earnings per share. 
D) dividend yield. 
A) return on equity. 
B) price/earnings ratio. 
C) earnings per share. 
D) dividend yield.

Question 19

On a statement of cash flows(indirect method),which line item is NOT reported as an operating activity?

Accepted Answer

A) Depreciation expense 
B) Net income 
C) Increase in inventory 
D) Repayment of long-term debt 
A) Depreciation expense 
B) Net income 
C) Increase in inventory 
D) Repayment of long-term debt

Question 20

In the statement of cash flows,sales of marketable securities are considered an operating activity.

Accepted Answer

A) True 
 B)False

How is the leverage ratio calculated?

You are using a leading competitor,Company B,for benchmarking your company,Company A.When benchmarking,the gross margin of Company A is expressed as a percentage of:

A type of analysis that indicates the direction a business is taking is:

A company reports the following information from the statement of cash flows: Which line item provides a signal that the company may have cash flow problems?

For investment analysis,it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

Usually new companies have a lower cost of capital.

Which of the following would be most helpful in the comparison of different size companies?

Ratios that test liquidity include all of the following EXCEPT:

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.

On a statement of cash flows,which of the following is a sign of a healthy company?

A measure of a company's ability to collect cash from credit customers is the:

Zemanowski Company reports the following sales figures(in millions): What is the trend percentage in 2010 if 2008 is the base year?

Economic value added (EVA)is computed as:

The capital charge in EVA is computed as:

When comparing companies of different sizes,vertical analysis is a useful tool.

The amount of a company's net income earned for each share of its outstanding common stock is termed the:

On a statement of cash flows(indirect method),which line item is NOT reported as an operating activity?

In the statement of cash flows,sales of marketable securities are considered an operating activity.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets,natural Resources, Intangibles

Long-Term Investments: The Time Value of Money

Liabilities

Stockholders Equity

Evaluating Performance: Earnings Quality, the Income Statement, the Statement of Comprehensive Income

The Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

How is the leverage ratio calculated?

You are using a leading competitor,Company B,for benchmarking your company,Company A.When benchmarking,the gross margin of Company A is expressed as a percentage of:

A type of analysis that indicates the direction a business is taking is:

A company reports the following information from the statement of cash flows: Which line item provides a signal that the company may have cash flow problems?

For investment analysis,it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

Usually new companies have a lower cost of capital.

Which of the following would be most helpful in the comparison of different size companies?

Ratios that test liquidity include all of the following EXCEPT:

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.

On a statement of cash flows,which of the following is a sign of a healthy company?

A measure of a company's ability to collect cash from credit customers is the:

Zemanowski Company reports the following sales figures(in millions): What is the trend percentage in 2010 if 2008 is the base year?

Economic value added (EVA)is computed as:

The capital charge in EVA is computed as:

When comparing companies of different sizes,vertical analysis is a useful tool.

The amount of a company's net income earned for each share of its outstanding common stock is termed the:

On a statement of cash flows(indirect method),which line item is NOT reported as an operating activity?

In the statement of cash flows,sales of marketable securities are considered an operating activity.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets,natural Resources, Intangibles

Long-Term Investments: The Time Value of Money

Liabilities

Stockholders Equity

Evaluating Performance: Earnings Quality, the Income Statement, the Statement of Comprehensive Income

The Statement of Cash Flows

Filters