Question 1

Trend analysis using income statement data is widely used for predicting the future.

Accepted Answer

A) True 
 B)False

Question 2

The primary focus of horizontal analysis is:

Accepted Answer

A) percentage changes in line items from comparative financial statements. 
B) the balance sheet only. 
C) the amount of individual financial statement line items as a percentage of some related total,such as total assets. 
D) the income statement only. 
A) percentage changes in line items from comparative financial statements. 
B) the balance sheet only. 
C) the amount of individual financial statement line items as a percentage of some related total,such as total assets. 
D) the income statement only.

Question 3

The acid-test ratio reflects the company's percentage of total assets financed with debt.

Accepted Answer

A) True 
 B)False

Question 4

On a statement of cash flows,which is NOT considered a financing activity?

Accepted Answer

A) Paid income taxes 
B) Proceeds from long-term debt 
C) Repayment of long-term debt 
D) Paid dividends 
A) Paid income taxes 
B) Proceeds from long-term debt 
C) Repayment of long-term debt 
D) Paid dividends

Question 5

Net Cash Provided by Operating Activities that are consistently lower than net income may imply that:

Accepted Answer

A) a dividend has not been issued in a long time. 
B) the common stock should be split. 
C) the company may be facing a cash shortage. 
D) working capital has decreased. 
A) a dividend has not been issued in a long time. 
B) the common stock should be split. 
C) the company may be facing a cash shortage. 
D) working capital has decreased.

Question 6

Which of the following statements about financial ratios is FALSE?

Accepted Answer

A) When calculating return on assets,preferred dividends are subtracted from net income. 
B) When calculating return on equity,preferred dividends are subtracted from net income. 
C) When calculating the price-earnings ratio,preferred dividends are subtracted from market price per share. 
D) When calculating earnings per share,preferred dividends are subtracted from net income. 
A) When calculating return on assets,preferred dividends are subtracted from net income. 
B) When calculating return on equity,preferred dividends are subtracted from net income. 
C) When calculating the price-earnings ratio,preferred dividends are subtracted from market price per share. 
D) When calculating earnings per share,preferred dividends are subtracted from net income.

Question 7

On the statement of cash flows of a healthy company,Net Cash Provided by Operating Activities generally exceeds net income because depreciation expense is added back to net income.

Accepted Answer

A) True 
 B)False

Question 8

A positive economic value added (EVA)suggests an increase in stockholders' wealth.

Accepted Answer

A) True 
 B)False

Question 9

The percentage change in a financial statement line item over two years is computed by dividing the dollar amount of the line item in the most recent year by the prior year dollar amount of the line item.

Accepted Answer

A) True 
 B)False

Question 10

On the statement of cash flows of a healthy company,Net Cash Provided by Operating Activities is generally less than net income.

Accepted Answer

A) True 
 B)False

Question 11

The cost of capital is a weighted average of the returns demanded by the company's stockholders and lenders.

Accepted Answer

A) True 
 B)False

Question 12

The ratio that measures the number of times that operating income can cover interest expense is the:

Accepted Answer

A) leverage. 
B) rate of return on total assets. 
C) debt ratio. 
D) times-interest-earned ratio. 
A) leverage. 
B) rate of return on total assets. 
C) debt ratio. 
D) times-interest-earned ratio.

Question 13

In the statement of cash flows,more purchases of long-term assets than sales of long-term assets are considered a sign of a healthy company.

Accepted Answer

A) True 
 B)False

Question 14

Bryanwood Company reports the following data:   Based on the above information,what can be said about the company's business strategy?

Accepted Answer

A) The company has lost control of operating expenses. 
B) The company has reduced cost of goods sold. 
C) The company has successfully undertaken some cost-cutting measures for operating expenses. 
D) The company has fewer sales in 2015 than 2014. 
A) The company has lost control of operating expenses. 
B) The company has reduced cost of goods sold. 
C) The company has successfully undertaken some cost-cutting measures for operating expenses. 
D) The company has fewer sales in 2015 than 2014.

Question 15

In performing vertical analysis,the base for inventory is:

Accepted Answer

A) total liabilities and stockholders' equity. 
B) total assets. 
C) total cash and cash equivalents. 
D) total current assets. 
A) total liabilities and stockholders' equity. 
B) total assets. 
C) total cash and cash equivalents. 
D) total current assets.

Question 16

If a corporation's economic value added is negative,stockholders will probably be displeased with the company's management.

Accepted Answer

A) True 
 B)False

Question 17

The cost of capital for a start-up company:

Accepted Answer

A) is lower for a start-up company since it is untested. 
B) depends only on the market rate of interest. 
C) depends only on the state of the economy. 
D) is higher for a start-up company because it is more risky than an established company. 
A) is lower for a start-up company since it is untested. 
B) depends only on the market rate of interest. 
C) depends only on the state of the economy. 
D) is higher for a start-up company because it is more risky than an established company.

Question 18

In performing vertical analysis,the base for operating expenses is:

Accepted Answer

A) net sales. 
B) gross profit. 
C) net income. 
D) operating income. 
A) net sales. 
B) gross profit. 
C) net income. 
D) operating income.

Question 19

An example of a company with cash flow problems is:

Accepted Answer

A) a company sold property,plant and equipment for $50 million and purchased property,plant and equipment for $10 million 
B) a company borrowed $1 million with long-term bonds payable and paid $1 million on long-term notes payable 
C) a company sold property,plant and equipment for $5 million and purchased property,plant and equipment for $100 million 
D) net cash provided by operating activities is $10 million and net income is $1 million 
A) a company sold property,plant and equipment for $50 million and purchased property,plant and equipment for $10 million 
B) a company borrowed $1 million with long-term bonds payable and paid $1 million on long-term notes payable 
C) a company sold property,plant and equipment for $5 million and purchased property,plant and equipment for $100 million 
D) net cash provided by operating activities is $10 million and net income is $1 million

Question 20

A company's net income as a percentage of sales is 15%.Using vertical analysis,the cost of goods sold as a percentage of sales must be 85%.

Accepted Answer

A) True 
 B)False

Trend analysis using income statement data is widely used for predicting the future.

The primary focus of horizontal analysis is:

The acid-test ratio reflects the company's percentage of total assets financed with debt.

On a statement of cash flows,which is NOT considered a financing activity?

Net Cash Provided by Operating Activities that are consistently lower than net income may imply that:

Which of the following statements about financial ratios is FALSE?

On the statement of cash flows of a healthy company,Net Cash Provided by Operating Activities generally exceeds net income because depreciation expense is added back to net income.

A positive economic value added (EVA)suggests an increase in stockholders' wealth.

The percentage change in a financial statement line item over two years is computed by dividing the dollar amount of the line item in the most recent year by the prior year dollar amount of the line item.

On the statement of cash flows of a healthy company,Net Cash Provided by Operating Activities is generally less than net income.

The cost of capital is a weighted average of the returns demanded by the company's stockholders and lenders.

The ratio that measures the number of times that operating income can cover interest expense is the:

In the statement of cash flows,more purchases of long-term assets than sales of long-term assets are considered a sign of a healthy company.

Bryanwood Company reports the following data: Based on the above information,what can be said about the company's business strategy?

In performing vertical analysis,the base for inventory is:

If a corporation's economic value added is negative,stockholders will probably be displeased with the company's management.

The cost of capital for a start-up company:

In performing vertical analysis,the base for operating expenses is:

An example of a company with cash flow problems is:

A company's net income as a percentage of sales is 15%.Using vertical analysis,the cost of goods sold as a percentage of sales must be 85%.

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

Trend analysis using income statement data is widely used for predicting the future.

The primary focus of horizontal analysis is:

The acid-test ratio reflects the company's percentage of total assets financed with debt.

On a statement of cash flows,which is NOT considered a financing activity?

Net Cash Provided by Operating Activities that are consistently lower than net income may imply that:

Which of the following statements about financial ratios is FALSE?

On the statement of cash flows of a healthy company,Net Cash Provided by Operating Activities generally exceeds net income because depreciation expense is added back to net income.

A positive economic value added (EVA)suggests an increase in stockholders' wealth.

The percentage change in a financial statement line item over two years is computed by dividing the dollar amount of the line item in the most recent year by the prior year dollar amount of the line item.

On the statement of cash flows of a healthy company,Net Cash Provided by Operating Activities is generally less than net income.

The cost of capital is a weighted average of the returns demanded by the company's stockholders and lenders.

The ratio that measures the number of times that operating income can cover interest expense is the:

In the statement of cash flows,more purchases of long-term assets than sales of long-term assets are considered a sign of a healthy company.

Bryanwood Company reports the following data: Based on the above information,what can be said about the company's business strategy?

In performing vertical analysis,the base for inventory is:

If a corporation's economic value added is negative,stockholders will probably be displeased with the company's management.

The cost of capital for a start-up company:

In performing vertical analysis,the base for operating expenses is:

An example of a company with cash flow problems is:

A company's net income as a percentage of sales is 15%.Using vertical analysis,the cost of goods sold as a percentage of sales must be 85%.

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