Question 1

A general rule in choosing among alternative investments is the greater the risk taken, the

Accepted Answer

A)  greater the return required. 
B)  lower the potential expected. 
C)  greater the price of the investment. 
D)  lower the profits expected. 
A)  greater the return required. 
B)  lower the potential expected. 
C)  greater the price of the investment. 
D)  lower the profits expected.

Question 2

The following information pertains to Jasmin Corporation. Assume that all balance sheet amounts represent both average and ending figures.     Jasmin Corporation had 6,000 shares of common stock issued and outstanding. The market price of Jasmin common stock on December 31, 2009, was $23.00. Jasmin paid dividends of $0.90 per share during 2009.
What is the price/earnings (P/E) ratio for this corporation? Round your answer to two decimal places.

Accepted Answer

A)  8.20 times 
B)  10.70 times 
C)  7.20 times 
D)  9.20 times 
A)  8.20 times 
B)  10.70 times 
C)  7.20 times 
D)  9.20 times

Question 3

Interim financial statements report data for a period of more than one year.

Accepted Answer

A) True 
 B)False

Question 4

Ratios are most useful in identifying

Accepted Answer

A)  causes. 
B)  differences. 
C)  relationships. 
D)  trends. 
A)  causes. 
B)  differences. 
C)  relationships. 
D)  trends.

Question 5

The ability to pay bills when due and to meet unexpected needs for cash most closely describes

Accepted Answer

A)  cash flow adequacy. 
B)  long-term solvency. 
C)  liquidity. 
D)  profitability. 
A)  cash flow adequacy. 
B)  long-term solvency. 
C)  liquidity. 
D)  profitability.

Question 6

Horizontal analysis of comparative financial statements includes the

Accepted Answer

A)  development of common-size statements. 
B)  calculation of dollar amount changes and percentage changes from the previous to the current year. 
C)  calculation of the percentage of net sales for each item listed. 
D)  calculation of liquidity ratios. 
A)  development of common-size statements. 
B)  calculation of dollar amount changes and percentage changes from the previous to the current year. 
C)  calculation of the percentage of net sales for each item listed. 
D)  calculation of liquidity ratios.

Question 7

In a diversified company, segments may be represented by different industries, geographical markets, and major customers.

Accepted Answer

A) True 
 B)False

Question 8

In conducting horizontal analysis, it is important to focus attention on the changes in

Accepted Answer

A)  the composition of the statements. 
B)  dollar amounts and their percentages. 
C)  dollar amounts. 
D)  percentages. 
A)  the composition of the statements. 
B)  dollar amounts and their percentages. 
C)  dollar amounts. 
D)  percentages.

Question 9

Use the following information to calculate the ratios requested below. Round answers to two decimal places. Show your work.

Accepted Answer

The answer of Use the following information to calculate the...

Question 10

Which of the following is a long-term solvency ratio?

Accepted Answer

A)  Return on equity 
B)  Dividends yield 
C)  Debt to equity ratio 
D)  Payables turnover 
A)  Return on equity 
B)  Dividends yield 
C)  Debt to equity ratio 
D)  Payables turnover

Question 11

The following information pertains to Jasmin Corporation. Assume that all balance sheet amounts represent both average and ending figures.     Jasmin Corporation had 6,000 shares of common stock issued and outstanding. The market price of Jasmin common stock on December 31, 2009, was $20. Jasmin paid dividends of $0.90 per share during 2009.
What is the return on equity for this corporation? Round your answer to 1 decimal place.

Accepted Answer

A)  5.0 percent 
B)  10.0 percent 
C)  23.3 percent 
D)  53.3 percent 
A)  5.0 percent 
B)  10.0 percent 
C)  23.3 percent 
D)  53.3 percent

Question 12

The use of rule-of-thumb measures is not an exact science and should be used with great care.

Accepted Answer

A) True 
 B)False

Question 13

What is vertical analysis, and why is it useful in performing financial performance measurement?

Accepted Answer

Vertical analysis will show what percent

Question 14

Determining the percentage change in an item from one year to the next is a type of horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 15

If sales for 2008 (the base year), 2009, and 2010 are $20,000, $15,600, and $24,600, respectively, the index numbers assigned to 2009 and 2010, respectively, are

Accepted Answer

A)  62.4 and 128. 
B)  156 and 118. 
C)  128.2 and 133. 
D)  78 and 123. 
A)  62.4 and 128. 
B)  156 and 118. 
C)  128.2 and 133. 
D)  78 and 123.

Question 16

A primary purpose of vertical analysis is to observe trends over a five-year period.

Accepted Answer

A) True 
 B)False

Question 17

Prepare a trend analysis of the following data using 2010 as the base year. Place your answers in the chart provided. Comment on the trend.

Accepted Answer

The answer of Prepare a trend analysis of the following...

Question 18

A 20 percent change in net sales will result in a 20 percent change in net income.

Accepted Answer

A) True 
 B)False

Question 19

In general, the greater the investment risk taken, the lower the return required as compensation.

Accepted Answer

A) True 
 B)False

Question 20

Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before this transaction, the entry to record the payment of a previously declared and recorded cash dividend will

Accepted Answer

A)  increase the current ratio and the quick ratio. 
B)  decrease the current ratio and the quick ratio. 
C)  increase the current ratio but have no effect on the quick ratio. 
D)  have no effect on the current ratio or the quick ratio. 
A)  increase the current ratio and the quick ratio. 
B)  decrease the current ratio and the quick ratio. 
C)  increase the current ratio but have no effect on the quick ratio. 
D)  have no effect on the current ratio or the quick ratio.

Exam 16: Financial Performance Measurement

A general rule in choosing among alternative investments is the greater the risk taken, the

Interim financial statements report data for a period of more than one year.

Ratios are most useful in identifying

The ability to pay bills when due and to meet unexpected needs for cash most closely describes

Horizontal analysis of comparative financial statements includes the

In a diversified company, segments may be represented by different industries, geographical markets, and major customers.

In conducting horizontal analysis, it is important to focus attention on the changes in

Use the following information to calculate the ratios requested below. Round answers to two decimal places. Show your work.

Which of the following is a long-term solvency ratio?

The use of rule-of-thumb measures is not an exact science and should be used with great care.

What is vertical analysis, and why is it useful in performing financial performance measurement?

Determining the percentage change in an item from one year to the next is a type of horizontal analysis.

If sales for 2008 (the base year), 2009, and 2010 are $20,000, $15,600, and $24,600, respectively, the index numbers assigned to 2009 and 2010, respectively, are

A primary purpose of vertical analysis is to observe trends over a five-year period.

Prepare a trend analysis of the following data using 2010 as the base year. Place your answers in the chart provided. Comment on the trend.

A 20 percent change in net sales will result in a 20 percent change in net income.

In general, the greater the investment risk taken, the lower the return required as compensation.

Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before this transaction, the entry to record the payment of a previously declared and recorded cash dividend will

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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