Exam 5: Financial Reporting and Analysis

Use this balance sheet and income statement to answer the following question. Use ending balances whenever average balances are required for computing ratios. The profit margin for Abner Systems is

Accounting information should make a difference to the outcome of a decision, according to the qualitative characteristic of

Use this information to answer the following question. If the income statement were prepared in a multistep form, excess of other expenses over other revenues would be

Use the information from the following single-step income statement to prepare a multistep income statement in proper form.

Which of the following does not include net income in its computation?

Use this information to answer the following question. The total amount of working capital is

Full disclosure of all important facts aids in overcoming the limitations of accounting information.

Bill Pierce owns several ice cream shops all within 50 miles of his home. He has plans to expand the number of shops he owns. This planned expansion will require a large bank loan. Bill has always done his own accounting work and has prepared a set of financial statements for each of the past five years of operations to present to the bank. Because some periods were more profitable than others, Bill attempted to streamline his earnings by switching depreciation and inventory valuation methods frequently. This created the appearance that his company earnings were very consistent over the years. Discuss the merits of Bill's financial statements with regard to his streamlining decisions.

Financial statements are generally prepared for a limited number of users.

Illegal acts of a small dollar amount can be ignored because they are immaterial.

The asset turnover ratio equals

An advantage of the single-step income statement over the multistep form is

Which of the following accounts is not classified as a selling expense on the income statement?

Use this information to answer the following question. The debt to equity ratio is

Financial statements are general-purpose in Nature because of their wide audience.

Return on assets is a better measure of profitability than profit margin because it takes into account the assets invested in the business.

Current assets divided by current liabilities is known as the

The relevance of accounting information is also an indication of its reliability.

Advertising expense appears as a general and administrative expense on the income statement.

Use the information from the following multistep income statement to prepare a single-step income statement in proper form.