Question 1

Which of the following is not a category of financial statement ratios?

Accepted Answer

A)  Financial leverage. 
B)  Liquidity. 
C)  Profitability. 
D) Prospectus. 
A)  Financial leverage. 
B)  Liquidity. 
C)  Profitability. 
D) Prospectus. D

Question 2

An entity's current ratio will be influenced by:

Accepted Answer

A)  the inventory cost flow assumption used. 
B)  writing off an overdue account receivable against the allowance for uncollectible accounts. 
C)  the depreciation method used. 
D) issuance of a stock dividend. 
A)  the inventory cost flow assumption used. 
B)  writing off an overdue account receivable against the allowance for uncollectible accounts. 
C)  the depreciation method used. 
D) issuance of a stock dividend. A

Question 3

A leveraged buyout refers to:

Accepted Answer

A)  one firm issues stock to take over another firm. 
B)  one firm trades its stock for the stock of another firm. 
C)  a firm goes heavily into debt in order to obtain the funds to purchase the shares of the public stockholders and thus take the firm private. 
D) one firm pays cash for the shares of a takeover firm's shares. 
A)  one firm issues stock to take over another firm. 
B)  one firm trades its stock for the stock of another firm. 
C)  a firm goes heavily into debt in order to obtain the funds to purchase the shares of the public stockholders and thus take the firm private. 
D) one firm pays cash for the shares of a takeover firm's shares. C

Question 4

The comparison of activity measures of different companies is complicated by the fact that:

Accepted Answer

A)  different inventory cost flow assumptions may be used. 
B)  dollar amounts of assets may be significantly different. 
C)  only one of the companies may have preferred stock outstanding. 
D) the number of shares of common stock issued may be significantly different. 
A)  different inventory cost flow assumptions may be used. 
B)  dollar amounts of assets may be significantly different. 
C)  only one of the companies may have preferred stock outstanding. 
D) the number of shares of common stock issued may be significantly different.

Question 5

The following information was available for the year ended December 31, 2016:
Required:
(a.) Calculate the debt ratio at December 31, 2016.(b.) Calculate the debt/equity ratio at December 31, 2016.(c.) Calculate the times interest earned for the year ended December 31, 2016.

Accepted Answer

@#IMG-DLM& (a.) Debt ratio = Total liabilities/(To

Question 6

A potential creditor's judgment about granting credit would be most influenced by the potential customer's:

Accepted Answer

A)  current ratio at the end of the prior fiscal year. 
B)  most recent acid-test ratio. 
C)  trend of acid-test ratio over the past three years. 
D) practice with respect to taking cash discounts offered by current suppliers. 
A)  current ratio at the end of the prior fiscal year. 
B)  most recent acid-test ratio. 
C)  trend of acid-test ratio over the past three years. 
D) practice with respect to taking cash discounts offered by current suppliers.

Question 7

The price/earnings ratio:

Accepted Answer

A)  is a measure of the relative expensiveness of a firm's common stock. 
B)  does not usually change by more than 1.0 during the year. 
C)  can be used to determine the cash dividend to be received during the year. 
D) is calculated by dividing the earnings multiple by net income. 
A)  is a measure of the relative expensiveness of a firm's common stock. 
B)  does not usually change by more than 1.0 during the year. 
C)  can be used to determine the cash dividend to be received during the year. 
D) is calculated by dividing the earnings multiple by net income.

Question 8

An individual interested in making a judgment about the profitability of a company should:

Accepted Answer

A)  review the trend of working capital for several years. 
B)  calculate the company's ROI for the most recent year. 
C)  review the trend of the company's ROI for several years. 
D) compare the company's ROI for the most recent year with the industry average ROI for the most recent year. 
A)  review the trend of working capital for several years. 
B)  calculate the company's ROI for the most recent year. 
C)  review the trend of the company's ROI for several years. 
D) compare the company's ROI for the most recent year with the industry average ROI for the most recent year.

Question 9

The following information was available for the year ended December 31, 2016:
Required:
(a.) Calculate the price/earnings ratio for 2016.(b.) Calculate the dividend payout ratio for 2016.(c.) Calculate the dividend yield for 2016.

Accepted Answer

@#IMG-DLM& (a.) Price/earning ratio = Market price

Question 10

A management that wanted to increase the financial leverage of its firm would:

Accepted Answer

A)  raise additional capital by selling common stock. 
B)  use excess cash to purchase preferred stock for the treasury. 
C)  raise additional capital by selling fixed interest rate long-term bonds. 
D) try to increase its ROI by increasing asset turnover. 
A)  raise additional capital by selling common stock. 
B)  use excess cash to purchase preferred stock for the treasury. 
C)  raise additional capital by selling fixed interest rate long-term bonds. 
D) try to increase its ROI by increasing asset turnover.

Question 11

When a firm has financial leverage:

Accepted Answer

A)  ROI will be greater than ROE. 
B)  ROI will usually be less than it would be without leverage. 
C)  risk is greater than if there wasn't any leverage. 
D) the firm will always have a higher ROE than it would without leverage. 
A)  ROI will be greater than ROE. 
B)  ROI will usually be less than it would be without leverage. 
C)  risk is greater than if there wasn't any leverage. 
D) the firm will always have a higher ROE than it would without leverage.

Question 12

Which of the following is(are) an example of a measure of leverage?

Accepted Answer

A)  Debt yield. 
B)  Debt payout ratio. 
C)  Preferred dividend coverage ratio. 
D) Debt/equity ratio. 
A)  Debt yield. 
B)  Debt payout ratio. 
C)  Preferred dividend coverage ratio. 
D) Debt/equity ratio.

Question 13

A common size income statement:

Accepted Answer

A)  uses the same dollar amount of revenues for each year. 
B)  expresses items as a percentage of revenues. 
C)  makes comparisons between years more difficult. 
D) is useful in estimating the impact of inflation. 
A)  uses the same dollar amount of revenues for each year. 
B)  expresses items as a percentage of revenues. 
C)  makes comparisons between years more difficult. 
D) is useful in estimating the impact of inflation.

Question 14

Management's use of resources can best be evaluated by focusing on measures of:

Accepted Answer

A)  liquidity. 
B)  activity. 
C)  leverage. 
D) book value. 
A)  liquidity. 
B)  activity. 
C)  leverage. 
D) book value.

Question 15

Another term for the price/earnings ratio is:

Accepted Answer

A)  cost ratio. 
B)  sales multiple. 
C)  earnings multiple. 
D) profit ratio. 
A)  cost ratio. 
B)  sales multiple. 
C)  earnings multiple. 
D) profit ratio.

Question 16

A higher P/E ratio means that:

Accepted Answer

A)  the stock is more reasonably priced. 
B)  the stock is relatively expensive. 
C)  investors are wary of the stock. 
D) earnings are expected to decrease. 
A)  the stock is more reasonably priced. 
B)  the stock is relatively expensive. 
C)  investors are wary of the stock. 
D) earnings are expected to decrease.

Question 17

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

Accepted Answer

A)  less than 10. 
B)  between 10 and 25. 
C)  between 25 and 40. 
D) over 40. 
A)  less than 10. 
B)  between 10 and 25. 
C)  between 25 and 40. 
D) over 40.

Question 18

The following information was available for the year ended December 31, 2016:
Required:
(a.) Calculate the inventory turnover for 2016.(b.) Calculate the number of days' sales in inventory for 2016, using year-end inventories.(c.) Calculate the accounts receivable turnover for 2016.(d.) Calculate the number of days' sales in accounts receivable for 2016, using year-end accounts receivable.

Accepted Answer

@#IMG-DLM& (a.) Inventory turnover = Cost of goods

Question 19

Which of the following are examples of physical measures of activity that are sometimes disclosed in corporate annual reports?

Accepted Answer

A)  Sales in units. 
B)  Number of employees. 
C)  Gross profit per square foot of selling space. 
D) None of the above are examples of physical measures of activity that are sometimes reported in corporate annual reports. 
E)  A, B, and C above are all examples of physical measures of activity that are sometimes reported in corporate annual reports. 
A)  Sales in units. 
B)  Number of employees. 
C)  Gross profit per square foot of selling space. 
D) None of the above are examples of physical measures of activity that are sometimes reported in corporate annual reports. 
E)  A, B, and C above are all examples of physical measures of activity that are sometimes reported in corporate annual reports.

Question 20

The dividend payout ratio describes:

Accepted Answer

A)  the proportion of earnings paid as dividends. 
B)  the relationship of dividends per share to market price per share. 
C)  the percentage change in dividends this year compared to last year. 
D) dividends as a percentage of the price/earnings ratio. 
A)  the proportion of earnings paid as dividends. 
B)  the relationship of dividends per share to market price per share. 
C)  the percentage change in dividends this year compared to last year. 
D) dividends as a percentage of the price/earnings ratio.

Which of the following is not a category of financial statement ratios?

An entity's current ratio will be influenced by:

A leveraged buyout refers to:

The comparison of activity measures of different companies is complicated by the fact that:

The following information was available for the year ended December 31, 2016: Required: (a.) Calculate the debt ratio at December 31, 2016.(b.) Calculate the debt/equity ratio at December 31, 2016.(c.) Calculate the times interest earned for the year ended December 31, 2016.

A potential creditor's judgment about granting credit would be most influenced by the potential customer's:

The price/earnings ratio:

An individual interested in making a judgment about the profitability of a company should:

The following information was available for the year ended December 31, 2016: Required: (a.) Calculate the price/earnings ratio for 2016.(b.) Calculate the dividend payout ratio for 2016.(c.) Calculate the dividend yield for 2016.

A management that wanted to increase the financial leverage of its firm would:

When a firm has financial leverage:

Which of the following is(are) an example of a measure of leverage?

A common size income statement:

Management's use of resources can best be evaluated by focusing on measures of:

Another term for the price/earnings ratio is:

A higher P/E ratio means that:

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

Which of the following are examples of physical measures of activity that are sometimes disclosed in corporate annual reports?

The dividend payout ratio describes:

Accounting-Present and Past

Financial Statements and Accounting Conceptsprinciples

Fundamental Interpretations Made From Financial Statement Data

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant, and Equipment, and Other Noncurrent Assets

Accounting for and Presentation of Liabilities

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements, and Other Disclosures

Managerial Accounting and Cost-Volume-Profit Relationships

Cost Accounting and Reporting

Cost Planning

Cost Control

Costs for Decision Making

Filters

Exam 11: Financial Statement Analysis

Which of the following is not a category of financial statement ratios?

An entity's current ratio will be influenced by:

A leveraged buyout refers to:

The comparison of activity measures of different companies is complicated by the fact that:

The following information was available for the year ended December 31, 2016: Required: (a.) Calculate the debt ratio at December 31, 2016.(b.) Calculate the debt/equity ratio at December 31, 2016.(c.) Calculate the times interest earned for the year ended December 31, 2016.

A potential creditor's judgment about granting credit would be most influenced by the potential customer's:

The price/earnings ratio:

An individual interested in making a judgment about the profitability of a company should:

The following information was available for the year ended December 31, 2016: Required: (a.) Calculate the price/earnings ratio for 2016.(b.) Calculate the dividend payout ratio for 2016.(c.) Calculate the dividend yield for 2016.

A management that wanted to increase the financial leverage of its firm would:

When a firm has financial leverage:

Which of the following is(are) an example of a measure of leverage?

A common size income statement:

Management's use of resources can best be evaluated by focusing on measures of:

Another term for the price/earnings ratio is:

A higher P/E ratio means that:

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

Which of the following are examples of physical measures of activity that are sometimes disclosed in corporate annual reports?

The dividend payout ratio describes:

Accounting-Present and Past

Financial Statements and Accounting Conceptsprinciples

Fundamental Interpretations Made From Financial Statement Data

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant, and Equipment, and Other Noncurrent Assets

Accounting for and Presentation of Liabilities

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements, and Other Disclosures

Managerial Accounting and Cost-Volume-Profit Relationships

Cost Accounting and Reporting

Cost Planning

Cost Control

Costs for Decision Making

Filters