Deck 14: Financial Statement Analysis

Question 1

Investors and creditors generally evaluate a company by using a single year's data.

Answer 1

False

Question 2

In a horizontal analysis, the actual dollar change is a better analytical tool than knowing the percentage change.

Answer 2

False

Question 3

Horizontal analysis is the study of percentage changes in comparative financial statements.

Answer 3

True

Question 4

Jack Corporation uses horizontal analysis to compare its income statement from year to year. Jack Corporation reported the following data last year as well as the percent change when compared to the current year: What is the Sales Revenue in the current year?

A)$642,000
B)$42,000
C)$560,748
D)$657,600

Question 5

An accurate description of horizontal analysis would be which of the following?

A)Study of percentage changes in various financial statement amounts from year to year
B)Study of changes in individual financial statement amounts as a percentage of a related base amount
C)Study of changes in key financial ratios from year to year
D)None of the above

Question 6

Which type of analysis compares the data of the current year to the data of the previous year in both percentage and dollar amount of increase or decrease?

A)Vertical analysis
B)Trend analysis
C)Horizontal analysis
D)Benchmarking

Question 7

Jack Corporation uses horizontal analysis to compare its income statement from year to year. Jack Corporation reported the following data last year as well as the percent change when compared to the current year: What is the Cost of Goods Sold in the current year?

A)$178,218
B)$181,800
C)$185,000
D)$192,600

Question 8

The comparison of operating expenses in Year 1 and Year 2 would be included in which of the following types of analysis?

A)Profitability
B)Capital
C)Horizontal
D)Trend

Question 9

The study of percentage changes in comparative financial statements is an example of

A)vertical analysis.
B)trend analysis.
C)benchmarking.
D)horizontal analysis.

Question 10

Using a base year as 100% and expressing other years as a percentage of the base year is an example of

A)trend analysis.
B)vertical analysis.
C)horizontal analysis.
D)benchmarking.

Question 11

Most financial statement analysis covers trends of more than one year.

Question 12

Which of the following types of analysis include trend percentage analysis?

A)Vertical
B)Horizontal
C)Benchmarking
D)Profitability

Question 13

A company reported the following amounts of net income: Which of the following is the percentage change from Year 2 to Year 3?

A)85.71%
B)44.23%
C)167.86%
D)185.71%

Question 14

Horizontal analysis and vertical analysis are used to analyze the performance of a single company.

Question 15

In a horizontal analysis, the earlier period is the base period.

Question 16

Jack Corporation uses horizontal analysis to compare its income statement from year to year. Jack Corporation reported the following data last year as well as the percent change when compared to the current year: What is the Gross Profit in the current year?

A)$420,000
B)$460,200
C)$449,400
D)$445,200

Question 17

A trend percentage is computed by dividing the dollar amount of change by the base-year amount.

Question 18

A company reported the following amounts of net income: Which of the following is the percentage change from Year 1 to Year 2?

A)260.00%
B)215.00%
C)160.00%
D)21.15%

Question 19

Generally, using more than one year of data to analyze company performance is desirable.

Question 20

Which type of analysis includes the computation of the percentage change in total assets between two balance sheet dates?

A)Profitability
B)Vertical
C)Horizontal
D)Capital

Question 21

The Bristol Corporation data for the current year and prior year is as follows: With respect to net sales revenue, what would a horizontal analysis report?

A)There was an increase of 20.00% in net sales revenue.
B)There is a sales return of $5.00.
C)The cost of goods sold is 77.37 % of net sales revenue.
D)There is an accounts receivable turnover of 10.40 times.

Question 22

The Bristol Corporation data for the current year and prior year is as follows: With respect to net income before income tax expense and net income, what would a horizontal analysis report?

A)There was an increase in both net income before income tax expense and net income of 10%.
B)Both net income before income tax expense and net income increased by $6000.
C)The current ratio is 27.76
D)Both net income before tax expense and net income were 11% of net sales revenue.

Question 23

The Bristol Corporation data for the current year and prior year is as follows: With respect to current liabilities, what would a horizontal analysis report?

A)The current ratio is 2.23.
B)Current liabilities are 1.26% of total capital.
C)Current liabilities saw a 51.82% increase from the prior year to the current year.
D)Current liabilities saw a 34.13% increase from the prior year to the current year.

Question 24

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to selling/general expenses?

A)There was a 6.21% decrease from prior to current year.
B)There was a 6.21% increase from prior to current year.
C)The current ratio is 1.07.
D)Selling/general expenses are 7.25% of net sales revenue.

Question 25

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to current assets?

A)Inventory turnover of 6.13 times
B)Current ratio of 2.62
C)A 30.00% increase in current assets
D)Current assets as 30.00% of total assets

Question 26

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to common stock?

A)Stockholder's equity is 66.72% of total capital
B)Increase of $10,600 in common stock
C)23.30% increase from prior to current year of cost of goods sold
D)Sales return of $0.11

Question 27

The Bristol Corporation data for the current year and prior year is as follows: With respect to long-term liabilities, what would a horizontal analysis report?

A)Long-term liabilities decreased by 11.76%.
B)Long-term liabilities increased by $4000.
C)Long-term liabilities increased by 11.76%.
D)Long-term liabilities decreased by $4000.

Question 28

Use the following information to do a horizontal analysis of Rae Company's income statement for the current year and prior year: What is the percentage change in net income?

A)51.52%
B)-34.00%
C)29.59%
D)22.84%

Question 29

A company reported the following amounts of net income: Which of the following is the percentage change from Year 2 to Year 3?

A)20.67%
B)48.46%
C)19.67%
D)23.03%

Question 30

The Bristol Corporation data for the current year and prior year is as follows: With respect to selling/general expenses, what would a horizontal analysis report?

A)The current ratio is 0.44.
B)There was a 4.28% increase from prior to current year.
C)There was a 4.28% decrease from prior to current year.
D)Selling/general expenses are 108.27% of net sales revenue.

Question 31

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to net income before income tax expense and net income?

A)Both net income before tax expense and net income were 12% of net sales revenue.
B)Both net income before income tax expense and net income increased by $135,000.
C)The current ratio is 1.06.
D)There was an increase in both net income before income tax expense and net income of 25%.

Question 32

The Bristol Corporation data for the current year and prior year is as follows: With respect to current assets, what would a horizontal analysis report?

A)Inventory turnover of 1.29 times
B)Current ratio of 3.56
C)Current assets as 100.00% of total assets
D)A 38.89% increase in current assets

Question 33

Use the following information to do a horizontal analysis of Rae Company's income statement for the current year and prior year: What is the dollar change in selling/general expenses?

A)$(160)
B)$87,000
C)$20,000
D)$(110,000)

Question 34

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to current liabilities?

A)Current liabilities saw a 28.45% increase from the prior year to the current year.
B)Current liabilities are 156.97% of total capital.
C)The current ratio is 1.36.
D)Current liabilities saw a 22.15% increase from the prior year to the current year.

Question 35

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to net sales revenue?

A)There is a sales return of $0.11.
B)There was an increase of 17.93% in net sales revenue.
C)The cost of goods sold is 77.37% of net sales revenue.
D)There is an accounts receivable turnover of 10.26 times.

Question 36

Use the following information to do a horizontal analysis of Rae Company's income statement for the current year and prior year: What is the dollar change in gross profit?

A)$(92,440)
B)$(77,800)
C)$55,800
D)$31,800

Question 37

A company reported the following amounts of net income: Which of the following is the percentage change from Year 1 to Year 2?

A)25.81%
B)20.83%
C)26.81%
D)52.02%

Question 38

The Goodberry Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to long-term liabilities?

A)Long-term liabilities increased by $6000.
B)Long-term liabilities decreased by 29.46%.
C)Long-term liabilities increased by 17.14%.
D)Long-term liabilities decreased by $16,500.

Question 39

The Bristol Corporation data for the current year and prior year is as follows: With respect to common stock, what would a horizontal analysis report?

A)Stockholder's equity as 81.24% of total capital
B)Sales return of $11.17
C)24.19% increase from prior to current year of cost of goods sold
D)Increase of $11,800 in common stock

Question 40

Use the following information to do a horizontal analysis of Rae Company's income statement for the current year and prior year What is the percentage change in cost of goods sold?

A)78.61%
B)27.21%
C)53.19%
D)34.72%

Question 41

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to long-term liabilities show?

A)The debt ratio is 35.32%.
B)Long-term liabilities increased by 51.33%.
C)The current ratio is 4.24%.
D)Long-term liabilities decreased by $5400.

Question 42

In a vertical analysis of an income statement, sales revenue is assigned a percentage of 100.

Question 43

The formula used in vertical analysis of the income statement is: (each income statement line item/sales revenue)= vertical %.

Question 44

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to common stock show?

A)An increase of 19.60% in sales revenue
B)Increase of $10,000 in common stock
C)An increase of 34.81% from prior to current year
D)Sales return of $9.11

Question 45

In a vertical analysis of a balance sheet, total assets is assigned a percentage of 100.

Question 46

Sales revenue is used as the base for vertical analysis percentages on the income statement.

Question 47

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to net sales revenue show?

A)Cost of goods sold is 80.70% of net sales revenue
B)A sales return of 9.14%
C)An increase of 19.20% in net sales revenue
D)Accounts receivable turnover of 8.08 times

Question 48

Net income is used as the base for vertical analysis percentages on the income statement.

Question 49

The formula used in vertical analysis of the balance sheet is: (each balance sheet line item/total assets)= vertical %.

Question 50

In a vertical analysis of a balance sheet, total liabilities is assigned a percentage of 100.

Question 51

Use the following information to do a horizontal analysis of Carlin Corporation's balance sheet for the end of the current and prior years. Fill in the table.

Question 52

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to net income show?

A)Both net income before tax expense and net income are 8.99% of net sales revenue.
B)There was an increase in net income of 52.86%.
C)Both net income before income tax expense and net income increased by $18,500.
D)The current ratio is 4.26.

Question 53

Trend analysis is the same thing as a vertical analysis.

Question 54

Vertical analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base.

Question 55

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to current liabilities show?

A)Current liabilities are 33.24% of total capital.
B)Current liabilities saw a 27.54% increase from the prior year to the current year.
C)The current ratio is 4.65.
D)Current liabilities saw a 38.00% increase from the prior year to the current year.

Question 56

Trend percentages are not a form of vertical analysis.

Question 57

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to current assets show?

A)Inventory turnover of 9.02 times
B)Current ratio of 4.48.
C)A 27.99% increase in current assets
D)Current assets are 100.00% of total assets

Question 58

The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to selling/general expenses show?

A)A 62.81% increase
B)Selling/general expenses as 6.39% of net sales revenue
C)A current ratio of 3.98.
D)A 24.00% decrease

Question 59

Use the following information to do a horizontal analysis of Boyce Corporation's income statement for the current year and prior year:

Question 60

The formula used in vertical analysis of the balance sheet is: (each balance sheet line item/total liabilities)= vertical %.

Question 61

To follow is selected information about the Little Dipper Company for the current year and prior year. What is the current year's income tax percentage (as would be found on a vertical analysis of the income statement for the current year)?

A)4)15%
B)8)85%
C)24.07%
D)18.07%

Question 62

In performing a vertical analysis of an income statement, which of the following is generally used as the base amount?

A)Net sales
B)Total expenses
C)Gross sales
D)Gross profit

Question 63

Jill Corporation prepared a vertical analysis of its income statement and the following excerpt is available: What is the Cost of Goods Sold percentage as found on a vertical analysis income statement?

A)58.2%
B)41.8%
C)100%
D)1)72%

Question 64

To follow is selected information about the Little Dipper Company for the current year and prior year. What is the current year's selling and general expenses percentage (as would be found on a vertical analysis of the income statement for the current year)?

A)8)92%
B)64.10%
C)5)99%
D)23.08%

Question 65

Gavette Company reported the following information for the current year and prior year: What would a vertical analysis report with respect to the relationship between current year net sales revenue and COGS?

A)COGS was 60.00% of net sales revenue
B)A 8.20% decrease from prior to current year
C)An increase of $19,680 from prior to current year
D)An increase of $146,880 from prior to current year

Question 66

In vertical analysis, the base used for comparison on the balance sheet is

A)total stockholders' equity.
B)total liabilities.
C)total assets.
D)none of the above

Question 67

Jill Corporation prepared a vertical analysis of its income statement and the following excerpt is available: What is the Gross Profit for the year based on the information provided from the vertical analysis?

A)$501,600
B)$698,400
C)$618,000
D)Cannot determine from the information given

Question 68

To follow is selected information about the Little Dipper Company for the current year and prior year. What is the current year's net income percentage (as would be found on a vertical analysis of the income statement for the current year)?

A)10.28%
B)70.30%
C)9)14%
D)236.69%

Question 69

Jill Corporation prepared a vertical analysis of its income statement and the following excerpt is available: What is the Sales percentage as found on a vertical analysis income statement?

A)58.2%
B)41.8%
C)100%
D)1)72%

Question 70

Which of the following terms is defined as an analysis of a financial statement that reveals the relationship of each statement item to a specific base?

A)Benchmarking
B)Horizontal analysis
C)Vertical analysis
D)Capital analysis

Question 71

Vertical analysis would rarely be performed on which of the following?

A)Income statement
B)Schedule of depreciation
C)Balance sheet
D)All of the above are common targets of vertical analysis.

Question 72

Gavette Company reported the following information for the current year and prior year: What would a vertical analysis report with respect to current year selling and general expenses?

A)An increase of $74,768
B)23.63% of net sales revenue
C)A decrease of 23.63%
D)16.37% of net sales revenue

Question 73

Gavette Company reported the following information for the current year and prior year: What would a vertical analysis report with respect to current year income tax expense?

A)A decrease of $3744
B)A decrease of 124.80% from prior to current year
C)Income tax expense is 1.84% of net sales revenue
D)A decrease of $25,368

Question 74

Jill Corporation prepared a vertical analysis of its income statement and the following excerpt is available: What is the Cost of Goods Sold for the year based on the information provided from the vertical analysis?

A)$501,600
B)$698,400
C)$618,000
D)Cannot determine from the information given

Question 75

Gavette Company reported the following information for the current year and prior year: What would a vertical analysis report with respect to current year net income before income tax and income tax expense?

A)An increase of $17,768 from prior to current year
B)An increase of both net income before income tax and income tax of 21.00%
C)A decrease of $17,768 in net income before tax
D)Net income before tax of 21.00% and income tax of 3.09% of net sales revenue

Question 76

In a vertical analysis of an income statement, gross profit is assigned a percentage of 100.

Question 77

Gavette Company reported the following information for the current year and prior year: With respect to current year net sales revenue, what would a vertical analysis report?

A)COGS would be 62.31% of net sales revenue
B)A dividend yield of $18.84
C)A decrease of 21.00% in net sales revenue
D)Net sales revenue would be the base amount

Question 78

Selected information about the Thomas Trucks Company for the current year and prior year is given below. The current year's cost of goods sold percentage (as would be found on a vertical analysis of the income statement for the current year)is

A)4)76%
B)37.82%
C)10.95%
D)62.18%

Question 79

To follow is selected information about the Little Dipper Company for the current year and prior year. What is the current year's cost of goods sold percentage (as would be found on a vertical analysis of the income statement for the current year)?

A)35.83%
B)64.17%
C)-2.42%
D)8)96%

Question 80

In performing a vertical analysis of a balance sheet, which of the following is generally used as the base amount?

A)Total liabilities
B)Net assets
C)Total assets
D)Total stockholder's equity