Question 1

Match between columns
                        Premises: Evaluates the attractiveness of an investment in a particular stock.
Indicates how effectively a company uses its economic resources.
Indicates how efficiently a company collects its receivables.
Evaluates a company's efficiency in controlling costs and expenses.
A severe test of a company's short-term debt-paying ability.
Indicates the percentage of assets contributed by creditors.
Indicates the rate of return on individual stock purchases.
Indicates a company's ability to cover its interest obligations.
Indicates a company's short-term liquidity.
Indicates the percentage of assets contributed by stockholders.

Accepted Answer

The Answer of Acid-test ratio and Current ratio and Debt is...

Question 2

Exhibit 6-2 Given the following information for the Green Company:
$\begin{array}{ll}
\text { Net sales (all on account) } & \$ 5,200,000 \
\text { Interest expense } & 240,000 \
\text { Income tax expense } & 280,000 \
\text { Net income } & 420,000 \
\text { Income tax rate } & 40 \%\\text { Total assets: }\
&\text { January } 1,2010 & \$ 1,800,000 \
&\text { December } 31,2010 & 2,400,000\\text { Stockholders' equity: }\
&\text { January } 1,2010 & 1,500,000 \
&\text { December } 31,2010 & 1,600,000\\text { Current assets, December } 31,2010 & 700,000 \
\text { Quick assets, December } 31,2010 & 400,000 \
\text { Current liabilities, December 31, 2010 } & 300,000\
\text { Net accounts receivable: }\&\text { January } 1,2010 & 200,000 \
&\text { December } 31,2010 & 180,000
\end{array}$
- Refer to Exhibit 6-2.Green's acid-test ratio at December 31, 2010, was

Accepted Answer

A) 3.67 times 
B) 2.33 times 
C) 1.33 times 
D) 0.43 times

Question 3

Which one of the following need not be disclosed for reportable segments?

Accepted Answer

A) interest revenue and expense 
B) profit or loss 
C) capital expenditures for long-lived assets 
D) seasonal revenues

Question 4

Information reported or disclosed about the profit or loss of reportable segments consists of

Accepted Answer

A) a measure of operating profit or loss 
B) segment revenues (separated into sales to external customers and intersegment sales) 
C) interest revenue and interest expense 
D) all of these choices

Question 5

All of the following relate directly to the Securities and Exchange Commission except

Accepted Answer

A) Regulation S-X 
B) Financial Reporting Releases 
C) Form 10-Q 
D) Statements of Financial Accounting Concepts

Question 6

Under GAAP for segment reporting, a company must report

Accepted Answer

A) a measure of profit or loss for each reportable segment 
B) factors used to identify its reportable segments 
C) the types of products and services from which each reporting segment derives its revenues 
D) all of these choices

Question 7

Which of the following auditor opinions would be appropriate when a company's financial statements are presented fairly in conformity with GAAP except for the effects of a certain item?

Accepted Answer

A) adverse opinion 
B) qualified opinion 
C) disclaimer of opinion 
D) unqualified opinion

Question 8

Which one of the following statements related to financial information is not true?

Accepted Answer

A) Liquidity refers to the company's ability to change the amounts and timing of cash flows to adapt to unexpected needs and opportunities. 
B) In general, the higher the risk of an investment, the higher the return on investment expected by investors. 
C) Return on capital can be provided only after return of capital. 
D) Operating capability describes the company's ability to maintain a given level of operations.

Question 9

The condensed financial statements of the Stetson Company for 2011 are as follows:
   Additional Information:
  Required:
Compute the following ratios for 2011:
 a. earnings per share
b. dividend yield
c. return on stockholders equity
d. acid-test ratio
e. receivablesturnover
f. times interest eaned
g. book value per common share

Accepted Answer

The answer of The condensed financial statements of the Stetson...

Question 10

The following information relates to the Anna Corporation: $\begin{array}{lrrr}\text { Operating } && \text { Segment } \
\text { Segment } & \text { Revenues } & \text { Asssets } &\text { Profit (Loss) }\
\mathrm{A} & \$ 60 & \$ 350 & \$ 3 \
\mathrm{B} & 210 & 1,000 & (10) \
\mathrm{C} & 290 & 2,150 & (50) \
\mathrm{D} & 50 & 700 & 7
\end{array}$ According to the segment reporting requirements under GAAP, which of these segments are considered reportable segments?

Accepted Answer

A) B and C 
B) B and D 
C) B, C, and D 
D) A, B, C, and D

Question 11

A marketing major has just asked you why accountants waste so much time preparing comparative financial statements when single-year statements should be sufficient.
Required:
Explain why single-year financial statements do not provide sufficient information for analysis and interpretation.

Accepted Answer

The answer of A marketing major has just asked you...

Question 12

Exhibit 6-2 Given the following information for the Green Company:
$\begin{array}{ll}
\text { Net sales (all on account) } & \$ 5,200,000 \
\text { Interest expense } & 240,000 \
\text { Income tax expense } & 280,000 \
\text { Net income } & 420,000 \
\text { Income tax rate } & 40 \%\\text { Total assets: }\
&\text { January } 1,2010 & \$ 1,800,000 \
&\text { December } 31,2010 & 2,400,000\\text { Stockholders' equity: }\
&\text { January } 1,2010 & 1,500,000 \
&\text { December } 31,2010 & 1,600,000\\text { Current assets, December } 31,2010 & 700,000 \
\text { Quick assets, December } 31,2010 & 400,000 \
\text { Current liabilities, December 31, 2010 } & 300,000\
\text { Net accounts receivable: }\&\text { January } 1,2010 & 200,000 \
&\text { December } 31,2010 & 180,000
\end{array}$
- Refer to Exhibit 6-2.Green's 2010 profit margin was

Accepted Answer

A) 8.1% 
B) 10.8% 
C) 13.5% 
D) 18.1%

Question 13

If the information contained in the financial statements is not presented fairly in conformity with generally accepted accounting principles, the auditor will issue a(n)

Accepted Answer

A) modified opinion 
B) qualified opinion 
C) adverse opinion 
D) disclaimer of opinion

Question 14

Under GAAP, a company should identify its operating segments for financial reporting through the use of the "management approach." The management approach is based on the way a company's management organizes the company's segments for making operating decisions and for assessing performance.
Required:
Describe how a company determines an operating segment using the "management approach."

Accepted Answer

The answer of Under GAAP, a company should identify its...

Question 15

Match between columns
                        Premises: Allows users to understand how the earning of net income relates to the receipt of cash from operations.
Allows users to understand how much cash was generated from operations per common share.
Allows users to understand how much of each sales dollar is available for financing and investing activities.
Allows users to measure the ability of a company to make principal payments.

Accepted Answer

The Answer of Cash flow from operations to sales and is...

Exam 6: Additional Aspects of Financial Reporting and Financial Analysis

Match the ratios to their respective descriptive statements by placing the appropriate letter in the space provided