Question 1

A trend percent,or index number,is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Accepted Answer

A) True 
 B)False

Question 2

Internal users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

A) True 
 B)False

Question 3

The following selected financial information for a company was reported for the current year end.Calculate the following company ratios:
(a)Accounts receivable turnover.
(b)Inventory turnover.
(c)Days' sales uncollected
Accounts receivable,beginning-year…………….$170,000
Accounts receivable,year-end…………………… 190,000
Merchandise inventory,beginning-year………….80,000
Merchandise inventory,year-end………………… 60,000
Cost of goods sold………………………………...580,000
Credit sales………………………………………...1,000,000

Accepted Answer

The answer of The following selected financial information for a...

Question 4

The ability to generate future revenues and meet long-term obligations is referred to as:

Accepted Answer

A) Liquidity and efficiency. 
B) Solvency. 
C) Profitability. 
D) Market prospects. 
E) Creditworthiness.

Question 5

An advantage of common-size statements is that they reflect the dollar magnitude (size)of the different companies under analysis.

Accepted Answer

A) True 
 B)False

Question 6

The higher the accounts receivable turnover,the more quickly accounts receivable are collected.

Accepted Answer

A) True 
 B)False

Question 7

Dividing Accounts receivable,net by Net sales and multiplying the result by 365 is the:

Accepted Answer

A) Profit margin. 
B) Days' sales uncollected. 
C) Accounts receivable turnover ratio. 
D) Average accounts receivable ratio. 
E) Current ratio.

Question 8

Three of the most common tools of financial analysis include horizontal analysis,vertical analysis,and ratio analysis.

Accepted Answer

A) True 
 B)False

Question 9

A component of operating efficiency and profitability,calculated by expressing net income as a percent of net sales,is the:

Accepted Answer

A) Acid-test ratio. 
B) Merchandise turnover. 
C) Price earnings ratio. 
D) Accounts receivable turnover. 
E) Profit margin ratio.

Question 10

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000.Using Year 1 as the base year,the percent change for Year 2 compared to the base year is:

Accepted Answer

A) −104% 
B) 100% 
C) −4% 
D) 96% 
E) 4.2%

Question 11

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount,dividing the result by the base period amount and multiplying that result by 100.

Accepted Answer

A) True 
 B)False

Question 12

For the following financial statement items,calculate trend percentages using Year 1 as the base year:
 $$\begin{array} { l r r r r r } 
& \text { Year 5 } & \text { Year 4 } & \text { Year 3 } & \text { Year 2 } & \text { Year 1 } \
\text { Sales } & \$ 1,195,400 & \$ 1,118,000& \$ 1,049,000 & \$ 963,200 & \$ 860,000 \
\text { Cost of sales } & 752,400& 704,000& 671,000 & 616,700 & 559,000\
\text { Gross profit } & \$ 443,000 & \$ 414,000 & \$ 378,000 & \$ 346,500 & \$ 301,000
\end{array}$$

Accepted Answer

The answer of For the following financial statement items,calculate trend...

Question 13

A corporation reports the following year-end balance sheet data.The company's debt ratio equals: $$\begin{array} { l r l r r } 
\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \
\text { Accourts receivable } & 55,000 & \text { Long-temn liabilities } & 35,000 \
\text { Irventory } & 60,000 & \text { Cormon stock } & 100,000 \
\text { Equiprment } & \underline{145,000} & \text { Retaired earnirgs } & \underline{90,000} \
\text { Total assets } & \underline{\$ 300,000} & \text { Total liabilities ard equity } & \underline{\$ 300,000}
\end{array}$$

Accepted Answer

A) 0.58 
B) 1.27 
C) 2.07 
D) 0.37 
E) 0.63

Question 14

The common-size percent is computed by:

Accepted Answer

A) Dividing the analysis amount by the base amount. 
B) Dividing the base amount by the analysis amount. 
C) Dividing the analysis amount by the base amount and multiplying the result by 100. 
D) Dividing the base amount by the analysis amount and multiplying the result by 1,000. 
E) Subtracting the base amount from the analysis amount and multiplying the result by 100.

Question 15

In order to be classified as an extraordinary gain or loss,the item must be both (1)________ and (2)________.

Accepted Answer

The answer of In order to be classified as an...

Question 16

Use the following selected information from Wheeler,LLC to determine the 2018 and 2017 common size percentages for cost of goods sold using Net sales as the base. $\begin{array}{lrrl}
&2018&&2017\
Net ~sales&\$ 276,200& & \$ 231,400 \
Cost ~of ~goods ~sold&151,90 0 & & 129,590 \
Operatirg ~expenses&55,240 & & 53,240 \
Net ~earmirgs&27,820 & & 19,820
\end{array}$

Accepted Answer

A) 36.4% for 2018 and 41.1% for 2017. 
B) 55.0% for 2018 and 56.0% for 2017. 
C) 119.4% for 2018 and 100.0% for 2017. 
D) 117.2% for 2018 and 100.0% for 2017. 
E) 65.1% for 2018 and 56.0% for 2017.

Question 17

Martinez Corporation reported Net sales of $765,000 and Net income of $142,000.The Profit margin is:

Accepted Answer

A) 539.0%. 
B) 5.39%. 
C) 81.4%. 
D) 1.86%. 
E) 18.56%.

Question 18

Refer to the following selected financial information from Marston Company.Compute the company's accounts receivable turnover for Year 2. $\begin{array}{lrr}
& \text { Year 2 } & \text { Year 1 } \
\text { Accounts receivable, net }  & 86,500 & 82,750 \
\text { Net sales }& 723,000 & 693,000
\end{array}$

Accepted Answer

A) 8.36. 
B) 8.37. 
C) 4.78. 
D) 8.59. 
E) 8.54.

Question 19

Desjardin Landscaping's income statement reports net income of $75,300,which includes deductions for interest expense of $11,500 and income taxes of $34,900.Its times interest earned is:

Accepted Answer

A) 10.6 times 
B) 7.5 times 
C) 4.0 times 
D) 6.5 times 
E) 0.15 times

Question 20

Graphical analysis of the balance sheet can be useful in assessing sources of financing.

Accepted Answer

A) True 
 B)False

Exam 13: Analyzing and Interpreting Financial Statements

A trend percent,or index number,is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Internal users of accounting information make the strategic and operating decisions of a company.

The ability to generate future revenues and meet long-term obligations is referred to as:

An advantage of common-size statements is that they reflect the dollar magnitude (size)of the different companies under analysis.

The higher the accounts receivable turnover,the more quickly accounts receivable are collected.

Dividing Accounts receivable,net by Net sales and multiplying the result by 365 is the:

Three of the most common tools of financial analysis include horizontal analysis,vertical analysis,and ratio analysis.

A component of operating efficiency and profitability,calculated by expressing net income as a percent of net sales,is the:

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000.Using Year 1 as the base year,the percent change for Year 2 compared to the base year is:

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount,dividing the result by the base period amount and multiplying that result by 100.

The common-size percent is computed by:

In order to be classified as an extraordinary gain or loss,the item must be both (1) and (2).

Martinez Corporation reported Net sales of $765,000 and Net income of $142,000.The Profit margin is:

Desjardin Landscaping's income statement reports net income of $75,300,which includes deductions for interest expense of $11,500 and income taxes of $34,900.Its times interest earned is:

Graphical analysis of the balance sheet can be useful in assessing sources of financing.