Question 1

The payout ratio measures the percentage of profit distributed as cash dividends.

Accepted Answer

A) True 
 B)False

Question 2

Profitability ratios measure a company's ability to survive over a long period of time.

Accepted Answer

A) True 
 B)False

Question 3

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

Accepted Answer

A)  that has been arranged from the highest number to the lowest number. 
B)  that has been arranged from the lowest number to the highest number. 
C)  to determine which items are in error. 
D)  to determine the amount and/or percentage increase or decrease that has taken place.

Question 4

In general, the faster the receivable turnover, the better and more reliable the ______ is.

Accepted Answer

A)  collection period 
B)  current ratio 
C)  inventory ratio 
D)  days sales in inventory

Question 5

A successful grocery store would probably have

Accepted Answer

A)  a low inventory turnover. 
B)  a high inventory turnover. 
C)  zero profit margin. 
D)  low volume.

Question 6

When horizontal analysis is used to measure the percentage change between any two periods of time, this is known as

Accepted Answer

A)  horizontal percentage of the base-period amount. 
B)  horizontal analysis period amount. 
C)  horizontal base period amount. 
D)  horizontal percentage change for period.

Question 7

Earnings per share is calculated

Accepted Answer

A)  only for common shares. 
B)  only for preferred shares. 
C)  for common and preferred shares. 
D)  only for bonds.

Question 8

In performing a vertical analysis for a merchandising company, the base for sales on the income statement is

Accepted Answer

A)  net sales. 
B)  total revenues. 
C)  profit. 
D)  cost of goods available for sale.

Question 9

The interest coverage ratio gives an indication of a company's ability to make its interest payments as they come due.

Accepted Answer

A) True 
 B)False

Question 10

Sheldon Shoes Ltd. has provided you with the following selected information from 2020 and 2021: $\begin{array}{lrr}
&\underline{2021} & \underline{2020}\
\text { Cash } & \$ 15,500 & \$ 10,200 \
\text { Accounts receivable } & 18,000 & 22,000 \
\text { Short-term investments } & 30,000 & 60,000 \
\text { Inventory } & 29,000 & 38,500 \
\text { Total current assets } & 92,500 & 130,700 \
\text { Total current liabilities } & 101,000 & 122,000
\end{array}$ Which of the following best interprets Sheldon Shoe's acid-test ratio analysis?

Accepted Answer

A)  Acid-test ratio has improved compared to prior year, increasing from 0.9 to 1.1. 
B)  Acid-test ratio has weakened compared to prior year, decreasing from 0.8 to 0.6. 
C)  Acid-test ratio has weakened compared to prior year, decreasing from 1.1 to 0.9. 
D)  Acid-test ratio has improved compared to prior year, increasing from 0.6 to 1.8.

Question 11

Below is the partial balance sheet for Gabi Gold Limited: $\begin{array}{lcc}
&\text { December } 31,2021 & \text { December } 31,2020 \
\text{Accounts Receivable.....................}&\$ 110,000 & \$ 140,000 \
\text{Inventory......................................}&80,000 & 95,000 \
\text{Total Assets..................................}&335,000 & 376,000
\end{array}$ Instructions
Using the items from the comparative balance sheet of Gabi Gold Limited, illustrate horizontal and vertical analysis. Discuss the results of each type of analysis.

Accepted Answer

The answer of Below is the partial balance sheet for...

Question 12

If a company has an acid-test ratio significantly higher than the current ratio, it means that the company has a significant amount of inventory.

Accepted Answer

A) True 
 B)False

Question 13

Horizontal analysis is used mainly in

Accepted Answer

A)  linear analysis. 
B)  intercompany analysis. 
C)  common size analysis. 
D)  intracompany analysis.

Question 14

Debt to total assets is a ratio which measures a company's solvency.

Accepted Answer

A) True 
 B)False

Question 15

Selected information from the comparative financial statements of Patrick Parker Inc. for the year ended December 31, appears below:  Instructions
Answer the following questions relating to the year ended December 31, 2021. Show calculations. 
a) The inventory turnover for 2021 is ______.
b) The interest coverage in 2021 is ______.
c) The debt to total assets for 2021 is ______.
d) The receivables turnover for 2021 is ______.
e) The return on assets for 2021 is ______.

Accepted Answer

The answer of Selected information from the comparative financial statements...

Question 16

Cook Corporation had a profit of $ 3,500,000 in 2020. Using 2020 as the base year, profit decreased by 45% in 2021 and increased by 180% in 2022.
Instructions
Calculate the profit reported by Cook Corporation for 2021 and 2022.

Accepted Answer

The answer of Cook Corporation had a profit of $...

Question 17

Gummybear Ltd had net credit sales of $ 7,500,000 and cost of goods sold of $ 4,500,000 for the year. The average inventory for the year amounted to $ 1,500,000. The days sales in inventory during the year was

Accepted Answer

A)  73 days. 
B)  49 days. 
C)  122 days. 
D)  219 days.

Question 18

The vertical percentage formula divides the analysis amount by the base amount.

Accepted Answer

A) True 
 B)False

Question 19

The following ratios have been calculated for Peters Limited for 2021: Profit margin. ................................................................... 20 %
$~~$Interest coverage ............................................................ 12 times
$~~$Receivables turnover ..................................................... 5 times
$~~$Current ratio.................................................................... 2.5:1
$~~$Acid-test ratio.................................................................. 1.4:1
$~~$Debt to total as sets ........................................................ 24 % The 2021 financial statements for Peters Limited with missing information follows:

Accepted Answer

The answer of The following ratios have been calculated for...

Question 20

Investors who are interested in purchasing company shares for the income potential will be interested in a company with a high payout ratio.

Accepted Answer

A) True 
 B)False

Exam 10: Financial Statement Analysis

The payout ratio measures the percentage of profit distributed as cash dividends.

Profitability ratios measure a company's ability to survive over a long period of time.

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

In general, the faster the receivable turnover, the better and more reliable the ______ is.

A successful grocery store would probably have

When horizontal analysis is used to measure the percentage change between any two periods of time, this is known as

Earnings per share is calculated

In performing a vertical analysis for a merchandising company, the base for sales on the income statement is

The interest coverage ratio gives an indication of a company's ability to make its interest payments as they come due.

If a company has an acid-test ratio significantly higher than the current ratio, it means that the company has a significant amount of inventory.

Horizontal analysis is used mainly in

Debt to total assets is a ratio which measures a company's solvency.

Cook Corporation had a profit of $ 3,500,000 in 2020. Using 2020 as the base year, profit decreased by 45% in 2021 and increased by 180% in 2022. Instructions Calculate the profit reported by Cook Corporation for 2021 and 2022.

Gummybear Ltd had net credit sales of $ 7,500,000 and cost of goods sold of $ 4,500,000 for the year. The average inventory for the year amounted to $ 1,500,000. The days sales in inventory during the year was

The vertical percentage formula divides the analysis amount by the base amount.

Investors who are interested in purchasing company shares for the income potential will be interested in a company with a high payout ratio.