Question 1

The following balance sheet information is provided for Frederick Company:
The company's quick (acid-test) ratio is closest to:

Accepted Answer

A)  0.9
B)  1.4
C)  1.1
D)  2.3E) C) and D)
F) B) and C)

Question 2

What is a primary drawback with examining and comparing absolute amounts from two businesses' financial statements?

Accepted Answer

The primary drawback is that absolute am...

Question 3

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a)Ratio analysis may involve studying relationships between an item reported on the balance sheet and another reported on the income statement.
_____ b)Comparing sales in 2015 with sales for 2014 is a form of horizontal analysis.
_____ c)Comparing net income in 2015 with sales for 2015 is a form of vertical analysis.
_____ d)Liquidity ratios measure a company's ability to generate profits in the short term.
_____ e)Working capital is calculated by using the following formula: quick assets - current liabilities.

Accepted Answer

a)True b)T...

Question 4

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Accepted Answer

A)  Current ratio.
B)  Earnings per share.
C)  Inventory turnover.
D)  Average collection period.E) A) and D)
F) A) and C)

Question 5

The quick ratio,although similar to the current ratio,is more conservative.

Accepted Answer

A) True 
 B)False

Question 6

Select the correct statement regarding vertical analysis.

Accepted Answer

A)  Vertical analysis of the income statement involves showing each item as a percentage of sales.
B)  Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets.
C)  Vertical analysis examines two or more items from the financial statements of one accounting period.
D)  All of these answer choices are correct.E) All of the above
F) A) and B)

Question 7

Short-term creditors are usually most interested in assessing:

Accepted Answer

A)  Liquidity.
B)  Solvency.
C)  Managerial effectiveness
D)  Profitability.E) All of the above
F) A) and B)

Question 8

Describe the factors involved in communicating useful financial information.

Accepted Answer

The primary factors involved in communic...

Question 9

Blumenthal Company declared and paid a cash dividend totaling $50,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:

Accepted Answer

A)  Decrease.
B)  Increase.
C)  Remain the same.
D)  Cannot be determined.E) A) and B)
F) C) and D)

Question 10

Which of the following statements is correct?

Accepted Answer

A)  The most widely quoted measure of a company's earnings performance is return on equity.
B)  Earnings per share is calculated for a company's preferred stock.
C)  Investors need to understand that the value of a company's earnings per share is affected by its choices of accounting principles and assumptions.
D)  The book value per share measures the market value of a corporation's stock.E) B) and C)
F) A) and B)

Question 11

Blumenthal Company received cash of $600,000 from issuing common stock.As a result of this transaction,the company's debt to equity ratio will:

Accepted Answer

A)  Decrease.
B)  Increase.
C)  Remain the same.
D)  Cannot be determined.E) A) and B)
F) B) and D)

Question 12

In vertical analysis,each item is expressed as a percentage of:

Accepted Answer

A)  Total cash on the balance sheet.
B)  Total assets on the balance sheet.
C)  Total current assets on the balance sheet.
D)  None of these answer choices are correct.E) A) and D)
F) B) and C)

Question 13

Chastain Company's current ratio for 2015 was 1.42,which was slightly above the current ratio for similar companies in its industry.Chastain's quick ratio for 2015 was 0.68,which is substantially lower than for similar companies in its industry.What conclusion would you reach based on this information?

Accepted Answer

The primary difference between the curre...

Question 14

Which of the following statements about financial statement analysis is incorrect?

Accepted Answer

A)  In horizontal percentage analysis,an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements.
B)  Vertical analysis compares two or more financial statement items within the same time period.
C)  Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year.
D)  The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis.E) All of the above
F) C) and D)

Question 15

The following balance sheet information was provided by Warner Company:
Assume 2015 net credit sales totaled $150,000.The company's average days to collect receivables is closest to:

Accepted Answer

A)  9 days
B)  44 days
C)  71 days
D)  40 daysE) A) and C)
F) A) and B)

Question 16

The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?

Accepted Answer

A)  3,14 times
B)  1.57 times
C)  1.60 times
D)  0.64 timesE) None of the above
F) A) and C)

Question 17

Which of the following statements is generally incorrect?

Accepted Answer

A)  A 30-day average collection period for accounts receivable is generally preferred over a 20-day average collection period.
B)  A 2:1 current ratio is generally preferred over a 1:1 current ratio.
C)  A 5% dividend yield is generally preferred over a 3% dividend yield.
D)  A 10% net margin is generally preferred over an 8% net margin.E) B) and C)
F) All of the above

Question 18

Select the incorrect statement regarding the information disclosed in financial statements.

Accepted Answer

A)  The costs of providing all possible information about a firm would be prohibitively high for the business.
B)  Some information disclosed in financial statements may be irrelevant to some users.
C)  Financial statements should be detailed enough to answer any financial-related question an investor might have.
D)  When too much information is presented users may suffer from information overload.E) None of the above
F) A) and D)

Question 19

Richmond Company collected $400 on account.What impact will this transaction have on the firm's current ratio?

Accepted Answer

A)  Increase it
B)  Decrease it
C)  No impact
D)  Not enough information is provided to answer the question.E) None of the above
F) A) and B)

Question 20

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

Accepted Answer

A) True 
 B)False

Exam 13: Financial Statement Analysis

What is a primary drawback with examining and comparing absolute amounts from two businesses' financial statements?

Correct Answer
verified
The primary drawback is that absolute am...
View Answer

Select the incorrect statement regarding the information disclosed in financial statements.

Correct Answer
verified

Short-term creditors are usually most interested in assessing:

Correct Answer
verified

The quick ratio,although similar to the current ratio,is more conservative.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified
a)True b)T...
View Answer

Describe the factors involved in communicating useful financial information.

Correct Answer
verified
The primary factors involved in communic...
View Answer

The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?

Correct Answer
verified

Blumenthal Company received cash of $600,000 from issuing common stock.As a result of this transaction,the company's debt to equity ratio will:

Correct Answer
verified

In vertical analysis,each item is expressed as a percentage of:

Correct Answer
verified

The following balance sheet information was provided by Warner Company: Assume 2015 net credit sales totaled $150,000.The company's average days to collect receivables is closest to:

Correct Answer
verified

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Correct Answer
verified

Correct Answer
verified
The primary difference between the curre...
View Answer

Blumenthal Company declared and paid a cash dividend totaling $50,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:

Correct Answer
verified

Select the correct statement regarding vertical analysis.

Correct Answer
verified

Richmond Company collected $400 on account.What impact will this transaction have on the firm's current ratio?

Correct Answer
verified

Which of the following statements about financial statement analysis is incorrect?

Correct Answer
verified

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

Correct Answer
verified

The following balance sheet information is provided for Frederick Company: The company's quick (acid-test) ratio is closest to:

Correct Answer
verified

Which of the following statements is generally incorrect?

Correct Answer
verified

Exam 13: Financial Statement Analysis

What is a primary drawback with examining and comparing absolute amounts from two businesses' financial statements?

Correct AnswerverifiedThe primary drawback is that absolute am...View AnswerShow Answer

Select the incorrect statement regarding the information disclosed in financial statements.

Correct AnswerverifiedShow Answer

Short-term creditors are usually most interested in assessing:

Correct AnswerverifiedShow Answer

The quick ratio,although similar to the current ratio,is more conservative.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct Answerverifieda)True b)T...View AnswerShow Answer

Describe the factors involved in communicating useful financial information.

Correct AnswerverifiedThe primary factors involved in communic...View AnswerShow Answer

The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?

Correct AnswerverifiedShow Answer

Blumenthal Company received cash of $600,000 from issuing common stock.As a result of this transaction,the company's debt to equity ratio will:

Correct AnswerverifiedShow Answer

In vertical analysis,each item is expressed as a percentage of:

Correct AnswerverifiedShow Answer

The following balance sheet information was provided by Warner Company: Assume 2015 net credit sales totaled $150,000.The company's average days to collect receivables is closest to:

Correct AnswerverifiedShow Answer

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe primary difference between the curre...View AnswerShow Answer

Blumenthal Company declared and paid a cash dividend totaling $50,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:

Correct AnswerverifiedShow Answer

Select the correct statement regarding vertical analysis.

Correct AnswerverifiedShow Answer

Richmond Company collected $400 on account.What impact will this transaction have on the firm's current ratio?

Correct AnswerverifiedShow Answer

Which of the following statements about financial statement analysis is incorrect?

Correct AnswerverifiedShow Answer

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

Correct AnswerverifiedShow Answer

The following balance sheet information is provided for Frederick Company: The company's quick (acid-test) ratio is closest to:

Correct AnswerverifiedShow Answer

Which of the following statements is generally incorrect?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The primary drawback is that absolute am...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a)True b)T...
View Answer

Correct Answer
verified
The primary factors involved in communic...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The primary difference between the curre...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified