Question 1

Internal users of financial information:

Accepted Answer

A)  Are not directly involved in operating a company.
B)  Are those individuals involved in managing and operating the company.
C)  Include shareholders and lenders.
D)  Include directors and customers.
E)  Include suppliers,regulators,and the press.F) A) and D)
G) All of the above

Question 2

Common-size statements:

Accepted Answer

A)  Reveal changes in the relative importance of each financial statement item to a base amount.
B)  Do not emphasize the relative importance of each item.
C)  Compare financial statements over time.
D)  Show the dollar amount of change for financial statement items.
E)  Reveal patterns in data across successive periods.F) C) and D)
G) A) and C)

Question 3

The comparison of a company's financial condition and performance to a base amount is known as:

Accepted Answer

A)  Financial reporting.
B)  Horizontal ratios.
C)  Investment analysis.
D)  Risk analysis.
E)  Vertical analysis.F) A) and D)
G) B) and D)

Question 4

Industry standards for financial statement analysis:

Accepted Answer

A)  Are based on a single competitor's financial performance.
B)  Are set by the government.
C)  Are available for the financial performance and condition of the company's industry.
D)  Are based on rules of thumb.
E)  Compare a company's income with its prior year's income.F) C) and D)
G) C) and E)

Question 5

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A corporation reports the following year-end balance sheet data.Calculate the following ratios:
(a)working capital
(b)acid-test ratio
(c)current ratio
(d)debt ratio
(e)equity ratio
(f)debt-to-equity ratio

Accepted Answer

The answer of A corporation reports the following year-end balance...

Question 8

Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current ratio is:

Accepted Answer

A)  1.4:1.
B)  0.7:1.
C)  0.3:1.
D)  1:1.
E)  0.4:1.F) A) and B)
G) A) and E)

Question 9

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what were the percentage increases for Year 2 and Year 3 compared to the base year?

Accepted Answer

A)  80% for Year 2 and 90% for Year 3.
B)  88% for Year 2 and 80% for Year 3.
C)  88% for Year 2 and 90% for Year 3.
D)  112.5% for Year 2 and 125% for Year 3.
E)  125% for Year 2 and 112.5% for Year 3.F) A) and C)
G) A) and B)

Question 10

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Accepted Answer

A) True 
 B)False

Question 11

Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750.The Days' sales in inventory (rounded to whole days) is:

Accepted Answer

A)  18 days.
B)  418 days.
C)  10 days.
D)  56 days.
E)  20 days.F) A) and E)
G) A) and B)

Question 12

Comparative calendar-year financial data for a company are shown below.Calculate the following ratios for the company for 2016:
(a)accounts receivable turnover
(b)day's sales uncollected
(c)inventory turnover
(d)days' sales in inventory

Accepted Answer

The answer of Comparative calendar-year financial data for a company...

Question 13

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

Accepted Answer

A)  3.1.
B)  22.0.
C)  93.8.
D)  32.0.
E)  3.3.F) A) and E)
G) A) and B)

Question 14

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 percentage change for Year 2 compared to the base year is:

Accepted Answer

A)  104%.
B)  100%.
C)  4%.
D)  96%.
E)  4.2%.F) A) and B)
G) A) and C)

Question 15

Calculate the percent increases for each of the following selected balance sheet items.

Accepted Answer

The answer of Calculate the percent increases for each of...

Question 16

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

A) True 
 B)False

Question 17

The return on common stockholder's equity measures a company's success in earning net income for its owners.

Accepted Answer

A) True 
 B)False

Question 18

Information from a manufacturing company's current year income statement follows.Calculate the company's (a)profit margin ratio, (b)gross margin ratio,and (c)times interest earned.

Accepted Answer

The answer of Information from a manufacturing company's current year...

Question 19

Financial reporting refers to:

Accepted Answer

A)  The application of analytical tools to general-purpose financial statements.
B)  The communication of financial information useful for decision making.
C)  General-purpose financial statements only.
D)  Ratio analysis only.
E)  Profitability.F) A) and D)
G) C) and D)

Question 20

Profitability is the ability to generate positive market expectations.

Accepted Answer

A) True 
 B)False

Exam 17: Analysis of Financial Statements

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

Correct AnswerverifiedShow Answer

A corporation reports the following year-end balance sheet data.Calculate the following ratios: (a)working capital (b)acid-test ratio (c)current ratio (d)debt ratio (e)equity ratio (f)debt-to-equity ratio

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Common-size statements:

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Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what were the percentage increases for Year 2 and Year 3 compared to the base year?

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A good financial report does not link interpretations and conclusions of analysis with the underlying information.

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Comparative calendar-year financial data for a company are shown below.Calculate the following ratios for the company for 2016: (a)accounts receivable turnover (b)day's sales uncollected (c)inventory turnover (d)days' sales in inventory

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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.

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Calculate the percent increases for each of the following selected balance sheet items.

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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 percentage change for Year 2 compared to the base year is:

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Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

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Industry standards for financial statement analysis:

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Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750.The Days' sales in inventory (rounded to whole days) is:

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Information from a manufacturing company's current year income statement follows.Calculate the company's (a)profit margin ratio, (b)gross margin ratio,and (c)times interest earned.

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Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current ratio is:

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Financial reporting refers to:

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The comparison of a company's financial condition and performance to a base amount is known as:

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The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

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Profitability is the ability to generate positive market expectations.

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Internal users of financial information:

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The return on common stockholder's equity measures a company's success in earning net income for its owners.

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