Question 1

The discontinued operations section of the income statement refers to

Accepted Answer

A)  discontinuance of a product line.
B)  the income or loss on products that have been completed and sold.
C)  obsolete equipment and discontinued inventory items.
D)  the disposal of a significant component of a business.E) All of the above
F) A) and D)

Question 2

Ratios are most useful in identifying

Accepted Answer

A)  trends.
B)  differences.
C)  causes.
D)  relationships.E) C) and D)
F) B) and C)

Question 3

In vertical analysis, the base amount for salaries and wages expense is generally

Accepted Answer

A)  net sales.
B)  salary & wages expense in a previous year.
C)  gross profit.
D)  net income.E) A) and B)
F) B) and C)

Question 4

Which of the following statements regarding changes in accounting principles is not true?

Accepted Answer

A)  Most changes in accounting principles are only reported in current periods when the principle change takes place.
B)  Changes in accounting principles are allowed when new principles are preferable to old ones.
C)  Most changes in accounting principles are retroactively reported.
D)  Consistency is one of the biggest concerns when a change in accounting principle is undertaken.E) A) and B)
F) A) and D)

Question 5

In performing a vertical analysis, the base for prepaid expenses is

Accepted Answer

A)  total current assets.
B)  total assets.
C)  total liabilities.
D)  prepaid expenses in a previous year.E) A) and D)
F) All of the above

Question 6

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Accepted Answer

A) True 
 B)False

Question 7

A common measure of liquidity is

Accepted Answer

A)  return on assets.
B)  accounts receivable turnover.
C)  profit margin.
D)  debt to equity.E) B) and C)
F) A) and D)

Question 8

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

Accepted Answer

A) True 
 B)False

Question 9

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

Accepted Answer

A) True 
 B)False

Question 10

The following information is available for Patterson Company:  The inventory turnover for 2022 is

Accepted Answer

A)  6.4 times.
B)  6.0 times.
C)  5.6 times.
D)  3.0 times.E) None of the above
F) A) and D)

Question 11

The following information pertains to Blue Flower Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit.  What is the current ratio for this company?

Accepted Answer

A)  1.17
B)  1.25
C)  1.67
D)  0.75E) A) and C)
F) B) and C)

Question 12

A primary purpose of vertical analysis is to observe trends over a three-year period.

Accepted Answer

A) True 
 B)False

Question 13

Which of these is not a liquidity ratio?

Accepted Answer

A)  Current ratio
B)  Asset turnover
C)  Inventory turnover
D)  Accounts receivable turnoverE) B) and D)
F) A) and D)

Question 14

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

Accepted Answer

A) True 
 B)False

Question 15

Bertram Corporation had net income of $325,000 and paid dividends to common stockholders of $39,000 in 2022.The weighted average number of shares outstanding in 2022 was 50,000 shares.Bertram Corporation's common stock is selling for $52 per share on the New York Stock Exchange.Bertram Corporation's payout ratio for 2022 is

Accepted Answer

A)  $6.5 per share.
B)  16%.
C)  12%.
D)  8.3%.E) B) and C)
F) A) and D)

Question 16

Alternative accounting methods affect the quality of earnings.

Accepted Answer

A) True 
 B)False

Question 17

In a common size income statement, the 100% figure is

Accepted Answer

A)  net income.
B)  cost of goods sold.
C)  gross profit.
D)  net sales.E) B) and C)
F) C) and D)

Question 18

Improper recognition of income is not one of the factors affecting the quality of earnings.

Accepted Answer

A) True 
 B)False

Question 19

The ratios that are used to determine a company's short-term debt paying ability are

Accepted Answer

A)  asset turnover, times interest earned, current ratio, and accounts receivables turnover.
B)  times interest earned, inventory turnover, current ratio, and receivables turnover.
C)  times interest earned, accounts receivable turnover ratio, current ratio, and inventory turnover.
D)  current ratio, account receivable turnover, and inventory turnover.E) A) and C)
F) All of the above

Question 20

When preparing an income statement, which of the following is the proper order for income statement components?

Accepted Answer

A)  Comprehensive income, Other comprehensive income items, Net income
B)  Net income, Comprehensive income, Other comprehensive income items
C)  Net income, Other comprehensive income items, Comprehensive income
D)  Other comprehensive income items Net income, Comprehensive incomeE) None of the above
F) B) and C)

Exam 13: Financial Analysis: The Big Picture

In a common size income statement, the 100% figure is

Correct Answer
verified

Ratios are most useful in identifying

Correct Answer
verified

Which of these is not a liquidity ratio?

Correct Answer
verified

The following information pertains to Blue Flower Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. What is the current ratio for this company?

Correct Answer
verified

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Correct Answer
verified

Which of the following statements regarding changes in accounting principles is not true?

Correct Answer
verified

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

Correct Answer
verified

In performing a vertical analysis, the base for prepaid expenses is

Correct Answer
verified

The ratios that are used to determine a company's short-term debt paying ability are

Correct Answer
verified

Correct Answer
verified

In vertical analysis, the base amount for salaries and wages expense is generally

Correct Answer
verified

The discontinued operations section of the income statement refers to

Correct Answer
verified

Improper recognition of income is not one of the factors affecting the quality of earnings.

Correct Answer
verified

A common measure of liquidity is

Correct Answer
verified

When preparing an income statement, which of the following is the proper order for income statement components?

Correct Answer
verified

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

Correct Answer
verified

Alternative accounting methods affect the quality of earnings.

Correct Answer
verified

The following information is available for Patterson Company: The inventory turnover for 2022 is

Correct Answer
verified

A primary purpose of vertical analysis is to observe trends over a three-year period.

Correct Answer
verified

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

Correct Answer
verified

Exam 13: Financial Analysis: The Big Picture

In a common size income statement, the 100% figure is

Correct AnswerverifiedShow Answer

Ratios are most useful in identifying

Correct AnswerverifiedShow Answer

Which of these is not a liquidity ratio?

Correct AnswerverifiedShow Answer

The following information pertains to Blue Flower Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. What is the current ratio for this company?

Correct AnswerverifiedShow Answer

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Correct AnswerverifiedShow Answer

Which of the following statements regarding changes in accounting principles is not true?

Correct AnswerverifiedShow Answer

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

Correct AnswerverifiedShow Answer

In performing a vertical analysis, the base for prepaid expenses is

Correct AnswerverifiedShow Answer

The ratios that are used to determine a company's short-term debt paying ability are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In vertical analysis, the base amount for salaries and wages expense is generally

Correct AnswerverifiedShow Answer

The discontinued operations section of the income statement refers to

Correct AnswerverifiedShow Answer

Improper recognition of income is not one of the factors affecting the quality of earnings.

Correct AnswerverifiedShow Answer

A common measure of liquidity is

Correct AnswerverifiedShow Answer

When preparing an income statement, which of the following is the proper order for income statement components?

Correct AnswerverifiedShow Answer

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

Correct AnswerverifiedShow Answer

Alternative accounting methods affect the quality of earnings.

Correct AnswerverifiedShow Answer

The following information is available for Patterson Company: The inventory turnover for 2022 is

Correct AnswerverifiedShow Answer

A primary purpose of vertical analysis is to observe trends over a three-year period.

Correct AnswerverifiedShow Answer

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

Correct AnswerverifiedShow Answer

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