Question 1

Consider the formula used to calculate each of the following financial performance ratios. From the list of financial statement items below, match its letter with the ratio it is used to calculate. Some financial statement items will be used more than once. Some ratios will use one letter from the list and some ratios will use two letters from the list.
Ratio
___ Net Profit Margin
___ Debt-to-assets ratio
___ EPS
___ ROE
___ Days to collect
___ Days to sell
___ Price earnings ratio
___ Current ratio
___ Fixed asset turnover
___ Gross profit percentage
___ Quick ratio
Financial Statement Item
A) Net income
B) Interest paid
C) Cost of goods sold
D) Net sales revenue
E) Total liabilities
F) Total assets at year end
G) Average stockholders' equity
H) Current liabilities

Accepted Answer

A and D, E...

Question 2

The following information pertains to the CJ Company:
A. 12.7% 
B. 1.7% 
C. 0.6% 
D. 0.9%

Accepted Answer

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Question 3

At the end of last year, Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000. The company issued shares to new stockholders at the beginning of the current year for $1,000,000. As a direct result of this transaction, the:

Accepted Answer

A)   debt-to-assets ratio will increase.
B)   asset turnover ratio will decrease.
C)   net profit margin ratio will increase.
D)   net profit margin ratio will decrease.E) B) and C)
F) A) and C)

Question 4

Which of the following would improve a current ratio that is now 1.2?

Accepted Answer

A)   Selling long-term assets for cash
B)   Purchasing land for cash
C)   Buying equipment in exchange for a two-year note
D)   Purchasing inventory on accountE) B) and D)
F) A) and C)

Question 5

Which of the following factors would cause the least amount of concern about a company's ability to continue as a going-concern?

Accepted Answer

A)   Excessive reliance on debt financing
B)   Loss of key personnel without comparable replacement
C)   Inadequate maintenance of long-lived assets
D)   Declining profit marginsE) B) and C)
F) C) and D)

Question 6

Which of these is not one of the categories of ratio analysis?

Accepted Answer

A)   Profitability
B)   Liquidity
C)   Solvency
D)   ProbabilityE) None of the above
F) All of the above

Question 7

The conceptual framework for financial accounting and reporting consists of which three main components?

Accepted Answer

A)   Goals, Concepts, and Exceptions.
B)   Objective, Codes, and Guidelines.
C)   Objective, Elements, and Concepts.
D)   Concepts, Principles, and Practices.E) A) and B)
F) None of the above

Question 8

Mercedes, Co. has the following quarterly financial information.  Required:
Part a. Calculate the gross profit percentage for each quarter.
Part b. Calculate the net profit margin for each quarter.
Part c. Calculate the EPS for each quarter.
Part d. Calculate the Price/Earnings ratio at the end of the year.
Part e. Evaluate the company's profitability.
Round all ratios to two decimal places.

Accepted Answer

Part a
Gross profit percentage = [(Net s...

Question 9

Which of the measures below is used to assess profitability?

Accepted Answer

A)   Current ratio
B)   Debt-to-assets ratio
C)   Asset turnover
D)   Receivables turnoverE) A) and B)
F) A) and C) C

Question 10

Which of the following is calculated by dividing net income by revenues?

Accepted Answer

A)   Gross profit margin
B)   Current ratio
C)   Net profit margin
D)   Asset turnoverE) All of the above
F) A) and B)

Question 11

For each of the accounting treatments below, indicate whether it is followed in GAAP, or IFRS, or both, by placing an "X" in the appropriate column(s).

Accepted Answer

The answer of For each of the accounting treatments below,...

Question 12

Which of the following will not improve a company's gross profit percentage?

Accepted Answer

A)   An increase in the sales price
B)   A decrease in the cost of inventory
C)   A decrease in the shipping cost for merchandise purchased
D)   Collecting cash from customers in advanceE) B) and C)
F) A) and D)

Question 13

Assume the following sales data for a company:  By what percentage did sales differ between Years 1 and 2 and Years 2 and 3, respectively?

Accepted Answer

A)   40.0% and (10.7%) 
B)   28.6% and (12.0%) 
C)   40.0% and (15.0%) 
D)   32.0% and (10.7%) E) A) and B)
F) B) and D)

Question 14

Which type of ratio indicates a company's ability to generate income in the current period?

Accepted Answer

A)   Profitability ratios
B)   Liquidity ratios
C)   Solvency ratios
D)   Current ratiosE) A) and C)
F) C) and D)

Question 15

How competitors calculate depreciation is most likely to affect comparisons between competitors if property, plant and equipment:

Accepted Answer

A)   makes up a large percentage of assets and average useful lives are fairly different.
B)   makes up a small percentage of assets and assets are financed in a different way.
C)   makes up a small percentage of assets and average useful lives are fairly similar.
D)   is primarily leased in the industry, not purchaseD.Different accounting methods for depreciation are likely to have a major impact on the comparability of financial ratios among competitors if property, plant, and equipment make up a large portion of total assets and the companies use a varying range of estimated useful lives for buildings and equipment.E) A) and B)
F) A) and C) A

Question 16

Which of the following nonfinancial factors is most likely to be a cause of a going-concern problem?

Accepted Answer

A)   Hiring a new CEO
B)   Loss of a key patent
C)   Announcing a new stock issue
D)   Replacing an old product lineE) All of the above
F) B) and C)

Question 17

The ratio that measures how many times a company replenishes its inventory in a year is the:

Accepted Answer

A)   days to sell ratio.
B)   receivables turnover ratio.
C)   inventory turnover ratio.
D)   days to collect ratio.E) None of the above
F) B) and D) C

Question 18

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Accepted Answer

A)   large percentage of assets and inventory costs are stable.
B)   large percentage of assets and inventory costs are not stable.
C)   small percentage of assets and inventory costs are not stable.
D)   small percentage of assets and inventory costs are stable.E) A) and B)
F) A) and C)

Question 19

Which of these ratios measure liquidity?

Accepted Answer

A)   Receivables turnover
B)   Net profit margin
C)   Debt-to-assets ratio
D)   Fixed asset turnoverE) All of the above
F) B) and C)

Question 20

Horizontal analysis:

Accepted Answer

A)   is used to identify trends over time.
B)   identifies the relative contribution made by each financial statement line item.
C)   provides an understanding of the relationships among various items on financial statements.
D)   involves comparing amounts across different financial statements.E) A) and B)
F) All of the above

Exam 13: Financial Statement Analysis

Correct Answer
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A and D, E...
View Answer

The following information pertains to the CJ Company: A. 12.7% B. 1.7% C. 0.6% D. 0.9%

Correct Answer
verified
What would be repor...
View Answer

At the end of last year, Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000. The company issued shares to new stockholders at the beginning of the current year for $1,000,000. As a direct result of this transaction, the:

Correct Answer
verified

Which of the following would improve a current ratio that is now 1.2?

Correct Answer
verified

Which of the following factors would cause the least amount of concern about a company's ability to continue as a going-concern?

Correct Answer
verified

Which of these is not one of the categories of ratio analysis?

Correct Answer
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The conceptual framework for financial accounting and reporting consists of which three main components?

Correct Answer
verified

Correct Answer
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Part a
Gross profit percentage = [(Net s...
View Answer

Which of the measures below is used to assess profitability?

Correct Answer
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C

Which of the following is calculated by dividing net income by revenues?

Correct Answer
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For each of the accounting treatments below, indicate whether it is followed in GAAP, or IFRS, or both, by placing an "X" in the appropriate column(s).

Correct Answer
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Which of the following will not improve a company's gross profit percentage?

Correct Answer
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Assume the following sales data for a company: By what percentage did sales differ between Years 1 and 2 and Years 2 and 3, respectively?

Correct Answer
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Which type of ratio indicates a company's ability to generate income in the current period?

Correct Answer
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How competitors calculate depreciation is most likely to affect comparisons between competitors if property, plant and equipment:

Correct Answer
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A

Which of the following nonfinancial factors is most likely to be a cause of a going-concern problem?

Correct Answer
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The ratio that measures how many times a company replenishes its inventory in a year is the:

Correct Answer
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C

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Correct Answer
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Which of these ratios measure liquidity?

Correct Answer
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Horizontal analysis:

Correct Answer
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Exam 13: Financial Statement Analysis

Correct AnswerverifiedA and D, E...View AnswerShow Answer

The following information pertains to the CJ Company: A. 12.7% B. 1.7% C. 0.6% D. 0.9%

Correct Answerverified What would be repor...View AnswerShow Answer

At the end of last year, Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000. The company issued shares to new stockholders at the beginning of the current year for $1,000,000. As a direct result of this transaction, the:

Correct AnswerverifiedShow Answer

Which of the following would improve a current ratio that is now 1.2?

Correct AnswerverifiedShow Answer

Which of the following factors would cause the least amount of concern about a company's ability to continue as a going-concern?

Correct AnswerverifiedShow Answer

Which of these is not one of the categories of ratio analysis?

Correct AnswerverifiedShow Answer

The conceptual framework for financial accounting and reporting consists of which three main components?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart aGross profit percentage = [(Net s...View AnswerShow Answer

Which of the measures below is used to assess profitability?

Correct AnswerverifiedC

Which of the following is calculated by dividing net income by revenues?

Correct AnswerverifiedShow Answer

For each of the accounting treatments below, indicate whether it is followed in GAAP, or IFRS, or both, by placing an "X" in the appropriate column(s).

Correct AnswerverifiedShow Answer

Which of the following will not improve a company's gross profit percentage?

Correct AnswerverifiedShow Answer

Assume the following sales data for a company: By what percentage did sales differ between Years 1 and 2 and Years 2 and 3, respectively?

Correct AnswerverifiedShow Answer

Which type of ratio indicates a company's ability to generate income in the current period?

Correct AnswerverifiedShow Answer

How competitors calculate depreciation is most likely to affect comparisons between competitors if property, plant and equipment:

Correct AnswerverifiedA

Which of the following nonfinancial factors is most likely to be a cause of a going-concern problem?

Correct AnswerverifiedShow Answer

The ratio that measures how many times a company replenishes its inventory in a year is the:

Correct AnswerverifiedC

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Correct AnswerverifiedShow Answer

Which of these ratios measure liquidity?

Correct AnswerverifiedShow Answer

Horizontal analysis:

Correct AnswerverifiedShow Answer

Correct Answer
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A and D, E...
View Answer

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What would be repor...
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Part a
Gross profit percentage = [(Net s...
View Answer

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C

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A

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C

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