Question 1

Which of the following is a profitability measure?

Accepted Answer

A)   Net income ÷ Revenues
B)   Total assets ÷ Total stockholders' equity
C)   Total liabilities ÷ Total stockholders' equity
D)   Cost of goods sold ÷ Average inventoryE) B) and C)
F) A) and D)

Question 2

In a common size income statement, each item on the income statement is expressed as a percentage of:

Accepted Answer

A)   net income.
B)   gross profit.
C)   total expenses.
D)   sales revenue.E) None of the above
F) A) and C)

Question 3

The going-concern assumption states that the:

Accepted Answer

A)   company will always maximize the profit for stockholders.
B)   company is not expected to go out of business in the near future.
C)   company is a separate concern from the stockholders.
D)   company's results will be reported in a consistent manner from period to perioD.The going-concern (also called the continuity)  assumption means that a business is assumed to be capable of continuing its operations long enough to meet its obligations.E) C) and D)
F) None of the above

Question 4

Benchmarks are required to evaluate a company's performance

Accepted Answer

A) True 
 B)False

Question 5

Net income was $418,600 in the current year and $364,000 in the prior year. The year-to-year percentage change in net income is closest to:

Accepted Answer

A)   15%.
B)   55%.
C)   87%.
D)   13%.E) A) and B)
F) A) and C)

Question 6

Which of the following measures would assist in assessing the liquidity of a company?

Accepted Answer

A)   Return on equity
B)   Fixed asset turnover ratio
C)   Receivables turnover ratio
D)   Times interest earnedE) None of the above
F) A) and B)

Question 7

Company X has net sales revenue of $1,250,000, cost of goods sold of $760,000, and all other expenses of $290,000. The beginning balance of stockholders' equity is $400,000 and the beginning balance of fixed assets is $361,000. The ending balance of stockholders' equity is $600,000 and the ending balance of fixed assets is $389,000. The fixed asset turnover ratio is closest to:

Accepted Answer

A)   0.53.
B)   2.50.
C)   3.33.
D)   0.80.E) A) and B)
F) C) and D)

Question 8

Which of the following is not a profitability ratio?

Accepted Answer

A)   Return on equity (RO
E)  
B)   Earnings per share
C)   Fixed asset turnover
D)   Days to sellE) B) and D)
F) None of the above

Question 9

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover

Accepted Answer

A) True 
 B)False

Question 10

When evaluating its net profit margin for the current year, Coca Cola would most likely use all of the following benchmarks except:

Accepted Answer

A)   Anheuser Busch's net profit margin.
B)   the Fortune 500's net profit margin.
C)   Pepsico's net profit margin.
D)   the average net profit margin for the soft drink manufacturing industry.E) A) and B)
F) C) and D)

Question 11

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Accepted Answer

A)   Net profit margin ratio
B)   Current ratio
C)   Inventory turnover ratio
D)   Fixed asset turnover ratioE) B) and C)
F) A) and D)

Question 12

A company's comparative balance sheet show total assets of $990,000 and $900,000, for the current and prior years, respectively. The percentage change to be reported in the horizontal analysis is an increase of:

Accepted Answer

A)   10%.
B)   9%.
C)   5%.
D)   4%.E) A) and B)
F) A) and C)

Question 13

A company has a debt-to-assets ratio of 0.45. If the company then borrows cash from the bank to finance a building acquisition, which of the following is a correct statement?

Accepted Answer

A)   The debt-to-assets ratio will be unchanged.
B)   The debt-to-assets ratio will increase.
C)   The debt-to-assets ratio will decrease.
D)   The debt-to-assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.E) All of the above
F) None of the above

Question 14

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

Accepted Answer

A)   Return on equity ratio
B)   Net profit margin ratio
C)   Current ratio
D)   Fixed asset turnover ratioE) B) and C)
F) None of the above

Question 15

Which of the following measures would assist in assessing the profitability of a company?

Accepted Answer

A)   Debt-to-assets ratio
B)   Fixed asset turnover ratio
C)   Receivables turnover ratio
D)   Current ratioE) None of the above
F) A) and C)

Question 16

If net income is rising, but net sales revenue and the gross profit percentage remain the same, then:

Accepted Answer

A)   operating expenses are falling.
B)   operating expenses are rising.
C)   cost of goods sold is falling.
D)   cost of goods sold is rising.E) B) and C)
F) A) and B)

Question 17

During the current accounting period, revenue from credit sales is $671,000. The Accounts Receivable balance is $51,480 at the beginning of the period and $52,200 at the end of the period. Which of the following statements is correct?

Accepted Answer

A)   The receivables turnover ratio is 12.9.
B)   On average, it takes 12.9 days to collect payment from credit customers.
C)   The receivables turnover ratio is 28.3.
D)   On average, the company sells its inventory every 28.3 days.E) A) and B)
F) None of the above

Question 18

The ratio that measures the company's ability to meet required interest payments is the:

Accepted Answer

A)   debt-to-equity ratio.
B)   current ratio.
C)   Price/Earnings ratio.
D)   times interest earned ratio.E) B) and C)
F) A) and C)

Question 19

Which of the following is calculated by dividing cost of goods sold by average inventory and then dividing this result into 365 days?

Accepted Answer

A)   Inventory turnover
B)   Current ratio
C)   Days to collect ratio
D)   Days to sell ratioE) A) and B)
F) A) and C)

Question 20

Company X has net sales revenue of $780,000, cost of goods sold of $343,200, and all other expenses of $327,600. The net profit margin is closest to:

Accepted Answer

A)   0.32.
B)   0.56.
C)   0.86.
D)   0.14.E) A) and D)
F) B) and C)

Exam 13: Financial Statement Analysis

When evaluating its net profit margin for the current year, Coca Cola would most likely use all of the following benchmarks except:

Correct Answer
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A company's comparative balance sheet show total assets of $990,000 and $900,000, for the current and prior years, respectively. The percentage change to be reported in the horizontal analysis is an increase of:

Correct Answer
verified

Which of the following is calculated by dividing cost of goods sold by average inventory and then dividing this result into 365 days?

Correct Answer
verified

Which of the following is not a profitability ratio?

Correct Answer
verified

A company has a debt-to-assets ratio of 0.45. If the company then borrows cash from the bank to finance a building acquisition, which of the following is a correct statement?

Correct Answer
verified

The ratio that measures the company's ability to meet required interest payments is the:

Correct Answer
verified

Which of the following measures would assist in assessing the profitability of a company?

Correct Answer
verified

Which of the following is a profitability measure?

Correct Answer
verified

Net income was $418,600 in the current year and $364,000 in the prior year. The year-to-year percentage change in net income is closest to:

Correct Answer
verified

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover

Correct Answer
verified

Company X has net sales revenue of $780,000, cost of goods sold of $343,200, and all other expenses of $327,600. The net profit margin is closest to:

Correct Answer
verified

Correct Answer
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The going-concern assumption states that the:

Correct Answer
verified

During the current accounting period, revenue from credit sales is $671,000. The Accounts Receivable balance is $51,480 at the beginning of the period and $52,200 at the end of the period. Which of the following statements is correct?

Correct Answer
verified

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Correct Answer
verified

Benchmarks are required to evaluate a company's performance

Correct Answer
verified

If net income is rising, but net sales revenue and the gross profit percentage remain the same, then:

Correct Answer
verified

Which of the following measures would assist in assessing the liquidity of a company?

Correct Answer
verified

In a common size income statement, each item on the income statement is expressed as a percentage of:

Correct Answer
verified

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

Correct Answer
verified

Exam 13: Financial Statement Analysis

When evaluating its net profit margin for the current year, Coca Cola would most likely use all of the following benchmarks except:

Correct AnswerverifiedShow Answer

A company's comparative balance sheet show total assets of $990,000 and $900,000, for the current and prior years, respectively. The percentage change to be reported in the horizontal analysis is an increase of:

Correct AnswerverifiedShow Answer

Which of the following is calculated by dividing cost of goods sold by average inventory and then dividing this result into 365 days?

Correct AnswerverifiedShow Answer

Which of the following is not a profitability ratio?

Correct AnswerverifiedShow Answer

A company has a debt-to-assets ratio of 0.45. If the company then borrows cash from the bank to finance a building acquisition, which of the following is a correct statement?

Correct AnswerverifiedShow Answer

The ratio that measures the company's ability to meet required interest payments is the:

Correct AnswerverifiedShow Answer

Which of the following measures would assist in assessing the profitability of a company?

Correct AnswerverifiedShow Answer

Which of the following is a profitability measure?

Correct AnswerverifiedShow Answer

Net income was $418,600 in the current year and $364,000 in the prior year. The year-to-year percentage change in net income is closest to:

Correct AnswerverifiedShow Answer

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover

Correct AnswerverifiedShow Answer

Company X has net sales revenue of $780,000, cost of goods sold of $343,200, and all other expenses of $327,600. The net profit margin is closest to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The going-concern assumption states that the:

Correct AnswerverifiedShow Answer

During the current accounting period, revenue from credit sales is $671,000. The Accounts Receivable balance is $51,480 at the beginning of the period and $52,200 at the end of the period. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Correct AnswerverifiedShow Answer

Benchmarks are required to evaluate a company's performance

Correct AnswerverifiedShow Answer

If net income is rising, but net sales revenue and the gross profit percentage remain the same, then:

Correct AnswerverifiedShow Answer

Which of the following measures would assist in assessing the liquidity of a company?

Correct AnswerverifiedShow Answer

In a common size income statement, each item on the income statement is expressed as a percentage of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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