Question 1

Gains or losses from discontinued operations are reported on a separate line on the income statement net of income tax effects.

Accepted Answer

A) True 
 B)False

Question 2

If the debt-to-assets ratio is 0.63, it means that 37% of the company's financing has been provided by stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 3

Company X has a capital acquisitions ratio of 0.8. Company Y has a capital acquisitions ratio of 1.2. Which of the following statements is true?

Accepted Answer

A)   Company X is more likely to have a higher quality of income ratio than Company Y.
B)   Company Y is less likely to need external financing than Company X.
C)   Company X is more likely to have a higher times interest earned ratio than Company Y.
D)   Company X is less likely to need external financing than Company Y.E) A) and C)
F) A) and B)

Question 4

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

Accepted Answer

A)   32%
B)   56%
C)   86%
D)   14%E) All of the above
F) A) and C)

Question 5

What is the fixed asset turnover ratio for 2011?

Accepted Answer

A)   1.28
B)   1.24
C)   0.75
D)   1.64E) All of the above
F) None of the above

Question 6

A company provided the following information:  There was no change in contributed capital this year and there were no dividends declared in the current year. The return on equity ratio for the current year is:

Accepted Answer

A)   20.7%
B)   75%
C)   3.8%
D)   1.33%E) All of the above
F) B) and C)

Question 7

What is the debt-to-assets ratio for 2011?

Accepted Answer

A)   39
B)   61
C)   35
D)   0E) None of the above
F) All of the above

Question 8

If sales revenue for 2012 is $850,000, what is the asset turnover ratio for 2012?

Accepted Answer

A)   68
B)   63
C)   0
D)   74E) A) and B)
F) A) and C)

Question 9

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)   Asset turnover ratio.E) A) and D)
F) A) and C)

Question 10

Which of the following could indicate bad news?

Accepted Answer

A)   An increase in asset turnover ratio.
B)   A decrease in days to sell.
C)   A decrease in EPS.
D)   An increase in capital acquisition ratio.E) A) and C)
F) A) and D)

Question 11

A company has a current ratio of 2.0 and a quick ratio of 1.4. If the company then collects an accounts receivable, which of the following is a true statement?

Accepted Answer

A)   The current ratio will not change and the quick ratio will increase.
B)   The current ratio will increase and the quick ratio will increase.
C)   The current ratio and the quick ratio will not change.
D)   The current ratio will increase and the quick ratio will decrease.E) All of the above
F) B) and D)

Question 12

Which ratio is used to evaluate how a company is managing its property, plant and equipment?

Accepted Answer

A)   Accounts receivable turnover
B)   Inventory turnover
C)   Fixed asset turnover
D)   Net profit marginE) A) and B)
F) None of the above

Question 13

Compute the earnings per share for the current year.

Accepted Answer

A)   $10.00
B)   $20.00
C)   $7.25
D)   $7.50E) None of the above
F) All of the above

Question 14

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) A) and B)
F) All of the above

Question 15

If an analyst wants to examine a company's current ability to generate income, which of the following would best be considered?

Accepted Answer

A)   Liquidity
B)   Market share
C)   Profitability
D)   SolvencyE) A) and D)
F) None of the above

Question 16

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 margin (gross profit) 
C)   Total expenses
D)   Sales revenueE) A) and D)
F) None of the above

Question 17

A company's comparative balance sheets show total assets for 2012 and 2011 as $990,000 and $900,000, respectively. What is the percentage change to be reported in the horizontal analysis?

Accepted Answer

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

Question 18

The cost-benefit constraint recognizes that:

Accepted Answer

A)   the costs of providing information to users should be less than the benefits.
B)   the expenses of an operation should be less than the revenues.
C)   the expenses and revenues associated with a transaction should be reported at the same time.
D)   all the information that is possible to be gathered should be reported.E) None of the above
F) All of the above

Question 19

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

Accepted Answer

A)   Quality of income ratio
B)   Times interest earned ratio
C)   Inventory turnover ratio
D)   Capital acquisitions ratioE) A) and B)
F) A) and C)

Question 20

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

Accepted Answer

A)   Return on equity.
B)   Current ratio.
C)   Net profit margin.
D)   Total asset turnover.E) A) and D)
F) B) and C)

Exam 13: Measuring and Evaluating Financial Performance

Gains or losses from discontinued operations are reported on a separate line on the income statement net of income tax effects.

Correct AnswerverifiedShow Answer

If the debt-to-assets ratio is 0.63, it means that 37% of the company's financing has been provided by stockholders' equity.

Correct AnswerverifiedShow Answer

A company has a current ratio of 2.0 and a quick ratio of 1.4. If the company then collects an accounts receivable, which of the following is a true statement?

Correct AnswerverifiedShow Answer

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

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Compute the earnings per share for the current year.

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A company provided the following information: There was no change in contributed capital this year and there were no dividends declared in the current year. The return on equity ratio for the current year is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Company X has a capital acquisitions ratio of 0.8. Company Y has a capital acquisitions ratio of 1.2. Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

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 gross profit percentage is:

Correct AnswerverifiedShow Answer

Which ratio is used to evaluate how a company is managing its property, plant and equipment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the fixed asset turnover ratio for 2011?

Correct AnswerverifiedShow Answer

The cost-benefit constraint recognizes that:

Correct AnswerverifiedShow Answer

If an analyst wants to examine a company's current ability to generate income, which of the following would best be considered?

Correct AnswerverifiedShow Answer

Which of the following could indicate bad news?

Correct AnswerverifiedShow Answer

What is the debt-to-assets ratio for 2011?

Correct AnswerverifiedShow Answer

If sales revenue for 2012 is $850,000, what is the asset turnover ratio for 2012?

Correct AnswerverifiedShow Answer

A company's comparative balance sheets show total assets for 2012 and 2011 as $990,000 and $900,000, respectively. What is the percentage change to be reported in the horizontal analysis?

Correct AnswerverifiedShow Answer

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