Question 1

The following information is taken from the financial statements of a company for the current year:
 
-Use the information above to answer the following question.On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

Accepted Answer

A)   76%
B)   24%
C)   31%
D)   18%E) B) and C)
F) None of the above

Question 2

A current ratio of 2.5 means that for every dollar of:

Accepted Answer

A)   accounts payable, there is $2.50 of cash.
B)   current liabilities, there is $2.50 of current assets.
C)   current assets, there is $2.50 of current liabilities.
D)   total liabilities, there is $2.50 of cash.E) B) and D)
F) B) and C)

Question 3

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

Accepted Answer

A)   Debt-to-assets
B)   Fixed asset turnover
C)   Return on equity
D)   Current ratioE) A) and B)
F) A) and C)

Question 4

A current ratio of less than one is not so much of a concern when the company has a:

Accepted Answer

A)   low fixed asset turnover ratio.
B)   high days to collect number.
C)   high inventory turnover ratio.
D)   high debt-to-equity ratio.E) B) and D)
F) None of the above

Question 5

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) B) and D)
F) None of the above

Question 6

Vertical analysis is the comparison of a company's financial information over time.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

Accepted Answer

A)   Return on assets ratio
B)   Return on equity ratio
C)   Earnings per share
D)   Net profit margin ratioE) A) and B)
F) C) and D)

Question 8

Which income statement line item had the largest percentage increase from the prior year to the current year?

Accepted Answer

A)   Depreciation Expense
B)   Cost of Goods Sold
C)   Interest Expense
D)   SalesE) All of the above
F) A) and B)

Question 9

Which of the following is not a similarity of GAAP and IFRS?

Accepted Answer

A)   They both generally require that an exchange take place before a transaction is recorded.
B)   They both promote information that is relevant and that faithfully represents the underlying transactions.
C)   They both include rules about recognition, classification, and measurement of transactions.
D)   They both allow fixed assets to be reported at fair values.E) A) and B)
F) B) and D)

Question 10

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Accepted Answer

A)   previous period amount from the current amount.
B)   current period amount from the previous period amount.
C)   current period amount from the previous period amount and then dividing the result by the previous period amount.
D)   previous period amount from the current period amount and then dividing the result by the current period amount.E) B) and C)
F) C) and D)

Question 11

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Accepted Answer

A)   The number of stores has expanded.
B)   Cost of Goods sold has been increasing.
C)   Employee wages have been increasing.
D)   The company has closed some of its stores.E) A) and B)
F) B) and D)

Question 12

To analyze changes in a company's sales over the last five years,you should perform:

Accepted Answer

A)   vertical analysis.
B)   ratio analysis.
C)   horizontal analysis.
D)   cross-sectional analysis.E) C) and D)
F) A) and C)

Question 13

Husain,Inc.'s income statement and other financial information for the current year is presented below.
  
Required:
Part a.Perform vertical analysis of the income statement.(Round to the nearest whole percentage.)
Part b.Calculate the debt-to-assets ratio.(Round to two decimal places.)
Part c.Calculate the times interest earned ratio.(Round to two decimal places.)
Part d.Evaluate the company's solvency.

Accepted Answer

Part a

Part b
Debt to Assets = Total ...

Question 14

Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?

Accepted Answer

A)   Puffin generated more sales per dollar of fixed assets.
B)   Puffin has greater depreciation expense.
C)   Puffin has more fixed assets.
D)   Puffin has greater sales.E) A) and B)
F) A) and C)

Question 15

The debt-to-assets ratio is the:

Accepted Answer

A)   ratio of current liabilities to current assets.
B)   ratio of long term liabilities to fixed assets.
C)   ratio of total liabilities to total assets.
D)   proportion of short-term liabilities to total liabilities.E) All of the above
F) C) and D)

Question 16

Horizontal analysis involves:

Accepted Answer

A)   Comparing individual financial statement line items with each other to understand the relationships between line items.
B)   Comparing individual financial statement line items to some benchmark, typically similar competitors' financial statement line items.
C)   Comparing individual financial statement line items over time.
D)   Comparing individual financial statement line items that have been arranged horizontally from highest to lowest dollar amounts.E) None of the above
F) B) and D)

Question 17

The income statements for Urban Outfits,Inc.are presented below:
  
Required:
Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent.
Part b.Interpret your analysis.Comment on significant changes.

Accepted Answer

Part a

Part b
Sales increased by 7% b...

Question 18

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.E) A) and D)
F) C) and D)

Question 19

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 20

Which of the following ratios is used to evaluate solvency?

Accepted Answer

A)   Earnings per share (EPS) 
B)   Fixed asset turnover
C)   Debt-to-assets
D)   Current ratioE) A) and B)
F) A) and C)

Exam 13: Measuring and Evaluating Financial Performance

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

Correct Answer
verified

To analyze changes in a company's sales over the last five years,you should perform:

Correct Answer
verified

Which of the following is not a similarity of GAAP and IFRS?

Correct Answer
verified

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

Correct Answer
verified

The debt-to-assets ratio is the:

Correct Answer
verified

A current ratio of less than one is not so much of a concern when the company has a:

Correct Answer
verified

Which income statement line item had the largest percentage increase from the prior year to the current year?

Correct Answer
verified

Vertical analysis is the comparison of a company's financial information over time.

Correct Answer
verified

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

Correct Answer
verified

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Correct Answer
verified

Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?

Correct Answer
verified

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

Correct Answer
verified

The going-concern assumption states that the:

Correct Answer
verified

Which of the following ratios is used to evaluate solvency?

Correct Answer
verified

Correct Answer
verified
Part a

Part b
Debt to Assets = Total ...
View Answer

Horizontal analysis involves:

Correct Answer
verified

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Correct Answer
verified

A current ratio of 2.5 means that for every dollar of:

Correct Answer
verified

The following information is taken from the financial statements of a company for the current year: -Use the information above to answer the following question.On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

Correct Answer
verified

The income statements for Urban Outfits,Inc.are presented below: Required: Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent. Part b.Interpret your analysis.Comment on significant changes.

Correct Answer
verified
Part a

Part b
Sales increased by 7% b...
View Answer

Exam 13: Measuring and Evaluating Financial Performance

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

Correct AnswerverifiedShow Answer

To analyze changes in a company's sales over the last five years,you should perform:

Correct AnswerverifiedShow Answer

Which of the following is not a similarity of GAAP and IFRS?

Correct AnswerverifiedShow Answer

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

The debt-to-assets ratio is the:

Correct AnswerverifiedShow Answer

A current ratio of less than one is not so much of a concern when the company has a:

Correct AnswerverifiedShow Answer

Which income statement line item had the largest percentage increase from the prior year to the current year?

Correct AnswerverifiedShow Answer

Vertical analysis is the comparison of a company's financial information over time.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Correct AnswerverifiedShow Answer

Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The going-concern assumption states that the:

Correct AnswerverifiedShow Answer

Which of the following ratios is used to evaluate solvency?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart a Part bDebt to Assets = Total ...View AnswerShow Answer

Horizontal analysis involves:

Correct AnswerverifiedShow Answer

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Correct AnswerverifiedShow Answer

A current ratio of 2.5 means that for every dollar of:

Correct AnswerverifiedShow Answer

The following information is taken from the financial statements of a company for the current year: -Use the information above to answer the following question.On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

Correct AnswerverifiedShow Answer

The income statements for Urban Outfits,Inc.are presented below: Required: Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent. Part b.Interpret your analysis.Comment on significant changes.

Correct AnswerverifiedPart a Part bSales increased by 7% b...View AnswerShow Answer

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Part a

Part b
Debt to Assets = Total ...
View Answer

Correct Answer
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Part a

Part b
Sales increased by 7% b...
View Answer