FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 14: Financial Statement Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

True/False

Review LaterAdd Note

Review Later

In terms of solvency,the larger the number of times interest is earned,the better.

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant purchased merchandise on account for $4,000.Which of the following statements is true?

A) Gant's current ratio will decrease.
B) Gant's quick ratio will increase.
C) Gant's working capital will increase.
D) Gant's quick ratio will increase and its current ratio will decrease.

E) None of the above
F) B) and C)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

The Poole Company reported the following income for Year 2: $\begin{array}{lr}\text { Sales}&\$30,000\\\text {Cost of goods sold }&8,000\\\text { Gross margin}&\$22,000\\\text {Selling and administrative expense }&10,000\\\text { Operating income}&\$12,000\\\text { Interest expense}&4,000\\\text {Income before taxes }&\$8,000\\\text {income tax expense }&2,500\\\text {Net income }&\$5,500\\\end{array}$ What is the company's net margin? (Rounded to the nearest whole percent.)

While horizontal analysis examines one item over many time periods,vertical analysis examines many items in the same interval of time.

Working capital is defined as:

The following balance sheet information is provided for Apex Company for Year 2: $\begin{array}{lr}\text { Assets }\\\text { Cash }&\$5,400\\\text { Accounts receivable }&15,500\\\text { Inventory }&18,000\\\text { Prepaid expenses }&1,600\\\text { Plant and equipment, net of depreciation }&20,200\\\text { Land }&19,950\\\text { Total assets }&\$80,650\\\text { Liabilities and Stockholders' Equity }\\\text { Accounts payable } & 4,500 \\\text { Salaries payable } & 11,500 \\\text { Bonds payable (due in ten years) } &19,000 \\\text { Common stock, no par } & 30,000 \\\text { Retained earnings } &15,650\\\text { Total liabilities and stockholders' equity }&\$80,650\end{array}$ What is the company's working capital?

If a company purchased a $60,000 piece of equipment by paying $30,000 and having the rest financed with a short-term note from the bank.Immediately after this transaction what is the expected impact on the components of the current ratio?

Solvency ratios are used to assess a company's:

You are considering an investment in Facebook stock and wish to assess the company's position in the stock market.All of the following ratios can be used except:

Factor(s) involved in communicating useful information is (are) :

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant recorded cost of goods sold of $4,100.As a result of this transaction,Gant's quick ratio will:

A limitation of financial statement analysis stems from the discretion of management to choose accounting procedures that cast the best light on the firm's performance.

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2 Gant paid $3,600 on accounts payable.Which of the following statements is not true?

Short-term creditors are usually most interested in assessing:

Which of the following statements regarding net margin is not true?

Martin Company reported net income of $15,000 on gross sales of $80,000.The company has average total assets of $135,000,of which $102,000 is property,plant and equipment.What is the company's return on investment? (Rounded to the nearest decimal point.)

Benson Company received cash of $5,000,000 by issuing 20-year bonds payable.As a result of this transaction,the company's current ratio will:

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

Which of the following is (are) objective(s) of ratio analysis?

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant issued common stock at par value for $10,000 cash.Which of the following statements is true?