Question 1

In performing a vertical analysis, the base for cost of goods sold is

Accepted Answer

A)  total selling expenses.
B)  net sales.
C)  total revenues.
D)  total expenses.E) None of the above
F) All of the above

Question 2

Comparative balance sheets are usually prepared for

Accepted Answer

A)  one year.
B)  two years.
C)  three years.
D)  four years.E) B) and C)
F) A) and D)

Question 3

The acid-test (quick)  ratio

Accepted Answer

A)  is used to quickly determine a company's solvency and long-term debt paying ability.
B)  relates cash, short-term investments, and net receivables to current liabilities.
C)  is calculated by taking one item from the income statement and one item from the balance sheet.
D)  is the same as the current ratio except it is rounded to the nearest whole percent.E) B) and C)
F) A) and D) D

Question 4

___________________ evaluates a series of financial statement data over a period of time.

Accepted Answer

The answer of ___________________ evaluates a series of financial statement...

Question 5

Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis.

Accepted Answer

A) True 
 B)False

Question 6

A limitation in calculating ratios in financial statement analysis is that

Accepted Answer

A)  it requires a calculator.
B)  no one other than management would be interested in them.
C)  some account balances may reflect atypical data at year end.
D)  they seldom identify problem areas in a company.E) C) and D)
F) B) and C)

Question 7

Susie's Sweets Candy Shop had a balance in the Accounts Receivable account of $780,000 at the beginning of the year and a balance of $820,000 at the end of the year.Net credit sales during the year amounted to $5,840,000.The average collection period of the receivables in terms of days was

Accepted Answer

A)  30 days.
B)  365 days.
C)  100 days.
D)  50 days.E) A) and D)
F) C) and D)

Question 8

In analyzing the financial statements of a company, a single item on the financial statements

Accepted Answer

A)  should be reported in bold-face type.
B)  is more meaningful compared to other financial information.
C)  is significant only if it is large.
D)  should be accompanied by a footnote.E) A) and B)
F) A) and C)

Question 9

______________________ evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount.The base amount on the income statement is typically __________________ while the base amount on the balance sheet is typically ___________________.

Accepted Answer

vertical a...

Question 10

A technique for evaluating financial statements that expresses the relationship among selected items of financial statement date is

Accepted Answer

A)  common size analysis.
B)  horizontal analysis.
C)  ratio analysis.
D)  vertical analysis.E) B) and C)
F) B) and D) A

Question 11

Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.

Accepted Answer

A) True 
 B)False  False

Question 12

The ratios that are used to determine a company's short-term debt paying ability are

Accepted Answer

A)  asset turnover, times interest earned, current ratio, and receivables turnover.
B)  times interest earned, inventory turnover, current ratio, and receivables turnover.
C)  times interest earned, acid-test ratio, current ratio, and inventory turnover.
D)  current ratio, acid-test ratio, receivables turnover, and inventory turnover.E) C) and D)
F) A) and D)

Question 13

Vertical analysis is also called

Accepted Answer

A)  common size analysis.
B)  horizontal analysis.
C)  ratio analysis.
D)  trend analysis.E) C) and D)
F) B) and D)

Question 14

A liquidity ratio measures the

Accepted Answer

A)  income or operating success of an enterprise over a period of time.
B)  ability of the enterprise to survive over a long period of time.
C)  short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.
D)  number of times interest is earned.E) B) and C)
F) None of the above

Question 15

In the horizontal analysis of the income statement, each item is generally stated as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 16

Times interest earned is also called the

Accepted Answer

A)  money multiplier.
B)  interest coverage ratio.
C)  coupon coverage ratio.
D)  premium ratio.E) A) and D)
F) A) and C)

Question 17

Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.

Accepted Answer

A) True 
 B)False

Question 18

The current ratio is

Accepted Answer

A)  calculated by dividing current liabilities by current assets.
B)  used to evaluate a company's liquidity and short-term debt paying ability.
C)  used to evaluate a company's solvency and long-term debt paying ability.
D)  calculated by subtracting current liabilities from current assets.E) C) and D)
F) A) and D)

Question 19

Stockholders are most interested in evaluating

Accepted Answer

A)  liquidity and solvency.
B)  profitability and solvency.
C)  liquidity and profitability.
D)  marketability and solvency.E) A) and D)
F) A) and B)

Question 20

Measures of a company's liquidity are concerned with the company's ability to service long-term debt.

Accepted Answer

A) True 
 B)False

Exam 7: Financial Statement Analysis

In performing a vertical analysis, the base for cost of goods sold is

Correct AnswerverifiedShow Answer

Comparative balance sheets are usually prepared for

Correct AnswerverifiedShow Answer

The acid-test (quick) ratio

Correct AnswerverifiedD

___________________ evaluates a series of financial statement data over a period of time.

Correct AnswerverifiedShow Answer

Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis.

Correct AnswerverifiedShow Answer

A limitation in calculating ratios in financial statement analysis is that

Correct AnswerverifiedShow Answer

Susie's Sweets Candy Shop had a balance in the Accounts Receivable account of $780,000 at the beginning of the year and a balance of $820,000 at the end of the year.Net credit sales during the year amounted to $5,840,000.The average collection period of the receivables in terms of days was

Correct AnswerverifiedShow Answer

In analyzing the financial statements of a company, a single item on the financial statements

Correct AnswerverifiedShow Answer

______________________ evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount.The base amount on the income statement is typically __________________ while the base amount on the balance sheet is typically ___________________.

Correct Answerverifiedvertical a...View AnswerShow Answer

A technique for evaluating financial statements that expresses the relationship among selected items of financial statement date is

Correct AnswerverifiedA

Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.

Correct AnswerverifiedFalse

The ratios that are used to determine a company's short-term debt paying ability are

Correct AnswerverifiedShow Answer

Vertical analysis is also called

Correct AnswerverifiedShow Answer

A liquidity ratio measures the

Correct AnswerverifiedShow Answer

In the horizontal analysis of the income statement, each item is generally stated as a percentage of net income.

Correct AnswerverifiedShow Answer

Times interest earned is also called the

Correct AnswerverifiedShow Answer

Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.

Correct AnswerverifiedShow Answer

The current ratio is

Correct AnswerverifiedShow Answer

Stockholders are most interested in evaluating

Correct AnswerverifiedShow Answer

Measures of a company's liquidity are concerned with the company's ability to service long-term debt.

Correct AnswerverifiedShow Answer

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__ evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount.The base amount on the income statement is typically while the base amount on the balance sheet is typically _.

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vertical a...
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