Question 1

The receivables turnover ratio is useful in assessing the profitability of receivables.

Accepted Answer

A) True 
 B)False

Question 2

Sustainable income differs from actual profit by the amount of

Accepted Answer

A)  irregular revenues, expenses, gains and losses.
B)  dividends declared.
C)  changes in accounting policies.
D)  comprehensive income.E) A) and D)
F) B) and C)

Question 3

In the vertical analysis of a statement of financial position, the base for current liabilities is total liabilities.

Accepted Answer

A) True 
 B)False

Question 4

An accrual-based equivalent to the debt to total assets ratio is the cash total debt coverage ratio.

Accepted Answer

A) True 
 B)False

Question 5

Short-term creditors are usually most interested in assessing

Accepted Answer

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

Question 6

Vertical analysis expresses each item in a financial statement as a percent of a base amount.

Accepted Answer

A) True 
 B)False

Question 7

One objective of the income statement is to separate the results of continuing operations from those of discontinued operations.

Accepted Answer

A) True 
 B)False

Question 8

Even if a company has a low debt to total assets ratio, it may have difficulty paying interest on debt if it also has a low times interest earned ratio.

Accepted Answer

A) True 
 B)False

Question 9

A common measure of liquidity is

Accepted Answer

A)  return on assets.
B)  receivables turnover.
C)  profit margin.
D)  debt to total assets.E) B) and D)
F) A) and B)

Question 10

Which one of the following would not be considered a liquidity ratio?

Accepted Answer

A)  Current ratio
B)  Inventory turnover ratio
C)  Cash current debt coverage ratio
D)  Return on assets ratioE) None of the above
F) A) and C)

Question 11

Which of the following income statement figures would probably be the best indicator of a company's future performance?

Accepted Answer

A)  Total revenues
B)  Gross profit
C)  Profit
D)  Profit from continuing operationsE) A) and D)
F) B) and D)

Question 12

Use the following information to answer questions 
Green Thumb Garden Supplies reported the following information for 2012 and 2013. 
-What are the earnings per share for 2013?

Accepted Answer

A)  $15.83
B)  $ 5.00
C)  $ 2.50
D)  $ 0.90E) B) and C)
F) B) and D)

Question 13

Under which of the following cases would a percentage change not be calculated?

Accepted Answer

A)  The trend of the amounts is decreasing but all amounts are positive.
B)  There is no amount in the base year.
C)  The trend of the amounts is decreasing but all amounts are negative.
D)  The trend of the amounts is increasing but all amounts are negative.E) A) and C)
F) C) and D)

Question 14

Horizontal analysis is also called trend analysis.

Accepted Answer

A) True 
 B)False

Question 15

In performing a vertical analysis, the base for prepaid expenses is

Accepted Answer

A)  total current assets.
B)  total assets.
C)  total liabilities.
D)  prepaid expenses in a previous year.E) A) and B)
F) B) and C)

Question 16

Horizontal analysis is a technique for evaluating financial statement data

Accepted Answer

A)  within a period of time.
B)  over a period of time.
C)  on a certain date.
D)  as it may appear in the future.E) B) and C)
F) A) and D)

Question 17

In vertical analysis of an income statement, the 100% figure is

Accepted Answer

A)  profit.
B)  cost of goods sold.
C)  gross profit.
D)  net sales.E) A) and D)
F) B) and C)

Question 18

Earnings before interest and tax (EBIT) is a proxy for the amount available to cover interest payments.

Accepted Answer

A) True 
 B)False

Question 19

Horizontal analysis is also called

Accepted Answer

A)  Percentage analysis.
B)  Trend analysis.
C)  Vertical analysis.
D)  Economic analysis.E) A) and B)
F) A) and D)

Question 20

The inventory turnover ratio is calculated by dividing

Accepted Answer

A)  cost of goods sold by ending inventory.
B)  cost of goods sold by beginning inventory.
C)  cost of goods sold by average inventory.
D)  average inventory by cost of goods sold.E) B) and C)
F) B) and D)

Exam 14: Performance Measurement

Horizontal analysis is also called trend analysis.

Correct AnswerverifiedShow Answer

In performing a vertical analysis, the base for prepaid expenses is

Correct AnswerverifiedShow Answer

Even if a company has a low debt to total assets ratio, it may have difficulty paying interest on debt if it also has a low times interest earned ratio.

Correct AnswerverifiedShow Answer

Horizontal analysis is a technique for evaluating financial statement data

Correct AnswerverifiedShow Answer

A common measure of liquidity is

Correct AnswerverifiedShow Answer

Short-term creditors are usually most interested in assessing

Correct AnswerverifiedShow Answer

The receivables turnover ratio is useful in assessing the profitability of receivables.

Correct AnswerverifiedShow Answer

Vertical analysis expresses each item in a financial statement as a percent of a base amount.

Correct AnswerverifiedShow Answer

Which of the following income statement figures would probably be the best indicator of a company's future performance?

Correct AnswerverifiedShow Answer

Earnings before interest and tax (EBIT) is a proxy for the amount available to cover interest payments.

Correct AnswerverifiedShow Answer

Under which of the following cases would a percentage change not be calculated?

Correct AnswerverifiedShow Answer

Use the following information to answer questions Green Thumb Garden Supplies reported the following information for 2012 and 2013. -What are the earnings per share for 2013?

Correct AnswerverifiedShow Answer

One objective of the income statement is to separate the results of continuing operations from those of discontinued operations.

Correct AnswerverifiedShow Answer

The inventory turnover ratio is calculated by dividing

Correct AnswerverifiedShow Answer

Sustainable income differs from actual profit by the amount of

Correct AnswerverifiedShow Answer

In vertical analysis of an income statement, the 100% figure is

Correct AnswerverifiedShow Answer

An accrual-based equivalent to the debt to total assets ratio is the cash total debt coverage ratio.

Correct AnswerverifiedShow Answer

Which one of the following would not be considered a liquidity ratio?

Correct AnswerverifiedShow Answer

Horizontal analysis is also called

Correct AnswerverifiedShow Answer

In the vertical analysis of a statement of financial position, the base for current liabilities is total liabilities.

Correct AnswerverifiedShow Answer

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