Question 1

Vertical analysis is useful in making comparisons of companies of different sizes.

Accepted Answer

A) True 
 B)False

Question 2

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 statement of financial position.
D)  is the same as the current ratio except it is rounded to the nearest whole percent.E) None of the above
F) A) and B)

Question 3

Under which of the following cases may a percentage change be computed?

Accepted Answer

A)  The trend of the balances is decreasing but all balances are positive.
B)  There is no balance in the base year.
C)  There is a positive balance in the base year and a negative balance in the subsequent year.
D)  There is a negative balance in the base year and a positive balance in the subsequent year.E) A) and B)
F) A) and C)

Question 4

Inventory turnover measures the number of times on average the inventory was sold during the period.

Accepted Answer

A) True 
 B)False

Question 5

Horizontal analysis evaluates 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) All of the above
F) None of the above

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Accepted Answer

The current assets of Kile Company are $150,000.The current liabilities are $100,000.The current ratio expressed as a proportion is   
A)   150% 
B)   1.5:1 
C)   67:1 
D)   $150,000÷$100,000. \begin{array}{ll}	ext { 
A)   } & 150 \% \ 	ext { 
B)   } & 1.5: 1 \ 	ext { 
C)   } & 67: 1 \ 	ext { 
D)   } & \$ 150,000 \div \$ 100,000 .\end{array}  
A)    
B)    
C)    
D)   ​150%1.5:167:1$150,000÷$100,000.​  E) B) and D)
F) A) and D)

Question 8

Each of the following is included in computing the acid-test ratio except

Accepted Answer

A)  cash.
B)  inventory.
C)  receivables.
D)  short-term investments.E) B) and C)
F) B) and D)

Question 9

Assume the following sales data for a company:  If 2010 is the base year, what is the percentage increase in sales from 2010 to 2011?

Accepted Answer

A)  23%
B)  30%
C)  77%
D)  130%E) A) and D)
F) A) and C)

Question 10

Trading on the equity (leverage)  refers to the

Accepted Answer

A)  amount of working capital.
B)  amount of capital provided by owners.
C)  use of borrowed money to increase the return to owners.
D)  number of times interest is earned.E) B) and D)
F) B) and C)

Question 11

Which one of the following is not a characteristic generally evaluated in analyzing financial statements?

Accepted Answer

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

Question 12

The days in inventory is computed by multiplying inventory turnover by 365.

Accepted Answer

A) True 
 B)False

Question 13

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) C) and D)
F) B) and D)

Question 14

Profitability ratios measure the ability of the enterprise to survive over a long period of time.

Accepted Answer

A) True 
 B)False

Question 15

Vertical analysis is also known as

Accepted Answer

A)  perpendicular analysis.
B)  common size analysis.
C)  trend analysis.
D)  straight-line analysis.E) A) and C)
F) None of the above

Question 16

In common size analysis,

Accepted Answer

A)  a base amount is required.
B)  a base amount is optional.
C)  the same base is used across all financial statements analyzed.
D)  the results of the horizontal analysis are necessary inputs for performing the analysis.E) All of the above
F) A) and B)

Question 17

A percentage change can be computed only if the base amount is zero or positive.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following is not a tool in financial statement analysis?

Accepted Answer

A)  Horizontal analysis
B)  Circular analysis
C)  Vertical analysis
D)  Ratio analysisE) A) and B)
F) A) and C)

Question 19

Another name for trend analysis is horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 20

Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year.Net credit sales during the year amounted to $2,000,000.The average collection period of the receivables in terms of days was

Accepted Answer

A)  30 days.
B)  365 days.
C)  146 days.
D)  73 days.E) A) and D)
F) None of the above

Exam 14: Financial Statement Analysis

The days in inventory is computed by multiplying inventory turnover by 365.

Correct Answer
verified

Trading on the equity (leverage) refers to the

Correct Answer
verified

Assume the following sales data for a company: If 2010 is the base year, what is the percentage increase in sales from 2010 to 2011?

Correct Answer
verified

Correct Answer
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Each of the following is included in computing the acid-test ratio except

Correct Answer
verified

Which one of the following is not a characteristic generally evaluated in analyzing financial statements?

Correct Answer
verified

Vertical analysis is also known as

Correct Answer
verified

Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year.Net credit sales during the year amounted to $2,000,000.The average collection period of the receivables in terms of days was

Correct Answer
verified

Vertical analysis is useful in making comparisons of companies of different sizes.

Correct Answer
verified

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

Correct Answer
verified

A percentage change can be computed only if the base amount is zero or positive.

Correct Answer
verified

Another name for trend analysis is horizontal analysis.

Correct Answer
verified

Inventory turnover measures the number of times on average the inventory was sold during the period.

Correct Answer
verified

In common size analysis,

Correct Answer
verified

The acid-test (quick) ratio

Correct Answer
verified

Under which of the following cases may a percentage change be computed?

Correct Answer
verified

Which one of the following is not a tool in financial statement analysis?

Correct Answer
verified

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

Correct Answer
verified

Horizontal analysis evaluates financial statement data

Correct Answer
verified

Profitability ratios measure the ability of the enterprise to survive over a long period of time.

Correct Answer
verified

Exam 14: Financial Statement Analysis

The days in inventory is computed by multiplying inventory turnover by 365.

Correct AnswerverifiedShow Answer

Trading on the equity (leverage) refers to the

Correct AnswerverifiedShow Answer

Assume the following sales data for a company: If 2010 is the base year, what is the percentage increase in sales from 2010 to 2011?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Each of the following is included in computing the acid-test ratio except

Correct AnswerverifiedShow Answer

Which one of the following is not a characteristic generally evaluated in analyzing financial statements?

Correct AnswerverifiedShow Answer

Vertical analysis is also known as

Correct AnswerverifiedShow Answer

Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year.Net credit sales during the year amounted to $2,000,000.The average collection period of the receivables in terms of days was

Correct AnswerverifiedShow Answer

Vertical analysis is useful in making comparisons of companies of different sizes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A percentage change can be computed only if the base amount is zero or positive.

Correct AnswerverifiedShow Answer

Another name for trend analysis is horizontal analysis.

Correct AnswerverifiedShow Answer

Inventory turnover measures the number of times on average the inventory was sold during the period.

Correct AnswerverifiedShow Answer

In common size analysis,

Correct AnswerverifiedShow Answer

The acid-test (quick) ratio

Correct AnswerverifiedShow Answer

Under which of the following cases may a percentage change be computed?

Correct AnswerverifiedShow Answer

Which one of the following is not a tool in financial statement analysis?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Horizontal analysis evaluates financial statement data

Correct AnswerverifiedShow Answer

Profitability ratios measure the ability of the enterprise to survive over a long period of time.

Correct AnswerverifiedShow Answer

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