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1 | |
Which of the following factors is NOT considered by accountants when providing information that is useful for decision making? (LO 1) |
| | A) | The intended users of the information |
| | B) | The types of decisions users make |
| | C) | How much time is available to gather the information |
| | D) | The available means of analyzing the information |
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2 | |
Which of the following is NOT a reason why a variety of analysis techniques have been developed for users of financial statement information? (LO 1) |
| | A) | Users have different levels of knowledge. |
| | B) | Financial statements are prepared for specific user groups. |
| | C) | Information needs vary for different decisions. |
| | D) | There is a diversity of users. |
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3 | |
What does horizontal analysis involve? (LO 2) |
| | A) | Studying relationships between different items reported in a set of financial statements |
| | B) | Comparing individual items on a financial statement to a significant total |
| | C) | Comparing the same financial statement items over several time periods |
| | D) | All of the above techniques |
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4 | |
Allen Company's sales for January and February were $40,000 and $50,000, respectively. By what percentage did Allen's sales increase from January to February? (LO 2) |
| | A) | 10% |
| | B) | 20% |
| | C) | 25% |
| | D) | 40% |
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5 | |
What does vertical analysis involve? (LO 2) |
| | A) | Studying relationships between different items reported in a set of financial statements |
| | B) | Comparing individual items on a financial statement to a significant total |
| | C) | Comparing the same financial statement items over several time periods |
| | D) | All of the above techniques |
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6 | |
Which of the following statements regarding horizontal and vertical analysis is TRUE? (LO 2) |
| | A) | Horizontal analysis uses percentages and absolute numbers. |
| | B) | Horizontal analysis compares many items within the same time period. |
| | C) | Vertical analysis uses absolute numbers, but not percentages. |
| | D) | Vertical analysis compares items over many time periods. |
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7 | |
What does ratio analysis involve? (LO 3) |
| | A) | Studying relationships between different items reported in a set of financial statements |
| | B) | Comparing individual items on a financial statement to a significant total |
| | C) | Comparing the same financial statement items over several time periods |
| | D) | All of the above techniques |
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8 | |
Which of the following ratios would NOT be used to assess a company's ability to pay its current liabilities? (LO 4) |
| | A) | Current ratio |
| | B) | Accounts receivable turnover |
| | C) | Quick ratio |
| | D) | Debt to assets ratio |
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9 | |
Use the following information to answer questions 9 through 11. Barker Company's balance sheet for 2005 is as follows:  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072846003/310579/chap13_01.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (53.0K)</a>]]>What is Barker's working capital? (LO 4) |
| | A) | $258,000 |
| | B) | $277,000 |
| | C) | $418,000 |
| | D) | $442,000 |
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10 | |
What is Barker's quick ratio? (LO 4) |
| | A) | 1.50 |
| | B) | 1.53 |
| | C) | 2.56 |
| | D) | 7.87 |
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11 | |
What is the expected impact on the current ratio if Barker pays the taxes payable? (LO 4) |
| | A) | Current assets decrease; therefore the current ratio decreases. |
| | B) | Current liabilities decrease; therefore the current ratio decreases. |
| | C) | Current assets and current liabilities decrease by the same amount; therefore the current ratio increases. |
| | D) | Current assets and current liabilities decrease by the same amount; therefore there is no impact on the current ratio. |
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12 | |
Use the following information to answer questions 12 and 13. The following information pertains to Smith Company:  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072846003/310579/chap13_03.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (14.0K)</a>]]>What is Smith's 2006 accounts receivable turnover? (LO 4) |
| | A) | 13.93 |
| | B) | 16.07 |
| | C) | 17.86 |
| | D) | 19.23 |
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13 | |
What is Smith's 2006 average days to sell inventory? (LO 4) |
| | A) | 26 days |
| | B) | 33 days |
| | C) | 41 days |
| | D) | 43 days |
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14 | |
Which of the following ratios would NOT be used to assess a company's ability to pay its long-term debts? (LO 5) |
| | A) | Debt to equity ratio |
| | B) | Number of times interest is earned |
| | C) | Quick ratio |
| | D) | Plant assets to long-term liabilities |
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15 | |
Use the following information to answer questions 15 and 16. The balance sheet and income statement for Barney Company is as follows:  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072846003/310579/chap13_06.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (81.0K)</a>]]>What is Barney's debt to assets ratio? (LO 5) |
| | A) | 24.0% |
| | B) | 41.1% |
| | C) | 72.6% |
| | D) | 137.8% |
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16 | |
What is Barney's number of times interest is earned? (LO 5) |
| | A) | 1.29 times |
| | B) | 1.80 times |
| | C) | 2.29 times |
| | D) | 2.50 times |
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17 | |
Croton Corporation has a debt to assets ratio of 55.3% and a times interest is earned ratio of 3.66. Plant Company has a debt to assets ratio of 67.2% and a times interest is earned ratio of 2.99. Based on this information, which of the following statements is TRUE? (LO 5) |
| | A) | Croton Corporation would likely have to pay a higher interest rate to obtain additional financing than would Plant Company. |
| | B) | Plant Company would likely have to pay a higher interest rate to obtain additional financing than would Croton Corporation. |
| | C) | Croton Corporation and Plant Company would likely have to pay the same interest rate to obtain additional financing. |
| | D) | Neither Croton Corporation nor Plant Company would likely be able to obtain additional financing. |
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18 | |
Which of the following is NOT a ratio typically used to measure a company's ability to generate earnings? (LO 6) |
| | A) | Net margin |
| | B) | Return on investment |
| | C) | Debt to equity |
| | D) | Asset turnover |
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19 | |
Use the following information to answer questions 19 and 20.  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072846003/310579/chap13_09.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>]]>Which company had the best performance based on the wealth generated from its investments? (LO 6) |
| | A) | Company A |
| | B) | Company B |
| | C) | Company C |
| | D) | Company D |
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20 | |
Which company provides its stockholders with the greatest profitability on their investment in the company? (LO 6) |
| | A) | Company A |
| | B) | Company B |
| | C) | Company C |
| | D) | Company D |
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21 | |
Which of the following ratios is NOT typically used by stockholders when evaluating a company? (LO 5, LO 6, LO 7) |
| | A) | Number of times interest is earned |
| | B) | Return on equity |
| | C) | Earnings per share |
| | D) | Dividend yield |
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22 | |
Use the following information to answer questions 22 and 23. The following information pertains to Graphic Corporation:  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072846003/310579/chap13_12.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (20.0K)</a>]]>What is Graphic's 2006 earnings per share (EPS)? (LO 7) |
| | A) | $3.87 per share |
| | B) | $3.99 per share |
| | C) | $4.21 per share |
| | D) | $4.43 per share |
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23 | |
What is Graphic's 2006 book value per share? (LO 7) |
| | A) | $16.35 per share |
| | B) | $19.35 per share |
| | C) | $18.78 per share |
| | D) | $22.35 per share |
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24 | |
To communicate with external users, companies present analytical information in which of the following ways? (LO 8)  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0072846003/310579/chap13_15.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (6.0K)</a>]]> |
| | A) | I & II |
| | B) | I & III |
| | C) | I, III, & IV |
| | D) | I, II, III, IV |
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25 | |
Which of the following statements regarding financial statement analysis is TRUE? (LO 9) |
| | A) | External users may rely solely on financial statement analysis when making decisions regarding a particular company. |
| | B) | External users must take into account industry characteristics when comparing companies in different industries. |
| | C) | External users may ignore economic trends and inflation when analyzing companies. |
| | D) | Conservatism and the historical cost concept ensure that financial statement analysis results are not distorted. |
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