 |
| 1 | |
Financial statement analysis provides an opportunity to determine solvency and profitability. |
| | A) | True |
| | B) | False |
|
|
|
| 2 | |
Book value per share equals total stockholders' equity available to a class of stock divided by the number of shares issued and outstanding. |
| | A) | True |
| | B) | False |
|
|
|
| 3 | |
The higher the accounts receivable turnover, the less time is needed to collect accounts. |
| | A) | True |
| | B) | False |
|
|
|
| 4 | |
Of the two financial statements used in horizontal analysis, the later statement represents the base year. |
| | A) | True |
| | B) | False |
|
|
|
| 5 | |
In vertical analysis of an income statement, each item is stated as a percentage of gross profit. |
| | A) | True |
| | B) | False |
|
|
|
| 6 | |
A useful basis for analyzing financial information is a comparison of statements from the same company for the current and one or more prior years. |
| | A) | True |
| | B) | False |
|
|
|
| 7 | |
A cash collection of a customer's charge account increases working capital. |
| | A) | True |
| | B) | False |
|
|
|
| 8 | |
Ratios are among the more widely used tools of financial analysis because they provide clues to and symptoms of underlying conditions. |
| | A) | True |
| | B) | False |
|
|
|
| 9 | |
Common-size statements involve horizontal analysis of a company's financial statements. |
| | A) | True |
| | B) | False |
|
|
|
| 10 | |
Merchandise inventory is NOT considered to be a quick asset. |
| | A) | True |
| | B) | False |
|
|
|
| 11 | |
Equipment is considered to be a liquid asset. |
| | A) | True |
| | B) | False |
|
|
|
| 12 | |
Dividend yield is used to compare the dividend-paying performance of different investment alternatives. |
| | A) | True |
| | B) | False |
|
|
|
| 13 | |
Return on common stockholders' equity measures a company's liquidity. |
| | A) | True |
| | B) | False |
|
|
|
| 14 | |
A company's operating efficiency and profitability can be expressed with the price-earnings ratio. |
| | A) | True |
| | B) | False |
|
|
|
| 15 | |
External users rely on financial statement analysis to make better and more informed decisions in pursuing their own goals. |
| | A) | True |
| | B) | False |
|
|
|
| 16 | |
The current ratio equals |
| | A) | current assets plus current liabilities. |
| | B) | current assets minus current liabilities. |
| | C) | quick assets divided by current liabilities. |
| | D) | current assets divided by total assets. |
| | E) | none of these. |
|
|
|
| 17 | |
What happens to working capital when cash is paid to a short-term creditor? |
| | A) | Plant and equipment is increased. |
| | B) | Plant and equipment is decreased. |
| | C) | Working capital does not change. |
| | D) | Working capital increases. |
| | E) | Working capital decreases. |
|
|
|
| 18 | |
Lester Corporation does not have any preferred stock. The corporation's total liabilities are $265,000, total expenses are $210,000, total stockholders' equity is $422,000, and revenue is $266,000. What is the rate of return on common stockholders' equity? |
| | A) | 13.27 percent |
| | B) | 62.8 percent |
| | C) | 13.03 percent |
| | D) | 21.1 percent |
| | E) | none of these |
|
|
|
| 19 | |
When total stockholders' equity available to common stockholders is divided by the number of common shares issued and outstanding, the result is |
| | A) | book value per share of common stock. |
| | B) | the rate of return on common stockholders' equity. |
| | C) | the earnings per share of common stock. |
| | D) | the price-earnings ratio on common stock. |
| | E) | none of these. |
|
|
|
| 20 | |
When calculating inventory turnover, which of the following appears in the numerator (top)? |
| | A) | net sales |
| | B) | average merchandise inventory |
| | C) | cost of goods sold |
| | D) | gross profit |
| | E) | none of these |
|
|
|
| 21 | |
Inventory turnover is equal to |
| | A) | average inventory divided by cost of goods sold. |
| | B) | total assets divided by average inventory. |
| | C) | net income divided by average inventory. |
| | D) | cost of goods sold divided by average inventory. |
| | E) | none of these. |
|
|
|
| 22 | |
Describe the effect of the following journal entry on working capital: debit Accumulated Depreciation, Equipment, $1,000; credit Equipment, $1,000. |
| | A) | Working capital is increased. |
| | B) | Working capital is not affected. |
| | C) | Net income is increased. |
| | D) | Working capital is decreased. |
| | E) | Net income is decreased. |
|
|
|
| 23 | |
The Solvency of a company refers to its |
| | A) | ability to meet short-term obligations and to efficiently generate revenues. |
| | B) | ability to generate positive market expectations |
| | C) | ability to generate future revenues and meet long-term obligations. |
| | D) | ability to provide financial rewards sufficient to attract and retain financing. |
| | E) | none of the above. |
|
|
|
| 24 | |
What type of analysis is indicated by the following?
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136679/802455/q9.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"> (21.0K)</a>]]> |
| | A) | differential analysis |
| | B) | vertical analysis |
| | C) | balance sheet analysis |
| | D) | horizontal analysis |
| | E) | none of these |
|
|
|
| 25 | |
Osborn Corporation's accounts show the following: Current Assets total, $300,000; Building, $500,000; Equipment, $130,000; Current Liabilities total, $45,000; Long-Term Liabilities total, $175,000. The ratio of the value of plant and equipment to long-term liabilities is |
| | A) | 3.41. |
| | B) | 3.60. |
| | C) | 2.31. |
| | D) | 2.89. |
| | E) | 3.87. |
|
|
|
| 26 | |
Which of the following is true about accounts receivable turnover analysis? |
| | A) | Turnover is computed by dividing net sales on account by average net accounts receivable. |
| | B) | Turnover implies a sale on account followed by a payment of the debt in cash or a write-off. |
| | C) | Turnover is the number of times charge accounts are paid off per year. |
| | D) | all of these |
| | E) | none of these |
|
|
|
| 27 | |
Equity ratio is equal to |
| | A) | average common shares outstanding divided by total equity. |
| | B) | total assets divided by total equity. |
| | C) | total equity divided by total liabilities. |
| | D) | Average stockholder's equity divided by average current assets. |
| | E) | none of these. |
|
|
|
| 28 | |
Profit margin ratio is equal to |
| | A) | Gross profit divided by net sales. |
| | B) | Net income divided by average total assets. |
| | C) | Net income divided by net sales. |
| | D) | Net sales divided by average gross profit. |
| | E) | none of these. |
|
|
|
| 29 | |
General-purpose financial statements include all of the following EXCEPT |
| | A) | statement of stockholders' |
| | B) | balance sheet |
| | C) | the profit and gross margin statement |
| | D) | statement of cash flows |
| | E) | all of the above are financial statements |
|
|
|
| 30 | |
On common-size comparative income statements, each item is shown as a percent of |
| | A) | net sales for that period |
| | B) | total assets for the period |
| | C) | total liabilities for the period |
| | D) | net income for the period |
|
|
.