Question 1

In preparing a common-size income statement,you express all revenue and expense accounts as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 2

On a common-size income statement,interest expense is shown as a percentage of

Accepted Answer

A)  Operating income.
B)  Net sales revenue.
C)  Net income.
D)  Gross profit.E) A) and C)
F) C) and D)

Question 3

Horizontal analysis is

Accepted Answer

A)  Looking at the changes in the account balances reported on a financial statement over time.
B)  Looking at the changes in the account balances within a financial statement for one year.
C)  Preparing an analysis of the profitability ratios in columns.
D)  None of these ans choices are correct.E) All of the above
F) A) and D)

Question 4

The income statement for Otto Construction Company appear below:
  Average total assets total $240,000.Otto's income tax rate is 25%.
What is the times interest earned ratio?

Accepted Answer

A)   2.38
B)   3.13
C)   3.16
D)   4.17E) None of the above
F) All of the above

Question 5

Another term for vertical analysis is

Accepted Answer

A)  Common-size analysis.
B)  Liquidity analysis.
C)  Horizontal analysis.
D)  Leverage analysis.E) None of the above
F) All of the above

Question 6

In preparing a common-size balance sheet,you express all account balances as a percentage of

Accepted Answer

A)  Total stockholders' equity.
B)  Total liabilities.
C)  Total assets plus total liabilities minus stockholders' equity.
D)  Total assets.E) C) and D)
F) B) and C)

Question 7

A problem with the current and acid test ratios is that,although they provide information about liquidity,they do not

Accepted Answer

A)  Indicate the dollar amounts of the differences.
B)  Indicate the underlying quality of the current assets.
C)  Include all the current assets.
D)  Include all the liabilities.E) A) and C)
F) All of the above

Question 8

The debt to equity ratio measures the amount of financing provided by creditors relative to

Accepted Answer

A)  Equity earned through from operations.
B)  Equity provided by retained earnings.
C)  Equity provided by owners.
D)  None of these ans choices are correct.E) C) and D)
F) None of the above

Question 9

Which of the following authorities require that companies present comparative financial statements that include both the current year and the previous year?

Accepted Answer

A)  IRS
B)  GAAP
C)  IIA
D)  GAASE) A) and B)
F) B) and D)

Question 10

On a common-size balance sheet,notes payable is shown as a percentage of

Accepted Answer

A)  Total liabilities.
B)  Current liabilities.
C)  Total assets.
D)  Total stockholders' equity.E) A) and D)
F) All of the above

Question 11

The 2013 and 2014 partial balance sheets for Ottoman Manufacturing Company appear below:
  What is the debt-to-equity ratio for 2014?

Accepted Answer

A)   2.19
B)   1.80
C)   1.25
D)   0.46E) B) and D)
F) All of the above

Question 12

A helpful approach to examine changes in the relative size of account balances within a single statement is referred to as

Accepted Answer

A)  Common-size analysis.
B)  Vertical analysis.
C)  Trend analysis.
D)  Common-size analysis and Vertical analysis,but not Trend analysis.E) B) and C)
F) All of the above

Question 13

The high accounts receivable turnover rate may indicate all of the following   except 	extbf{      except   } except

Accepted Answer

A)  Fast collection of accounts receivables.
B)  Greater liquidity.
C)  Credit terms that are too tight.
D)  All of these ans choices may be indications of a high accounts receivable turnover rate. E) A) and D)
F) B) and C)

Question 14

The quality of assets is assessed through the profitability ratios.

Accepted Answer

A) True 
 B)False

Question 15

Generally a high inventory turnover rate is considered.

Accepted Answer

A)  Good.
B)  Bad.
C)  Indifferent.
D)  Proportionate to net income.E) A) and B)
F) B) and C)

Question 16

The current ratio is also referred to as the quick ratio.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is   not 	extbf{    not     } not    a leverage ratio?

Accepted Answer

A)  Debt-to-equity ratio
B)  Times interest earned ratio
C)  Price earnings ratio
D)  Debt ratio E) All of the above
F) B) and D)

Question 18

Barnett Publishing Inc.,reported the following current asset data in $000s in its 2014 annual report.
  Required:

Prepare a trend analysis of Barnett’s current assets, rounding your answers to one decimal place. Comment on any significant trends you identify.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> •	Merchandise inventory exploded in 201...

Question 19

The following financial statement items are shown for J&T Manufacturing.
  Calculate the common-size percentage for Insurance Expense.

Accepted Answer

A)   3.3%
B)   5.8%
C)   23.3%
D)   50.0%E) A) and B)
F) A) and C)

Question 20

Working capital is the difference between a firm's total assets and total liabilities.

Accepted Answer

A) True 
 B)False

Exam 12: Financial Statement Analysis

Working capital is the difference between a firm's total assets and total liabilities.

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In preparing a common-size balance sheet,you express all account balances as a percentage of

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Another term for vertical analysis is

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On a common-size income statement,interest expense is shown as a percentage of

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A helpful approach to examine changes in the relative size of account balances within a single statement is referred to as

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Which of the following authorities require that companies present comparative financial statements that include both the current year and the previous year?

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On a common-size balance sheet,notes payable is shown as a percentage of

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Which of the following is not \textbf{ not } not a leverage ratio?

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The 2013 and 2014 partial balance sheets for Ottoman Manufacturing Company appear below: What is the debt-to-equity ratio for 2014?

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The current ratio is also referred to as the quick ratio.

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The following financial statement items are shown for J&T Manufacturing. Calculate the common-size percentage for Insurance Expense.

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Generally a high inventory turnover rate is considered.

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The high accounts receivable turnover rate may indicate all of the following except \textbf{ except } except

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The debt to equity ratio measures the amount of financing provided by creditors relative to

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Barnett Publishing Inc.,reported the following current asset data in $000s in its 2014 annual report. Required: Prepare a trend analysis of Barnett’s current assets, rounding your answers to one decimal place. Comment on any significant trends you identify.

Correct Answerverified • Merchandise inventory exploded in 201...View AnswerShow Answer

A problem with the current and acid test ratios is that,although they provide information about liquidity,they do not

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In preparing a common-size income statement,you express all revenue and expense accounts as a percentage of net income.

Correct AnswerverifiedShow Answer

Horizontal analysis is

Correct AnswerverifiedShow Answer

The quality of assets is assessed through the profitability ratios.

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The income statement for Otto Construction Company appear below: Average total assets total $240,000.Otto's income tax rate is 25%. What is the times interest earned ratio?

Correct AnswerverifiedShow Answer

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Which of the following is $\textbf{ not }$ a leverage ratio?

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The high accounts receivable turnover rate may indicate all of the following $\textbf{ except }$

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• Merchandise inventory exploded in 201...
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