Question 1

A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.

Accepted Answer

A) True 
 B)False

Question 2

Analysts are interested in sustainable income, which is equal to the past year's net income.

Accepted Answer

A) True 
 B)False

Question 3

From a creditor's point of view, the higher the debt to assets ratio, the lower the risk that the company may be unable to pay its obligations.

Accepted Answer

A) True 
 B)False

Question 4

The current ratio is one of the most utilized measures of profitability.

Accepted Answer

A) True 
 B)False

Question 5

A common measure of long-term solvency is

Accepted Answer

A)  the debt to assets ratio.
B)  the current ratio.
C)  the asset turnover.
D)  inventory turnover.E) A) and B)
F) None of the above

Question 6

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year.Net credit sales during the year amounted to $8,040,000.The accounts receivable turnover was

Accepted Answer

A)  9.5 times.
B)  10.1 times.
C)  8.9 times.
D)  9.8 times.E) A) and B)
F) All of the above

Question 7

Assume the following sales data for a company:  If 2019 is the base year, what is the percentage increase in sales from 2019 to 2020?

Accepted Answer

A)  60%
B)  25%
C)  125%
D)  160%E) A) and B)
F) B) and C)

Question 8

The best way to study the relationship of the components within a financial statement is to prepare

Accepted Answer

A)  common-size statements.
B)  a trend analysis.
C)  profitability analysis.
D)  ratio analysis.E) None of the above
F) A) and D)

Question 9

Given the following data for the King Company:  How would common stock appear on a common-size balance sheet?

Accepted Answer

A)  20%
B)  70%
C)  28%
D)  30%E) None of the above
F) A) and C)

Question 10

The ratios that are used to determine a company's short-term debt-paying ability are

Accepted Answer

A)  asset turnover, times interest earned, current ratio, and accounts receivables turnover.
B)  times interest earned, inventory turnover, current ratio, and receivables turnover.
C)  times interest earned, accounts receivable turnover ratio, current ratio, and inventory turnover.
D)  current ratio, account receivable turnover, and inventory turnover.E) A) and B)
F) B) and D)

Question 11

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

Accepted Answer

A)  that has been arranged from the highest number to the lowest number.
B)  that has been arranged from the lowest number to the highest number.
C)  to determine which items are in error.
D)  to determine the amount and/or percentage increase or decrease that has taken place.E) B) and D)
F) B) and C)

Question 12

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Accepted Answer

A) True 
 B)False

Question 13

Other comprehensive income is reported on the statement of comprehensive income immediately

Accepted Answer

A)  before Income from continuing operations.
B)  after Comprehensive income.
C)  before Income before income taxes.
D)  after Discontinued operations.E) A) and C)
F) All of the above

Question 14

A common measure of liquidity is

Accepted Answer

A)  return on assets.
B)  accounts receivable turnover.
C)  profit margin.
D)  debt to equity.E) B) and D)
F) B) and C)

Question 15

The current ratio is a

Accepted Answer

A)  liquidity ratio.
B)  profitability ratio.
C)  long-term solvency ratio.
D)  cash flow ratio.E) A) and B)
F) A) and C)

Question 16

When a change in depreciation method occurs

Accepted Answer

A)  prior years' financial statements should be changed to reflect the newly adopted method.
B)  the change should be reported in current and future years.
C)  the cumulative effect of the change should be reflected on the income statement as of the beginning of the next year.
D)  the cumulative effect of the change in accounting principle should be classified as a discontinued operation on the income statement.E) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A)  Horizontal analysis
B)  Circular analysis
C)  Vertical analysis
D)  Ratio analysisE) B) and C)
F) All of the above

Question 18

An income statement would not include

Accepted Answer

A)  other revenue and gains.
B)  income from operations.
C)  discontinued operations.
D)  dividends paid.E) B) and D)
F) C) and D)

Question 19

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 20

If equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, the ratio will always

Accepted Answer

A)  increase.
B)  decrease.
C)  stay the same.
D)  equal zero.E) A) and D)
F) All of the above

Exam 13: Financial Analysis: the Big Picture

The current ratio is one of the most utilized measures of profitability.

Correct AnswerverifiedShow Answer

From a creditor's point of view, the higher the debt to assets ratio, the lower the risk that the company may be unable to pay its obligations.

Correct AnswerverifiedShow Answer

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year.Net credit sales during the year amounted to $8,040,000.The accounts receivable turnover was

Correct AnswerverifiedShow Answer

The best way to study the relationship of the components within a financial statement is to prepare

Correct AnswerverifiedShow Answer

Assume the following sales data for a company: If 2019 is the base year, what is the percentage increase in sales from 2019 to 2020?

Correct AnswerverifiedShow Answer

Given the following data for the King Company: How would common stock appear on a common-size balance sheet?

Correct AnswerverifiedShow Answer

The current ratio is a

Correct AnswerverifiedShow Answer

Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

Correct AnswerverifiedShow Answer

A common measure of liquidity is

Correct AnswerverifiedShow Answer

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An income statement would not include

Correct AnswerverifiedShow Answer

A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.

Correct AnswerverifiedShow Answer

Analysts are interested in sustainable income, which is equal to the past year's net income.

Correct AnswerverifiedShow Answer

Trading on the equity (leverage) refers to the

Correct AnswerverifiedShow Answer

If equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, the ratio will always

Correct AnswerverifiedShow Answer

The ratios that are used to determine a company's short-term debt-paying ability are

Correct AnswerverifiedShow Answer

A common measure of long-term solvency is

Correct AnswerverifiedShow Answer

When a change in depreciation method occurs

Correct AnswerverifiedShow Answer

Other comprehensive income is reported on the statement of comprehensive income immediately

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified