Question 1

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Accepted Answer

A) True 
 B)False  True

Question 2

Match between columns
                        Premises:    Have high expectations of future earnings and therefore usually trade at higher P/E ratios. 
   Measure the earnings or operating effectiveness of a company. 
   Refers to a company's ability to pay its long-term liabilities. 
   Expresses each item in a financial statement as a percentage of the same base amount. 
   Have lower share prices in relationship to their fundamental ratios and therefore trade at lower PE ratios. 
   Analyzes trends in financial statement data for a single company over time. 
   Refers to a company's ability to pay its current liabilities.

Accepted Answer

The Answer of  Profitability ratios  and  Vertical is...

Question 3

The current ratio is:

Accepted Answer

A)   1.98.
B)   1.58.
C)   1.17.
D)   0.66.E) B) and D)
F) A) and D)

Question 4

BC Training reports sales revenue of $2,200,000. Average inventory during the year was $200,000. The inventory turnover ratio for the year is 8.0. What amount of gross profit would the company report in its income statement?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> *COGS = $200,000 x 8.0 = $1,6...

Question 5

Growth stocks have high expectations of future earnings growth, and therefore, usually trade at higher PE ratios.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a sign that a company cannot quickly turn its receivables into cash?

Accepted Answer

A)   A high receivables turnover ratio.
B)   A low receivables turnover ratio.
C)   A low average collection period.
D)   Both a high receivables turnover ratio and a low average collection period.E) A) and B)
F) None of the above

Question 7

The price-earnings (PE) ratio compares a company's share price with its earnings per share.

Accepted Answer

A) True 
 B)False

Question 8

We use vertical analysis for income statement accounts, but not balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 9

Asset turnover measures sales volume in relation to the investment in assets, and is calculated as net sales divided by average total assets.

Accepted Answer

A) True 
 B)False

Question 10

LeBron's Kids Camps has a current ratio of 0.75 to 1, based on current assets of $3 million and current liabilities of $4 million. How, if at all, will a $500,000 cash purchase of inventory affect the current ratio? How, if at all, will a $500,000 purchase of inventory on account affect the current ratio?

Accepted Answer

A cash purchase of inventory w...

Question 11

Which of the following is an aggressive accounting practice?

Accepted Answer

A)   Change from straight-line to double-declining balance depreciation.
B)   Record sales revenue before it is actually earned.
C)   Adjust the allowance for uncollectible accounts to a larger amount.
D)   Record inventory at lower of cost or market rather than at cost.E) All of the above
F) B) and D)

Question 12

Extraordinary items:

Accepted Answer

A)   Include very large gains or losses from ordinary business activities.
B)   Are items that are both unusual in nature and occur infrequently.
C)   Are shown on the income statement before the tax effect.
D)   Include the write-down of obsolete inventories.E) None of the above
F) A) and B)

Question 13

The debt to equity ratio is:

Accepted Answer

A)   0.33.
B)   0.77.
C)   1.17.
D)   1.30.E) A) and B)
F) None of the above

Question 14

Perform a vertical analysis on the following information: $$\begin{array} { | l | r | r | } 
\hline & \underline { 12013 } &  { \underline { \mathbf { 2 0 1 2 } } } \
\ \text { Cash } & \$ 500,000 & \$ 200,000 \
\hline \text { Accounts receivable } & 900,000 & 800,000 \
\hline \text { Inventory } & 700,000 & 500,000 \
\hline \text { Long-term assets } & 2,200,000 & 2,500,000 \
\hline \text { Total assets } & \$ 4,300,000 & \$ 4,000,000 \
\hline & & \
\hline
\end{array}$$

Accepted Answer

$$\begin{array} { | l | r | r | r | r | } 
\hline &  { \mathbf { 2 0 1 3 } } &&  { \mathbf { 2 0 1 2 } } \
\hline & \text { Amount } & \% & \text { Amount } & \% \
\hline \text { Cash } & \$ 500,000 & \mathbf { 1 1 . 6 } & \$ 200,000 & \mathbf { 5 . 0 } \
\hline \text { Accounts receivable } & 900,000 & \mathbf { 2 0 . 9 } & 800,000 & \mathbf { 2 0 . 0 } \
\hline \text { Inventory } & 700,000 & \mathbf { 1 6 . 3 } & 500,000 & \mathbf { 1 2 . 5 } \
\hline \text { Long-term assets } & 2,200,000 & \mathbf { 5 1 . 2 } & 2,500,000 & \mathbf { 6 2 . 5 } \
\hline \text { Total assets } & \$ 4,300,000 & \mathbf { 1 0 0 . 0 } & \$ 4,000,000 & \mathbf { 1 0 0 . 0 } \
\hline & & & & \
\hline
\end{array}$$

Question 15

Return on assets equals:

Accepted Answer

A)   Gross profit ratio x Inventory turnover.
B)   Profit margin x Inventory turnover.
C)   Gross profit ratio x Asset turnover.
D)   Profit margin x Asset turnover.E) A) and D)
F) A) and C)

Question 16

Explain the difference between conservative and aggressive accounting practices. Provide an example of a conservative accounting practice and explain why this practice is conservative. Provide an example of an aggressive accounting practice and explain why this practice is aggressive.

Accepted Answer

Conservative accounting practices are th...

Question 17

Return on assets is calculated as net income divided by ending total assets.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct?

Accepted Answer

A)   Receivables turnover ratio depicts the company's frequency of cash collections.
B)   Inventory turnover ratio can be used to assess the company's frequency of selling inventory.
C)   Current ratio reflects the company's ability to pay current debt.
D)   All of the other options are correct.E) A) and B)
F) All of the above

Question 19

Stealth Company's 2013 average collection period is:

Accepted Answer

A)   73 days.
B)   104 days.
C)   109 days.
D)   128 days.E) A) and D)
F) All of the above

Question 20

We can use ratios to help evaluate a firm's performance and financial position.

Accepted Answer

A) True 
 B)False  True

Exam 12: Financial Statement Analysis

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Correct Answer
verified
True

Listed below are seven terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided

The current ratio is:

Correct Answer
verified

BC Training reports sales revenue of $2,200,000. Average inventory during the year was $200,000. The inventory turnover ratio for the year is 8.0. What amount of gross profit would the company report in its income statement?

Correct Answer
verified
*COGS = $200,000 x 8.0 = $1,6...
View Answer

Growth stocks have high expectations of future earnings growth, and therefore, usually trade at higher PE ratios.

Correct Answer
verified

Which of the following is a sign that a company cannot quickly turn its receivables into cash?

Correct Answer
verified

The price-earnings (PE) ratio compares a company's share price with its earnings per share.

Correct Answer
verified

We use vertical analysis for income statement accounts, but not balance sheet accounts.

Correct Answer
verified

Asset turnover measures sales volume in relation to the investment in assets, and is calculated as net sales divided by average total assets.

Correct Answer
verified

Correct Answer
verified
A cash purchase of inventory w...
View Answer

Which of the following is an aggressive accounting practice?

Correct Answer
verified

Extraordinary items:

Correct Answer
verified

The debt to equity ratio is:

Correct Answer
verified

Return on assets equals:

Correct Answer
verified

Explain the difference between conservative and aggressive accounting practices. Provide an example of a conservative accounting practice and explain why this practice is conservative. Provide an example of an aggressive accounting practice and explain why this practice is aggressive.

Correct Answer
verified
Conservative accounting practices are th...
View Answer

Return on assets is calculated as net income divided by ending total assets.

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Stealth Company's 2013 average collection period is:

Correct Answer
verified

We can use ratios to help evaluate a firm's performance and financial position.

Correct Answer
verified
True

Exam 12: Financial Statement Analysis

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Correct AnswerverifiedTrue

Listed below are seven terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided

The current ratio is:

Correct AnswerverifiedShow Answer

BC Training reports sales revenue of $2,200,000. Average inventory during the year was $200,000. The inventory turnover ratio for the year is 8.0. What amount of gross profit would the company report in its income statement?

Correct Answerverified *COGS = $200,000 x 8.0 = $1,6...View AnswerShow Answer

Growth stocks have high expectations of future earnings growth, and therefore, usually trade at higher PE ratios.

Correct AnswerverifiedShow Answer

Which of the following is a sign that a company cannot quickly turn its receivables into cash?

Correct AnswerverifiedShow Answer

The price-earnings (PE) ratio compares a company's share price with its earnings per share.

Correct AnswerverifiedShow Answer

We use vertical analysis for income statement accounts, but not balance sheet accounts.

Correct AnswerverifiedShow Answer

Asset turnover measures sales volume in relation to the investment in assets, and is calculated as net sales divided by average total assets.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA cash purchase of inventory w...View AnswerShow Answer

Which of the following is an aggressive accounting practice?

Correct AnswerverifiedShow Answer

Extraordinary items:

Correct AnswerverifiedShow Answer

The debt to equity ratio is:

Correct AnswerverifiedShow Answer

Return on assets equals:

Correct AnswerverifiedShow Answer

Explain the difference between conservative and aggressive accounting practices. Provide an example of a conservative accounting practice and explain why this practice is conservative. Provide an example of an aggressive accounting practice and explain why this practice is aggressive.

Correct AnswerverifiedConservative accounting practices are th...View AnswerShow Answer

Return on assets is calculated as net income divided by ending total assets.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Stealth Company's 2013 average collection period is:

Correct AnswerverifiedShow Answer

We can use ratios to help evaluate a firm's performance and financial position.

Correct AnswerverifiedTrue

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified
*COGS = $200,000 x 8.0 = $1,6...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A cash purchase of inventory w...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Conservative accounting practices are th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True