Question 1

Return on common stockholders' equity is most closely related to

Accepted Answer

A)  gross profit rate and operating expenses to sales ratio.
B)  profit margin and free cash flow.
C)  times interest earned and debt to stockholders' equity ratio.
D)  return on asset and leverage (debt to assets ratio) .E) A) and D)
F) A) and C)

Question 2

All of the following are ways that a company's current ratio would decrease except

Accepted Answer

A)  purchasing inventory on account.
B)  adding equal amounts to the numerator and denominator.
C)  paying off one-third of its accounts payable.
D)  paying cash for new equipment.E) B) and D)
F) None of the above

Question 3

Dandy Candy Company sold its licorice division resulting in a loss of $80,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

Accepted Answer

A)  $100,000
B)  $20,000
C)  $80,000
D)  $60,000E) A) and B)
F) A) and C)

Question 4

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 5

When a horizontal analysis is performed and a zero or negative amount is reported in the base year, then

Accepted Answer

A)  no percentage change can be computed.
B)  the percent change will be negative.
C)  the accountant has made a mistake.
D)  the percentage change will be 100% of greater.E) A) and B)
F) All of the above

Question 6

The profit margin is calculated by dividing

Accepted Answer

A)  sales by cost of goods sold.
B)  gross profit by net sales.
C)  net income by stockholders' equity.
D)  net income by net sales.E) B) and D)
F) B) and C)

Question 7

The use of alternative accounting methods

Accepted Answer

A)  is not a problem in ratio analysis because the footnotes disclose the method used.
B)  may be a problem in ratio analysis even if disclosed.
C)  is not a problem in ratio analysis since eventually all methods will lead to the same end.
D)  is only a problem in ratio analysis with respect to inventory.E) A) and C)
F) All of the above

Question 8

In ratio analysis, the ratios are never expressed as a

Accepted Answer

A)  rate.
B)  logarithm.
C)  percentage.
D)  simple proportion.E) None of the above
F) All of the above

Question 9

Assume the following cost of goods sold data for a company:  2018$1,400,00020171,200,00020161,000,000\begin{array} { l r } 2018 & \$ 1,400,000 \2017 & 1,200,000 \2016 & 1,000,000\end{array}201820172016​$1,400,0001,200,0001,000,000​  If 2016 is the base year, what is the percentage increase in cost of goods sold from 2016 to 2018?

Accepted Answer

A)  140%
B)  40%
C)  20%
D)  17% E) All of the above
F) C) and D)

Question 10

Horizontal analysis of comparative financial statements includes the

Accepted Answer

A)  development of common size statements.
B)  calculation of liquidity ratios.
C)  calculation of dollar amount and percentage changes from financial statements over a period of time, as compared to a base year.
D)  evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount.E) A) and B)
F) B) and D)

Question 11

Which one of the following is not a characteristic generally evaluated in ratio analysis?

Accepted Answer

A)  Liquidity
B)  Profitability
C)  Marketability
D)  SolvencyE) A) and B)
F) A) and C)

Question 12

Long-term creditors are usually most interested in evaluating

Accepted Answer

A)  liquidity.
B)  marketability.
C)  profitability.
D)  solvency.E) B) and C)
F) A) and B)

Question 13

When preparing an income statement, which of the following is the proper order for income statement components?

Accepted Answer

A)  Comprehensive income, Other comprehensive income items, Net income
B)  Net income, Comprehensive income, Other comprehensive income items
C)  Net income, Other comprehensive income items, Comprehensive income
D)  Other comprehensive income items Net income, Comprehensive incomeE) A) and C)
F) B) and C)

Question 14

Assume the following sales data for a company:  2018$960,0002017750,0002016600,000\begin{array} { l r } 2018 & \$ 960,000 \2017 & 750,000 \2016 & 600,000\end{array}201820172016​$960,000750,000600,000​  If 2016 is the base year, what is the percentage increase in sales from 2016 to 2017?

Accepted Answer

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

Question 15

In a common size income statement, each item is expressed as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 16

Beta Corporation had net income of $325,000 and paid dividends to common stockholders of $39,000 in 2017. The weighted average number of shares outstanding in 2017 was 50,000 shares. Beta Corporation's common stock is selling for $52 per share on the New York Stock Exchange. Beta Corporation's price-earnings ratio is

Accepted Answer

A)  12.5 times.
B)  8.0 times.
C)  6.5 times.
D)  9.1 times.E) All of the above
F) B) and C)

Question 17

Aps Company reported the following on its income statement:   Income before income taxes $420,000 Income tax expense 120,000 Net income $300,000\begin{array}{lr}	ext { Income before income taxes } & \$ 420,000 \	ext { Income tax expense } &{120,000}\	ext { Net income }&\$300,000\end{array} Income before income taxes  Income tax expense  Net income ​$420,000120,000$300,000​  An analysis of the income statement revealed that interest expense was $60,000. Aps Company's times interest earned was

Accepted Answer

A)  6 times.
B)  9 times.
C)  8 times.
D)  5 times. E) All of the above
F) A) and B)

Question 18

Comparative balance sheets

Accepted Answer

A)  are usually prepared for at least one year.
B)  are usually prepared for at least two years.
C)  do not show both dollar amount and percentage changes.
D)  do not show a comparison of total stockholders' equity.E) C) and D)
F) A) and C)

Question 19

Alternative accounting methods affect the quality of earnings.

Accepted Answer

A) True 
 B)False

Question 20

Lupton Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $200,000 loss in the year of disposal. The loss on disposal of the segment was $100,000. If the tax rate is 30%, and income before income taxes was $1,600,000,

Accepted Answer

A)  the income tax expense on the income before discontinued operations is $390,000.
B)  the income from continuing operations is $1,120,000.
C)  net income is $1,300,000.
D)  the losses from discontinued operations are reported net of income taxes at $300,000.E) A) and D)
F) A) and C)

Exam 12: Financial Analysis: The Big Picture

All of the following are ways that a company's current ratio would decrease except

Correct Answer
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Assume the following sales data for a company: $\begin{array} { l r } 2018 & \$ 960,000 \\2017 & 750,000 \\2016 & 600,000\end{array}$ If 2016 is the base year, what is the percentage increase in sales from 2016 to 2017?

Correct Answer
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In a common size income statement, each item is expressed as a percentage of net income.

Correct Answer
verified

Correct Answer
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Which one of the following is not a characteristic generally evaluated in ratio analysis?

Correct Answer
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When preparing an income statement, which of the following is the proper order for income statement components?

Correct Answer
verified

When a horizontal analysis is performed and a zero or negative amount is reported in the base year, then

Correct Answer
verified

Dandy Candy Company sold its licorice division resulting in a loss of $80,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

Correct Answer
verified

In ratio analysis, the ratios are never expressed as a

Correct Answer
verified

The use of alternative accounting methods

Correct Answer
verified

The profit margin is calculated by dividing

Correct Answer
verified

Assume the following cost of goods sold data for a company: $\begin{array} { l r } 2018 & \$ 1,400,000 \\2017 & 1,200,000 \\2016 & 1,000,000\end{array}$ If 2016 is the base year, what is the percentage increase in cost of goods sold from 2016 to 2018?

Correct Answer
verified

Alternative accounting methods affect the quality of earnings.

Correct Answer
verified

Lupton Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $200,000 loss in the year of disposal. The loss on disposal of the segment was $100,000. If the tax rate is 30%, and income before income taxes was $1,600,000,

Correct Answer
verified

Long-term creditors are usually most interested in evaluating

Correct Answer
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Correct Answer
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Horizontal analysis of comparative financial statements includes the

Correct Answer
verified

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Correct Answer
verified

Comparative balance sheets

Correct Answer
verified

Return on common stockholders' equity is most closely related to

Correct Answer
verified

Exam 12: Financial Analysis: The Big Picture

All of the following are ways that a company's current ratio would decrease except

Correct AnswerverifiedShow Answer

Assume the following sales data for a company: 2018$960,0002017750,0002016600,000\begin{array} { l r } 2018 & \$ 960,000 \\2017 & 750,000 \\2016 & 600,000\end{array}201820172016​$960,000750,000600,000​ If 2016 is the base year, what is the percentage increase in sales from 2016 to 2017?

Correct AnswerverifiedShow Answer

In a common size income statement, each item is expressed as a percentage of net income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is not a characteristic generally evaluated in ratio analysis?

Correct AnswerverifiedShow Answer

When preparing an income statement, which of the following is the proper order for income statement components?

Correct AnswerverifiedShow Answer

When a horizontal analysis is performed and a zero or negative amount is reported in the base year, then

Correct AnswerverifiedShow Answer

Dandy Candy Company sold its licorice division resulting in a loss of $80,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

Correct AnswerverifiedShow Answer

In ratio analysis, the ratios are never expressed as a

Correct AnswerverifiedShow Answer

The use of alternative accounting methods

Correct AnswerverifiedShow Answer

The profit margin is calculated by dividing

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Alternative accounting methods affect the quality of earnings.

Correct AnswerverifiedShow Answer

Lupton Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $200,000 loss in the year of disposal. The loss on disposal of the segment was $100,000. If the tax rate is 30%, and income before income taxes was $1,600,000,

Correct AnswerverifiedShow Answer

Long-term creditors are usually most interested in evaluating

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Horizontal analysis of comparative financial statements includes the

Correct AnswerverifiedShow Answer

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Correct AnswerverifiedShow Answer

Comparative balance sheets

Correct AnswerverifiedShow Answer

Return on common stockholders' equity is most closely related to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Assume the following sales data for a company: $\begin{array} { l r } 2018 & \$ 960,000 \\2017 & 750,000 \\2016 & 600,000\end{array}$ If 2016 is the base year, what is the percentage increase in sales from 2016 to 2017?

Correct Answer
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