Question 1

The principle that requires companies to include notes to their financial statements is the:

Accepted Answer

A)  full disclosure principle.
B)  going-concern principle.
C)  cost-benefit principle.
D)  historical cost principle.E) A) and B)
F) All of the above

Question 2

Which of the following measures would assist in assessing the liquidity of a company?

Accepted Answer

A)  Return on equity
B)  Fixed asset turnover ratio
C)  Receivables turnover ratio
D)  Times interest earnedE) C) and D)
F) B) and D)

Question 3

In a common size balance sheet,each item on the balance sheet is expressed as a percentage of:

Accepted Answer

A)  total assets.
B)  total liabilities.
C)  net income.
D)  total stockholders' equity.E) C) and D)
F) A) and B)

Question 4

Financial statement analysis is useful for:

Accepted Answer

A)  evaluating a company's success in meeting the challenges that it faces.
B)  selecting the most appropriate accounting rules to follow.
C)  determining the market price of a company's stock.
D)  comparing US companies with foreign companies.E) A) and D)
F) C) and D)

Question 5

Which type of ratio indicates a company's ability to generate income in the current period?

Accepted Answer

A)  Profitability ratios
B)  Liquidity ratios
C)  Solvency ratios
D)  Current ratiosE) A) and B)
F) C) and D)

Question 6

At the end of last year,Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000.The company issued shares to new stockholders at the beginning of the current year for $1,000,000.As a direct result of this transaction,the:

Accepted Answer

A)  debt-to-assets ratio will increase.
B)  debt-to-assets ratio will decrease.
C)  net profit margin ratio will increase.
D)  net profit margin ratio will decrease.E) A) and C)
F) None of the above

Question 7

A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%.If the company then issues additional shares of common stock for cash,which of the following is a correct statement?

Accepted Answer

A)  The debt-to-assets ratio will decrease and the return on equity ratio will decrease.
B)  The debt-to-assets ratio will increase and the return on equity ratio will increase.
C)  The debt-to-assets ratio will not change and the return on equity ratio will not change.
D)  The debt-to-assets ratio will decrease and the return on equity ratio will increase.E) A) and B)
F) A) and C)

Question 8

Which of the following ratios is used to evaluate solvency?

Accepted Answer

A)  Earnings per share (EPS) 
B)  Fixed asset turnover
C)  Debt-to-assets
D)  Current ratioE) A) and D)
F) None of the above

Question 9

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The net profit margin is:

Accepted Answer

A)  0.32.
B)  0.56.
C)  0.86.
D)  0.14.E) All of the above
F) A) and B)

Question 10

Match each term with the appropriate definition.Not all definitions will be used.
-Time-Series Analysis

Accepted Answer

A)  The practice of reporting information in percentages rather than monetary amounts.
B)  A nonrecurring item on the income statement that reflects gains and losses associated with extraordinary events.
C)  Another name for a trend analysis.
D)  An increase in an asset or a decrease in a liability that results from peripheral activities.
E)  A section of the annual report that can be used in interpreting the results of financial statement analysis.F) The ratio calculated by dividing the price of a share of stock by the earnings per share.G) After-tax earnings adjusted for gains and losses that may disappear before they are realized.H) A nonrecurring item associated with abandoning or selling an operation.I) The practice of reporting accounting data in the national monetary unit.J) Also known as ratio analysis.K) The ratio calculated by dividing the net income by the number of common shares outstanding.L) The earnings of a company after taxes.M) J) and K)
N) G) and I)

Question 11

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Accepted Answer

A)  The number of stores has expanded.
B)  Cost of Goods sold has been increasing.
C)  Employee wages have been increasing.
D)  The company has closed some of its stores.E) A) and C)
F) B) and C)

Question 12

Net revenue divided by average net fixed assets is the calculation for which of the following ratios?

Accepted Answer

A)  Net profit margin
B)  Fixed asset turnover
C)  Current ratio
D)  Return on assetsE) None of the above
F) All of the above

Question 13

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Accepted Answer

A)  large percentage of assets and inventory costs are stable.
B)  large percentage of assets and inventory costs are not stable.
C)  small percentage of assets and inventory costs are not stable.
D)  small percentage of assets and inventory costs are stable.E) A) and D)
F) A) and C)

Question 14

Sheffield Company has $145,000 of inventory at the beginning of the year and $131,000 at the end of the year.Sales revenue is $1,972,800,cost of goods sold is $1,145,400,and net income is $248,400 for the year.The inventory turnover ratio is:

Accepted Answer

A)  1.8.
B)  8.3.
C)  6.0.
D)  14.3.E) None of the above
F) A) and C) B

Question 15

The income statements for Urban Outfits,Inc.are presented below:
Urban Outfits, Inc.
Income Statements
Year Ended December 31
$\begin{array} { l r r } 
& \text { Current Year } &  { \text { Prior Year } } \
\hline  \text { Sales revenue } & \$ 731,559 & \$ 683,700 \
\text { Cost of goods sold } & 358,719 & 329,100 \
\text { Gross prolit } & 372,840 & 354,600 \
\text { Operating and other expenses } & 122,960 & 114,400 \
\text { Interest expense } & 6,600 & 8,500 \
\text { Income tax expense } & 37,200 & 36,700 \
\text { Net income } & \$ 206,080 & \$ 195,000 \
\end{array}$
Required:
Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent.
Part b.Interpret your analysis.Comment on significant changes.

Accepted Answer

Part a

Part b
Sales increased by 7% but...

Question 16

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The gross profit percentage is closest to:

Accepted Answer

A)  32%.
B)  56%.
C)  86%.
D)  14%.E) None of the above
F) A) and C)

Question 17

Which of the following will not improve a company's gross profit percentage?

Accepted Answer

A)  An increase in the sales price.
B)  A decrease in the cost of inventory.
C)  A decrease in the shipping cost for merchandise purchased.
D)  Collecting cash from customers in advance.E) None of the above
F) A) and B) D

Question 18

Comprehensive income may be shown on:

Accepted Answer

A)  the balance sheet as a contra-asset account and reports the changes in investments' fair value.
B)  the income statement by adding or subtracting special items,such as changes in foreign currency exchange rates and certain investments.
C)  IFRS financial statements only.
D)  non-public companies' financial statements only.E) A) and D)
F) A) and B)

Question 19

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n) :

Accepted Answer

A)  reduction in the cost of goods sold.
B)  decrease in inventory.
C)  increase in inventory.
D)  increase in sales revenue.E) A) and D)
F) A) and C) B

Question 20

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

Accepted Answer

A)  Liquidity
B)  Market share
C)  Profitability
D)  SolvencyE) A) and B)
F) B) and C)

Exam 13: Measuring and Evaluating Financial Performance

The principle that requires companies to include notes to their financial statements is the:

Correct Answer
verified

Which of the following measures would assist in assessing the liquidity of a company?

Correct Answer
verified

In a common size balance sheet,each item on the balance sheet is expressed as a percentage of:

Correct Answer
verified

Financial statement analysis is useful for:

Correct Answer
verified

Which type of ratio indicates a company's ability to generate income in the current period?

Correct Answer
verified

At the end of last year,Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000.The company issued shares to new stockholders at the beginning of the current year for $1,000,000.As a direct result of this transaction,the:

Correct Answer
verified

A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%.If the company then issues additional shares of common stock for cash,which of the following is a correct statement?

Correct Answer
verified

Which of the following ratios is used to evaluate solvency?

Correct Answer
verified

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The net profit margin is:

Correct Answer
verified

Match each term with the appropriate definition.Not all definitions will be used. -Time-Series Analysis

Correct Answer
verified

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Correct Answer
verified

Net revenue divided by average net fixed assets is the calculation for which of the following ratios?

Correct Answer
verified

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Correct Answer
verified

Sheffield Company has $145,000 of inventory at the beginning of the year and $131,000 at the end of the year.Sales revenue is $1,972,800,cost of goods sold is $1,145,400,and net income is $248,400 for the year.The inventory turnover ratio is:

Correct Answer
verified
B

Correct Answer
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Part a

Part b
Sales increased by 7% but...
View Answer

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The gross profit percentage is closest to:

Correct Answer
verified

Which of the following will not improve a company's gross profit percentage?

Correct Answer
verified
D

Comprehensive income may be shown on:

Correct Answer
verified

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n) :

Correct Answer
verified
B

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

Correct Answer
verified

Exam 13: Measuring and Evaluating Financial Performance

The principle that requires companies to include notes to their financial statements is the:

Correct AnswerverifiedShow Answer

Which of the following measures would assist in assessing the liquidity of a company?

Correct AnswerverifiedShow Answer

In a common size balance sheet,each item on the balance sheet is expressed as a percentage of:

Correct AnswerverifiedShow Answer

Financial statement analysis is useful for:

Correct AnswerverifiedShow Answer

Which type of ratio indicates a company's ability to generate income in the current period?

Correct AnswerverifiedShow Answer

At the end of last year,Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000.The company issued shares to new stockholders at the beginning of the current year for $1,000,000.As a direct result of this transaction,the:

Correct AnswerverifiedShow Answer

A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%.If the company then issues additional shares of common stock for cash,which of the following is a correct statement?

Correct AnswerverifiedShow Answer

Which of the following ratios is used to evaluate solvency?

Correct AnswerverifiedShow Answer

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The net profit margin is:

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Time-Series Analysis

Correct AnswerverifiedShow Answer

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Correct AnswerverifiedShow Answer

Net revenue divided by average net fixed assets is the calculation for which of the following ratios?

Correct AnswerverifiedShow Answer

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Correct AnswerverifiedShow Answer

Sheffield Company has $145,000 of inventory at the beginning of the year and $131,000 at the end of the year.Sales revenue is $1,972,800,cost of goods sold is $1,145,400,and net income is $248,400 for the year.The inventory turnover ratio is:

Correct AnswerverifiedB

Correct AnswerverifiedPart aPart bSales increased by 7% but...View AnswerShow Answer

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The gross profit percentage is closest to:

Correct AnswerverifiedShow Answer

Which of the following will not improve a company's gross profit percentage?

Correct AnswerverifiedD

Comprehensive income may be shown on:

Correct AnswerverifiedShow Answer

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n) :

Correct AnswerverifiedB

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

Correct AnswerverifiedShow Answer

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B

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Part a

Part b
Sales increased by 7% but...
View Answer

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D

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B

Correct Answer
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