Question 1

In analyzing the financial statements of a company, a single item on the financial statements

Accepted Answer

A)  should be reported in bold-face type.
B)  is more meaningful if compared to other financial information.
C)  is significant only if it is large.
D)  should be accompanied by a footnote.

Question 2

Comprehensive income includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

Accepted Answer

A)  Current ratio
B)  Acid-test ratio
C)  Asset turnover
D)  Receivables turnover

Question 4

Net income does not appear in the numerator of the

Accepted Answer

A)  profit margin.
B)  return on assets.
C)  return on ordinary shareholders' equity.
D)  payout ratio.

Question 5

Times interest earned is also called the

Accepted Answer

A)  money multiplier.
B)  interest coverage ratio.
C)  coupon coverage ratio.
D)  premium ratio.

Question 6

Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.

Accepted Answer

A) True 
 B)False

Question 7

In common size analysis,

Accepted Answer

A)  a base amount is required.
B)  a base amount is optional.
C)  the same base is used across all financial statements analyzed.
D)  the results of the horizontal analysis are necessary inputs for performing the analysis.

Question 8

Short-term creditors are usually most interested in evaluating

Accepted Answer

A)  solvency.
B)  liquidity.
C)  marketability.
D)  profitability.

Question 9

Profitability ratios measure the ability of the enterprise to survive over a long period of time.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  Horizontal analysis
B)  Circular analysis
C)  Vertical analysis
D)  Ratio analysis

Question 11

Under which of the following cases may a percentage change be computed?

Accepted Answer

A)  The trend of the balances is decreasing but all balances are positive.
B)  There is no balance in the base year.
C)  There is a positive balance in the base year and a negative balance in the subsequent year.
D)  There is a negative balance in the base year and a positive balance in the subsequent year.

Question 12

Which one of the following is primarily interested in the liquidity of a company?

Accepted Answer

A)  Government agencies
B)  Shareholders
C)  Long-term creditors
D)  Short-term creditors

Question 13

Assume the following cost of goods sold data for a company:  2012$1,500,00020111,200,00020101,000,000\begin{array} { r r } 2012 & \$ 1,500,000 \2011 & 1,200,000 \2010 & 1,000,000\end{array}201220112010​$1,500,0001,200,0001,000,000​  If 2010 is the base year, what is the percentage increase in cost of goods sold from 2010 to 2012?

Accepted Answer

A)  150%
B)  50%
C)  67%
D)  33%

Question 14

The debt to total assets ratio measures

Accepted Answer

A)  the company's profitability.
B)  whether interest can be paid on debt in the current year.
C)  the proportion of interest paid relative to dividends paid.
D)  the percentage of the total assets provided by creditors.

Question 15

The current ratio is a measure of all the ratios calculated for the current year.

Accepted Answer

A) True 
 B)False

Question 16

Horizontal analysis evaluates 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.

Question 17

Comparative statements of financial position are usually prepared for

Accepted Answer

A)  one year.
B)  two years.
C)  three years.
D)  four years.

Question 18

In analyzing financial statements, horizontal analysis is a

Accepted Answer

A)  requirement.
B)  tool.
C)  principle.
D)  theory.

Question 19

Vertical analysis is useful in making comparisons of companies of different sizes.

Accepted Answer

A) True 
 B)False

Question 20

The formula for horizontal analysis of changes since the base period is the current year amount

Accepted Answer

A)  divided by the base year amount.
B)  minus the base year amount divided by the base year amount.
C)  minus the base year amount divided by the current year amount.
D)  plus the base year amount divided by the base year amount.

Exam 14: Financial Statement Analysis

Vertical analysis is useful in making comparisons of companies of different sizes.

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Comparative statements of financial position are usually prepared for

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Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

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

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Horizontal analysis evaluates a series of financial statement data over a period of time

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In analyzing financial statements, horizontal analysis is a

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The debt to total assets ratio measures

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Under which of the following cases may a percentage change be computed?

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The formula for horizontal analysis of changes since the base period is the current year amount

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The current ratio is a measure of all the ratios calculated for the current year.

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In analyzing the financial statements of a company, a single item on the financial statements

Correct AnswerverifiedShow Answer

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Profitability ratios measure the ability of the enterprise to survive over a long period of time.

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Times interest earned is also called the

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Which one of the following is primarily interested in the liquidity of a company?

Correct AnswerverifiedShow Answer

Net income does not appear in the numerator of the

Correct AnswerverifiedShow Answer

Short-term creditors are usually most interested in evaluating

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In common size analysis,

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Comprehensive income includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders.

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Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.

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