Question 1

Based on Washington's current ratio,which of the following statements is true regarding the company?

Accepted Answer

A)  Washington's current ratio has increased,indicating that the company is in a more favorable position to obtain short-term credit than in 2015.
B)  Washington's current ratio has decreased,indicating that the company is in a less favorable position to obtain short-term credit than in 2015.
C)  Washington's current ratio has increased,indicating that the company is in a less favorable position to obtain short-term credit than in 2015.
D)  Washington's current ratio has decreased,indicating that the company is in a more favorable position to obtain short-term credit than in 2015.E) All of the above
F) B) and C)

Question 2

Which of the following is included in the computation of the quick ratio?

Accepted Answer

A)  Net Sales
B)  Working capital
C)  Average daily sales
D)  Accounts receivableE) None of the above
F) All of the above

Question 3

The following information is available for Morgan Corporation:

Accepted Answer

A)  The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2015.
B)  The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2015.
C)  The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2015.
D)  The market price per share and the earnings per share are not statistically related to each other.E) A) and D)
F) A) and C)

Question 4

If a firm has an quick ratio of 1,the subsequent payment of an account payable will cause the ratio to increase.

Accepted Answer

A) True 
 B)False

Question 5

Basic analytical method in which all items are expressed only in relative terms (percentages of a common base) and are often useful for comparing one company with another or for comparing a company with industry averages are:

Accepted Answer

A)  horizontal analysis.
B)  percentage statements.
C)  profitability analysis.
D)  common-sized statements.E) B) and D)
F) C) and D)

Question 6

Sarbanes-Oxley Act of 2002 requires which of the following report to be prepared by the management of the company?

Accepted Answer

A)  A report evaluating the probability that the company will remain in business.
B)  A report showing management's assessment of internal control.
C)  A report assessing the market value of the company's current stock price.
D)  A report identifying the competency of the company's board of directors.E) A) and B)
F) All of the above

Question 7

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

Accepted Answer

A) True 
 B)False

Question 8

Using vertical analysis of the income statement,a company's net income as a percentage of net sales is 10%; therefore,the income tax expenses as a percentage of net sales must be 90%.

Accepted Answer

A) True 
 B)False

Question 9

The percentage analysis of increases and decreases in related items in comparative financial statements is called:

Accepted Answer

A)  vertical analysis.
B)  solvency analysis.
C)  profitability analysis.
D)  horizontal analysis.E) A) and C)
F) A) and B)

Question 10

For most profitable companies,the rate earned on total assets will be less than:

Accepted Answer

A)  the rate earned on stockholders' equity.
B)  the rate earned on total liabilities and stockholders' equity.
C)  the rate earned on sales.
D)  cannot be determined without more information.E) C) and D)
F) B) and C)

Question 11

The ratio of the sum of cash and other current assets that can be easily converted to cash to current liabilities is called as:

Accepted Answer

A)  price-earnings ratio.
B)  earnings ratio.
C)  quick ratio.
D)  current ratio.E) C) and D)
F) A) and B)

Question 12

The number of times interest charges are earned is computed as:

Accepted Answer

A)  net income plus interest expense,divided by interest expense.
B)  income before income tax plus interest expense,divided by interest expense.
C)  net income divided by interest expense.
D)  income before income tax divided by interest expense.E) None of the above
F) A) and B)

Question 13

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability.As a result of this transaction,the current ratio and working capital will:

Accepted Answer

A)  both decrease.
B)  both increase.
C)  increase and remain the same,respectively.
D)  remain the same and decrease,respectively.E) A) and C)
F) All of the above

Question 14

The ability of a business to earn a reasonable amount of income is referred to as the factor of:

Accepted Answer

A)  leverage.
B)  profitability.
C)  wealth.
D)  solvency.E) B) and C)
F) A) and D)

Question 15

If a company has current assets totaling $56,000 and current liabilities totaling $40,500,then the company's working capital totals $15,500.

Accepted Answer

A) True 
 B)False

Question 16

What is Transic's working capital for 2016?

Accepted Answer

A)  $35,000
B)  $90,000
C)  $125,000
D)  $18,000E) None of the above
F) A) and B)

Question 17

The percentage change in long-term liabilities between two balance sheet dates is an example of:

Accepted Answer

A)  vertical analysis.
B)  solvency analysis.
C)  profitability analysis.
D)  horizontal analysis.E) All of the above
F) B) and C)

Question 18

A company reports the following:

Determine the (a) accounts receivable turnover and (b) number of days’ sales in receivables. Round your answers to one decimal place.

Accepted Answer

(a)Accounts receivable turnover = Sales ...

Question 19

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

Accepted Answer

A) True 
 B)False

Question 20

The independent auditor's report does which of the following?

Accepted Answer

A)  Describes that the common-sized statements are covered by the audit.
B)  Gives the auditor's opinion regarding the fairness of the financial statements.
C)  Summarizes what the auditor did.
D)  States that the financial statements are effective.E) All of the above
F) A) and D)

Exam 9: Financial Statement Analysis

The ratio of the sum of cash and other current assets that can be easily converted to cash to current liabilities is called as:

Correct AnswerverifiedShow Answer

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

Correct AnswerverifiedShow Answer

For most profitable companies,the rate earned on total assets will be less than:

Correct AnswerverifiedShow Answer

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability.As a result of this transaction,the current ratio and working capital will:

Correct AnswerverifiedShow Answer

Basic analytical method in which all items are expressed only in relative terms (percentages of a common base) and are often useful for comparing one company with another or for comparing a company with industry averages are:

Correct AnswerverifiedShow Answer

Based on Washington's current ratio,which of the following statements is true regarding the company?

Correct AnswerverifiedShow Answer

The ability of a business to earn a reasonable amount of income is referred to as the factor of:

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The percentage change in long-term liabilities between two balance sheet dates is an example of:

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If a company has current assets totaling $56,000 and current liabilities totaling $40,500,then the company's working capital totals $15,500.

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The number of times interest charges are earned is computed as:

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The following information is available for Morgan Corporation:

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The independent auditor's report does which of the following?

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Which of the following is included in the computation of the quick ratio?

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The percentage analysis of increases and decreases in related items in comparative financial statements is called:

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What is Transic's working capital for 2016?

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A company reports the following: Determine the (a) accounts receivable turnover and (b) number of days’ sales in receivables. Round your answers to one decimal place.

Correct Answerverified(a)Accounts receivable turnover = Sales ...View AnswerShow Answer

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

Correct AnswerverifiedShow Answer

Sarbanes-Oxley Act of 2002 requires which of the following report to be prepared by the management of the company?

Correct AnswerverifiedShow Answer

If a firm has an quick ratio of 1,the subsequent payment of an account payable will cause the ratio to increase.

Correct AnswerverifiedShow Answer

Using vertical analysis of the income statement,a company's net income as a percentage of net sales is 10%; therefore,the income tax expenses as a percentage of net sales must be 90%.

Correct AnswerverifiedShow Answer

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(a)Accounts receivable turnover = Sales ...
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