Analyzing Financial Statements | Test Bank – 10th

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Student name:__________

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Financial statement analysis applies analytical tools to financial statements and related data for making business decisions.

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2) External users of accounting information manage and operate the company.

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3) The evaluation of company performance and financial condition focuses solely on past performance.

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4) The evaluation of company performance and financial condition includes evaluation of (1) past and current performance, (2) current financial position, and (3) future performance and risk.

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5) Solvency is the ability to meet long-term obligations and generate future revenues.

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6) Internal users of accounting information manage and operate the company.

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7) A purpose of financial statement analysis for internal users is to provide information to improve efficiency and effectiveness.

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8) Evaluation of company performance does not include analysis of (1) past and current performance, (2) current financial position, and (3) future performance and risk.

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9) A company's board of directors analyzes financial statements to monitor management’s performance.

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10) External auditors use financial statements to assess “fair presentation” of financial results.

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11) Financial analysis does not include assessing future performance and risk because financial statements are based on past performance.

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12) Profitability is the ability to meet long-term obligations.

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13) Profitability is the ability to provide financial rewards to attract and retain financing.

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14) Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenues.

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15) Market prospects is the ability to meet short-term obligations.

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16) Market prospects are the ability to generate positive market expectations.

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17) Profitability is the ability to generate positive market expectations.

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18) Financial reporting includes general-purpose financial statements, information from SEC 10-K and other filings, press releases, shareholders’ meetings, forecasts, management letters, and auditors’ reports.

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19) The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) fair presentation.

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20) The building blocks of financial statement analysis include (1) liquidity and efficiency, (2) solvency, (3) profitability, and (4) market prospects.

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21) General-purpose financial statements include the (1) income statement, (2) balance sheet, (3) statement of stockholders' equity (or statement of retained earnings), (4) statement of cash flows, and (5) notes to these statements.

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22) An example of an intracompany comparison is comparing Apple’s profit margin to the industry’s profit margin.

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23) Standards for comparison when interpreting financial statements include competitor and industry performance data.

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24) Financial reporting is the communication of financial information useful for making investment, credit, and other business decisions.

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25) Intracompany analysis is based on comparisons with competitors.

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26) Intracompany analysis compares a company’s current performance to its own prior performance.

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27) An example of a guideline (or rule of thumb) for comparison is the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

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28) Vertical analysis is the comparison of a company's financial condition and performance across time.

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29) Horizontal analysis is the comparison of a company's financial condition and performance across time.

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30) If a company is comparing its financial condition or performance to a base amount, it is using vertical analysis.

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31) Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

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32) If a company is comparing this year's financial performance to last year's financial performance, it is using horizontal analysis.

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33) When a negative amount is in one period and a positive amount is in the other, a meaningful percent change cannot be calculated.

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34) When no amount is in the base period, no percent change is computable.

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35) When a positive amount is in the base period and zero is in the analysis period, the decrease is 100 percent.

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36) When a positive amount is in the base period and zero is in the analysis period, the decrease is 0 percent.

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37) There are three common tools of financial statement analysis: (1) horizontal analysis, (2) vertical analysis, and (3) ratio analysis.

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38) The key factors section of a financial statement analysis report lists favorable and unfavorable factors, both quantitative and qualitative, for company performance.

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39) The executive summary of a financial statement analysis report includes the evidential matter, assumptions, and indictments for the report.

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40) A financial statement analysis report usually consists of six sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

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41) Basic earnings per share is calculated using income before interest and income taxes.

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42) Trend analysis is computing trend percents that show patterns in data across periods.

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43) Comparative financial statements are reports that show financial amounts in side-by-side columns on a single statement.

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44) Vertical analysis is used to reveal patterns in data covering two or more successive periods.

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45) Profit margin measures a company’s ability to earn net income from sales.

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46) Trend analysis is a form of horizontal analysis that can show patterns in data across periods.

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47) Trend analysis can show relations between items on different financial statements.

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48) Horizontal analysis is used to reveal patterns in data across time.

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49) A trend percent is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

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50) The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount, dividing the result by the analysis period amount and multiplying that result by 100.

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51) The percent change of a comparative financial statement item is computed by subtracting the base period amount from the analysis period amount, dividing the result by the base period amount and multiplying that result by 100.

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52) Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

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53) Horizontal analysis is used to understand the relative importance of each financial statement item.

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54) The base amount for a common-size balance sheet is usually total assets.

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55) A common-size balance sheet compares current year balance sheet account balances with current year cash flow statement account balances.

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56) Ratio analysis can measure key relations between financial statement items.

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57) A corporation reported cash of $13,973, total assets of $178,000, and net income of $50,150. Its common-size percent for cash equals 7.85%.

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58) A ratio shows a relation between two amounts and can be expressed as a percent, rate, or proportion.

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59) To be useful, a ratio must show an economically important relationship, such as a ratio of cost of goods sold to sales.

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60) Liquidity refers to the availability of resources to pay short-term cash requirements.

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61) Working capital is computed as current liabilities minus current assets.

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62) The current ratio is calculated as total assets divided by current assets.

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63) Total asset turnover measures a company's ability to use its assets to generate sales and reflects on operating efficiency.

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64) Capital structure measures a company’s ability to earn net income from sales.

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65) Debt financing is more risky than equity financing because of its required payments of interest and principal.

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66) The greater the times interest earned ratio, the greater the risk a company will not be able to pay interest expense.

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67) Efficiency refers to how productive a company is in using its assets.

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68) The higher the accounts receivable turnover, the less quickly accounts receivable are collected.

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69) Accounts receivable turnover measures how frequently a company converts its receivables into cash.

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70) Accounts receivable turnover can never be too high.

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71) A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

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72) The return on total assets can be calculated as profit margin times total asset turnover.

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73) The return on common stockholder's equity measures a company's ability to earn net income for common stockholders.

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74) Capital structure is a company’s makeup of equity and debt financing and is an important component of solvency analysis.

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75) The return on total assets ratio is a profitability measure.

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76) A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.

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MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
77) Which of the following is not a purpose of financial statement analysis:

A) Providing information to improve efficiency and effectiveness.
B) Providing information for managing and operating the company.
C) Helping external users make investing and lending decisions.
D) Helping the board of directors monitor management’s performance.
E) Assuring that the company will avoid an IRS audit.

78) Evaluation of company performance can include comparison and/or assessment of all but which of the following:

A) Past performance.
B) Current performance.
C) Current financial position.
D) Future performance and risk.
E) External user needs and demands.

79) External users of accounting information:

A) Are those individuals involved in managing and operating the company.
B) Include internal auditors and managers.
C) Are not directly involved in operating the company.
D) Make strategic decisions for a company.
E) Make operating decisions for a company.

80) Internal users of accounting information:

A) Are not directly involved in operating a company.
B) Are those individuals involved in managing and operating the company.
C) Include shareholders and lenders.
D) Include directors and customers.
E) Include suppliers, regulators, and the press.

81) The building blocks of financial statement analysis do not include:

A) Industry analysis.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Liquidity and efficiency.

82) Financial reporting refers to:

A) The application of analytical tools to general-purpose financial statements.
B) The communication of financial information useful for making investment, credit, and other business decisions.
C) General-purpose financial statements only.
D) Ratio analysis only.
E) Profitability.

83) The ability to meet short-term obligations and to efficiently generate revenues is called:

A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.

84) The ability to meet long-term obligations and generate future revenues is referred to as:

A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.

85) The ability to provide financial rewards to attract and retain financing is called:

A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.

86) The ability to generate positive market expectations is called:

A) Liquidity and efficiency.
B) Liquidity and solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.

87) Standards for comparisons in financial statement analysis do not include:

A) Intracompany standards.
B) Competitor standards.
C) Industry standards.
D) Management standards.
E) Guidelines (rules of thumb).

88) Intracompany standards for financial statement analysis:

A) Are based on a company's prior performance and its relations between financial items.
B) Are often set by competitors.
C) Are set by the company's industry through published statistics.
D) Are based on rules of thumb.
E) Are published by analyst services such as Standard & Poor’s.

89) Industry standards for financial statement analysis:

A) Are based on a single competitor's financial performance.
B) Are set by the government.
C) Are used to compare a company’s performance to industry performance.
D) Are based on rules of thumb.
E) Compare a company's income with its prior year's income.

90) Guidelines (rules-of-thumb) are general standards of comparison developed from:

A) Industry guidelines.
B) Past experience.
C) Analysis of competitors.
D) Relations between financial items.
E) Dun and Bradstreet.

91) Three common tools of financial analysis are:

A) Financial reporting, sensitivity analysis, transactional analysis.
B) Fair presentation, variance analysis, financial reporting.
C) Horizontal analysis, vertical analysis, ratio analysis.
D) Relativity analysis, financial reporting, fair value analysis.
E) Liquidation analysis, political analysis, fair value analysis.

92) The comparison of a company's financial condition and performance across time is known as:

A) Horizontal analysis.
B) Vertical analysis.
C) Political analysis.
D) Fair value reporting.
E) Liquidation analysis.

93) The measurement of key relations between financial statement items is known as:

A) Financial reporting.
B) Horizontal analysis.
C) Investment analysis.
D) Ratio analysis.
E) Risk analysis.

94) The comparison of a company's financial condition and performance to a base amount is known as:

A) Financial reporting.
B) Horizontal ratios.
C) Liquidation analysis.
D) Sensitivity analysis.
E) Vertical analysis.

95) A financial statement analysis report does not include:

A) An auditor statement.
B) An analysis overview.
C) An executive summary.
D) A key factors section.
E) Inferences such as forecasts.

96) The background on a company, its industry, and the economy is usually included in which section of a financial statement analysis report:

A) Executive summary.
B) Analysis overview.
C) Evidential conclusions.
D) Factor analysis.
E) Inferences.

97) A brief analysis of results and conclusions is usually included in which section of a financial statement analysis report:

A) Executive summary.
B) Analysis overview.
C) Evidential conclusions.
D) Factor analysis.
E) Inferences.

98) Which of the following statements regarding financial statement analysis reports is false?

A) Accounting standards determine which ratios are relevant and useful for the analysis.
B) The executive summary provides a brief analysis of results.
C) The analysis overview includes background on the company, its industry, and the economy.
D) Evidential matter includes ratios, trends, comparisons and all analytical measures.
E) The assumptions section includes a list of assumptions about a company’s industry and economic environment.

99) Gains and losses that are normal and frequent are reported as:

A) A separate line item when computing earnings per share.
B) A prior period adjustment on the statement of retained earnings.
C) A gain or loss from disposing of the discontinued segment's net assets.
D) A gain or loss from operation of a discontinued segment.
E) Part of continuing operations.

100) Which of the following items is typically not included as a separate item after normal revenues and expenses?

A) Depreciation expense.
B) Condemnation of property by the city government.
C) Loss of use of property due to a new and unexpected environmental regulation.
D) Loss due to an unusual and infrequent calamity.
E) Expropriation of property by a foreign government.

101) Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as:

A) Period-to-period statements.
B) Controlling statements.
C) Successive statements.
D) Comparative statements.
E) Serial statements.

102) Horizontal analysis:

A) Is a method used to evaluate changes in financial data across time.
B) Is also called vertical analysis.
C) Is the presentation of financial ratios.
D) Is a tool used to evaluate financial statement items relative to industry statistics.
E) Evaluates financial data across industries.

103) The dollar change for a comparative financial statement item is calculated by:

A) Subtracting the analysis period amount from the fair value amount.
B) Subtracting the base period amount from the analysis period amount.
C) Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100.
D) Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100.
E) Subtracting the base period amount from the analysis amount, then dividing the result by the base amount.

104) A company's sales in Year 1 were $270,000 and in Year 2 were $307,500. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

A) 88%.
B) 15%.
C) 14%.
D) 13%.
E) 100%.

105) A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

A) 87%.
B) 100%.
C) 115%.
D) 15%.
E) 13%.

106) Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,160. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

A) −104%.
B) 100%.
C) −4.0%.
D) 96%.
E) 4.2%.

107) Ash Company reported sales of $580,000 for Year 1, $630,000 for Year 2, and $680,000 for Year 3. Using Year 1 as the base year, what is the revenue trend percent for Years 2 and 3?

A) 92.0% for Year 2 and 92.6% for Year 3.
B) 92.0% for Year 2 and 85.3% for Year 3.
C) 108.6% for Year 2 and 117.2% for Year 3.
D) 117.2% for Year 2 and 108.6% for Year 3.
E) 85.3% for Year 2 and 92.6% for Year 3.

108) Ash Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for Year 3. Using Year 1 as the base year, what is the revenue trend percent for Years 2 and 3?

A) 80% for Year 2 and 90% for Year 3.
B) 88% for Year 2 and 80% for Year 3.
C) 88% for Year 2 and 90% for Year 3.
D) 112.5% for Year 2 and 125% for Year 3.
E) 125% for Year 2 and 112.5% for Year 3.

109) In horizontal analysis the percent change is computed by:

A) Subtracting the analysis period amount from the base period amount.
B) Subtracting the base period amount from the analysis period amount.
C) Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100.
D) Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100.
E) Subtracting the base period amount from the analysis amount, then dividing the result by the analysis period amount.

110) To compute trend percentages the analyst should:

A) Select a base period, divide analysis period amount by the base period amount and multiply that amount by 100.
B) Subtract the analysis period number from the base period number.
C) Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100.
D) Compare amounts across industries using Dun and Bradstreet.
E) Compare amounts to a competitor.

111) Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

A) Asset comparative statements.
B) Percentage comparative statements.
C) Common-size comparative statements.
D) Sales comparative statements.
E) General-purpose financial statements.

112) Common-size financial statements:

A) Show changes in the relative importance of each financial statement item.
B) Do not emphasize the relative importance of each item.
C) Show financial amounts in side-by-side columns on a single statement.
D) Show the dollar amount of change for financial statement items over time.
E) Is also known as horizontal analysis.

113) The common-size percent is computed by:

A) Dividing the analysis amount by the base amount.
B) Dividing the base amount by the analysis amount.
C) Dividing the analysis amount by the base amount and multiplying the result by 100.
D) Dividing the base amount by the analysis amount and multiplying the result by 1,000.
E) Subtracting the base amount from the analysis amount and multiplying the result by 100.

114) A corporation reported cash of $15,500 and total assets of $179,800 on its balance sheet. Its common-size percent for cash equals:

A) 11.60%.
B) 13.76%.
C) 8.62%.
D) 20.38%.
E) 6.62%.

115) A corporation reported cash of $15,300 and total assets of $180,000 on its balance sheet. Its common-size percent for cash equals:

A) 0.085%.
B) 8.50%.
C) 12.73%.
D) 1176%.
E) 7850%.

116) A corporation reported cash of $28,000, total assets of $466,000, and current liabilities of $159,710 on its balance sheet. Its common-size percent for cash equals:

A) 16.64%.
B) 60.10%.
C) 100.00%.
D) 6.01%.
E) 1664.00%.

117) A corporation reported cash of $27,550, total assets of $475,000, and current liabilities of $157,895 on its balance sheet. Its common-size percent for cash equals:

A) 17.45%.
B) 58.00%.
C) 100.00%.
D) 5.80%.
E) 1707.00%.

118) Current assets minus current liabilities is:

A) Profit margin.
B) Financial leverage.
C) Current ratio.
D) Working capital.
E) Quick assets.

119) Jones Corporation reported current assets of $183,000 and current liabilities of $132,000 on its most recent balance sheet. The working capital is:

A) 139%.
B) 72%.
C) ($51,000).
D) $51,000.
E) 39%.

120) Jones Corporation reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The working capital is:

A) 141%.
B) 71%.
C) ($56,000).
D) $56,000.
E) 41%.

121) Jones Corporation reported current assets of $191,800, current liabilities of $137,000, and total liabilities of $275,714 on its most recent balance sheet. The current ratio is:

A) 1.4 : 1.
B) 0.7 : 1.
C) 0.3 : 1.
D) 1 : 1.
E) 0.5 : 1.

122) Jones Corporation reported current assets of $190,000 and current liabilities of $135,500 on its most recent balance sheet. The current assets consisted of $62,600 Cash; $43,900 Accounts Receivable; and $83,500 of Inventory. The acid-test (quick) ratio is:

A) 1.4 : 1.
B) 0.79 : 1.
C) 0.56 : 1.
D) 1 : 1.
E) 0.62 : 1.

123) Jones Corporation reported current assets of $193,490 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,490 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is:

A) 1.4 : 1.
B) 0.77 : 1.
C) 0.54 : 1.
D) 1 : 1.
E) 0.64 : 1.

124) Current assets divided by current liabilities is the:

A) Current ratio.
B) Quick ratio.
C) Debt ratio.
D) Liquidity ratio.
E) Solvency ratio.

125) Quick assets (cash, short-term investments, and current receivables) divided by current liabilities is the:

A) Acid-test ratio.
B) Current ratio.
C) Working capital ratio.
D) Current liability turnover ratio.
E) Quick asset turnover ratio.

126) Net sales divided by average accounts receivable, net is the:

A) Days' sales uncollected.
B) Average accounts receivable ratio.
C) Current ratio.
D) Profit margin.
E) Accounts receivable turnover ratio.

127) Powers Company reported net sales of $1,350,000, average Accounts Receivable, net of $63,500, and net income of $57,400. The accounts receivable turnover ratio is:

A) 0.47 times.
B) 20.3 times.
C) 40.5 times.
D) 21.3 times.
E) 22.3 times.

128) Powers Company reported net sales of $1,201,050, average Accounts Receivable, net of $78,500, and net income of $51,025. The accounts receivable turnover ratio is:

A) 0.65 times.
B) 14.3 times.
C) 23.5 times.
D) 15.3 times.
E) 16.3 times.

129) Jacobs Company reported net sales of $1,200,000, accounts receivable, net of $72,000, and net income of $51,025. The days’ sales uncollected is:

A) 21.9 days.
B) 15.4 days.
C) 4.0 days.
D) 562.5 days.
E) 48.3 days.

130) Dividing Accounts receivable, net by Net sales and multiplying the result by 365 is the:

A) Profit margin.
B) Days' sales uncollected.
C) Accounts receivable turnover ratio.
D) Average accounts receivable ratio.
E) Current ratio.

131) Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:

A) Inventory turnover ratio.
B) Profit margin.
C) Days' sales in inventory.
D) Current ratio.
E) Total asset turnover.

132) Zhang Company reported Cost of goods sold of $848,000, beginning Inventory of $39,800 and ending Inventory of $47,600. The average Inventory amount is:

A) $39,800.
B) $47,600.
C) $87,400.
D) $43,700.
E) $7,800.

133) Zhang Company reported Cost of goods sold of $835,000, beginning Inventory of $37,200 and ending Inventory of $46,300. The average Inventory amount is:

A) $37,200.
B) $46,300.
C) $83,500.
D) $41,750.
E) $9,100.

134) Zhang Company reported cost of goods sold of $835,000, average inventory of $41,750, and net sales of $2,338,000. The inventory turnover ratio is:

A) 0.5 times.
B) 418 times.
C) 20 times.
D) 56 times.
E) 19 times.

135) Zhang Company reported Cost of goods sold of $840,000, ending Inventory of $168,000, and Net sales of $2,338,000. The Days’ sales in inventory is:

A) 73 days.
B) 1,825 days.
C) 7 days.
D) 131 days.
E) 26 days.

136) Net sales divided by average total assets is the:

A) Profit margin.
B) Total asset turnover.
C) Current ratio.
D) Sales return ratio.
E) Return on total assets.

137) Carducci Corporation reported net sales of $3,597,000, average total assets of $1,100,000, and net income of $847,000. The total asset turnover is:

A) 0.31 times.
B) 3.27 times.
C) 4.30 times.
D) 2.27 times.
E) 0.77 times.

138) Carducci Corporation reported net sales of $3.50 million and beginning total assets of $1.00 million and ending total assets of $1.40 million. The average total asset amount is:

A) $2.10 million.
B) $2.50 million.
C) $0.29 million.
D) $0.35 million.
E) $1.20 million.

139) Carducci Corporation reported net sales of $3.6 million and beginning total assets of $0.9 million and ending total assets of 1.3 million. The average total asset amount is:

A) $2.3 million.
B) $2.7 million.
C) $0.25 million.
D) $0.36 million.
E) $1.1 million.

140) Net income divided by net sales is the:

A) Return on total assets.
B) Profit margin.
C) Current ratio.
D) Total asset turnover.
E) Days' sales in inventory.

141) Martinez Corporation reported net sales of $767,000, net income of $140,000, and total assets of $7,654,374. The profit margin is:

A) 548.0%.
B) 5.48%.
C) 81.75%.
D) 1.83%.
E) 18.25%.

142) Martinez Corporation reported net sales of $765,000, net income of $141,525, and total assets of $7,634,409. The profit margin is:

A) 539.0%.
B) 5.4%.
C) 81.4%.
D) 1.9%.
E) 18.5%.

143) Net income divided by average total assets is:

A) Profit margin.
B) Total asset turnover.
C) Return on total assets.
D) Days' income in assets.
E) Current ratio.

144) Clairmont Industries reported net income of $282,828, average total assets of $637,000, and comprehensive income of $354,172. The return on total assets is:

A) 55.6%.
B) 78.9%.
C) 61.5%.
D) 44.4%.
E) 125.1%.

145) Annual cash dividends per share divided by market price per share is the:

A) Price-earnings ratio.
B) Price-dividends ratio.
C) Profit margin.
D) Dividend yield.
E) Earnings per share.

146) The market price of Shaw Corporation’s common stock is $50.00. Shaw declared and paid cash dividends of $3.30 per share and had earnings per share of $6.89. The Dividend yield ratio is:

A) 14.5%.
B) 13.8%.
C) 47.8%.
D) 144.8%.
E) 6.6%.

147) How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:

A) Accounts receivable turnover.
B) Inventory turnover.
C) Days' sales uncollected.
D) Current ratio.
E) Price earnings ratio.

148) A component of profitability, calculated by expressing net income as a percent of net sales, is the:

A) Acid-test ratio.
B) Merchandise turnover.
C) Price earnings ratio.
D) Accounts receivable turnover.
E) Profit margin ratio.

149) Which of the following ratios is a measure of solvency?

A) Acid-test ratio.
B) Current ratio.
C) Times interest earned ratio.
D) Total asset turnover.
E) Days' sales in inventory.

150) A company had a market price of $38.20 per share, earnings per share of $1.60, and dividends per share of $0.75. Its price-earnings ratio equals:

A) 27.1.
B) 23.9.
C) 29.9.
D) 25.9.
E) 22.3.

151) A company had a market price of $27.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:

A) 3.1.
B) 22.0.
C) 93.8.
D) 32.0.
E) 3.3.

152) A company reports basic earnings per share of $4.50, cash dividends per share of $1.75, and a market price per share of $65.25. The company's dividend yield equals:

A) 3.67%.
B) 14.82%.
C) 2.73%.
D) 6.75%.
E) 2.68%.

153) A company reports basic earnings per share of $3.50, cash dividends per share of $1.25, and a market price per share of $62.50. The company's dividend yield equals:

A) 2.00%.
B) 2.14%.
C) 3.60%.
D) 5.60%.
E) 18.50%.

154) Stark Company's most recent balance sheet reported total assets of $1,820,000, total liabilities of $840,000, and total equity of $980,000. Its debt to equity ratio is:

A) 0.46
B) 0.54
C) 1.17
D) 0.86
E) 1.00

155) Stark Company's most recent balance sheet reported total assets of $1,903,000, total liabilities of $803,000, and total equity of $1,100,000. Its debt to equity ratio is:

A) 0.42
B) 0.58
C) 1.38
D) 0.73
E) 1.00

156) Ron Landscaping's income statement reports net income of $75,700, which includes deductions for interest expense of $12,400 and income taxes of $36,100. Its times interest earned is:

A) 10.0 times
B) 7.1 times
C) 3.9 times
D) 6.1 times
E) 0.16 times

157) Ron Landscaping's income statement reports net income of $75,300, which includes deductions for interest expense of $11,500 and income taxes of $30,500. Its times interest earned is:

A) 10.2 times
B) 9.2 times
C) 4.0 times
D) 6.5 times
E) 0.15 times

158) Ariel Corporation reports the following year-end balance sheet data. The company's working capital equals:

A) $84,000
B) $161,000
C) $77,000
D) $308,000
E) $194,000

159) Ariel Corporation reports the following year-end balance sheet data. The company's working capital equals:

A) $80,000
B) $155,000
C) $75,000
D) $300,000
E) $190,000

160) Delta Company reports the following year-end balance sheet data. The company's acid-test ratio equals:

A) 0.60
B) 1.40
C) 2.23
D) 0.38
E) 0.62

161) Delta Company reports the following year-end balance sheet data. The company's acid-test ratio equals:

A) 0.73
B) 1.40
C) 2.20
D) 0.67
E) 0.63

162) Elli Company reports the following year-end balance sheet data. The company's current ratio equals:

A) 0.52
B) 1.29
C) 2.09
D) 0.34
E) 0.66

163) Elli Company reports the following year-end balance sheet data. The company's current ratio equals:

A) 1.26
B) 1.40
C) 2.07
D) 1.54
E) 0.67

164) JP Corporation reports the following year-end balance sheet data. The company's debt ratio equals:

A) 0.45
B) 1.38
C) 0.31
D) 2.21
E) 0.69

165) JP Corporation reports the following year-end balance sheet data. The company'sdebt ratio equals:

A) 0.58
B) 1.27
C) 2.70
D) 0.37
E) 0.63

166) Asiago Company reports the following year-end balance sheet data. The company's equity ratio equals:

A) 0.60
B) 1.40
C) 2.23
D) 0.38
E) 0.62

167) Asiago Company reports the following year-end balance sheet data. The company's equity ratio equals:

A) 1.59
B) 1.70
C) 2.07
D) 1.22
E) 0.63

168) WD Corporation reports the following year-end balance sheet data. The company's debt-to-equity ratio equals:

A) 0.57
B) 1.32
C) 2.14
D) 0.36
E) 0.64

169) WD Corporation reports the following year-end balance sheet data. The company's debt-to-equity ratio equals:

A) 0.58
B) 1.10
C) 1.22
D) 0.37
E) 0.63

170) Selected current year company information follows:

The total asset turnover is: (Do not round intermediate calculations.)

A) 3.11 times
B) 2.77 times
C) 6.25 times
D) 2.26 times
E) 2.49 times

171) Selected current year company information follows:

The total asset turnover is:

A) 0.64 times
B) 2.81 times
C) 1.08 times
D) 4.67 times
E) 6.28 times

172) Selected current year company information follows:

The return on total assets is: (Do not round intermediate calculations.)

A) 2.35%
B) 6.09%
C) 2.38%
D) 2.82%
E) 2.56%

173) Selected current year company information follows:

The return on total assets is:

A) 2.26%
B) 2.81%
C) 3.64%
D) 141.50%
E) 6.35%

174) Which of the following statements regarding a business segment is false?

A) A business segment is a part of a company that is separated by its products/services or by geographic location.
B) A segment has assets, liabilities, and financial results of operations that can be separated from those of other parts of the company.
C) A gain or loss from selling or closing down a segment is separately reported.
D) The income tax effects of a discontinued segment are combined with income tax from continuing operations.
E) A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately.

175) Use the following selected information from Letterman Corporation to determine the Year 1 and Year 2 common size percentages for cost of goods sold using Net sales as the base.

A) 60.2% for Year 2 and 55.0% for Year 1.
B) 44.1% for Year 2 and 36.0% for Year 1.
C) 166.2% for Year 2 and 181.9% for Year 1.
D) 122.7% for Year 2 and 100.0% for Year 1.
E) 8.1% for Year 2 and 7.1% for Year 1.

176) Use the following selected information from Letterman Corporation to determine the Year 1 and Year 2 common size percentages for cost of goods sold using Net sales as the base.

A) 36.4% for Year 2 and 41.1% for Year 1.
B) 55.0% for Year 2 and 56.0% for Year 1.
C) 119.4% for Year 2 and 100.0% for Year 1.
D) 117.2% for Year 2 and 100.0% for Year 1.
E) 65.1% for Year 2 and 56.0% for Year 1.

177) Use the following selected information from Allen Company to determine the Year 1 and Year 2 common size percentages for operating expenses using Net sales as the base.

A) 20.2% for Year 2 and 18.9% for Year 1.
B) 28.9% for Year 2 and 18.9% for Year 1.
C) 16.5% for Year 2 and 19.5% for Year 1.
D) 45.4% for Year 2 and 38.4% for Year 1.
E) 122.3% for Year 2 and 100.0% for Year 1.

178) Use the following selected information from Allen Company to determine the Year 1 and Year 2 common size percentages for operating expenses using Net sales as the base.

A) 36.4% for Year 2 and 41.1% for Year 1.
B) 55.0% for Year 2 and 56.0% for Year 1.
C) 23.9% for Year 2 and 23.0% for Year 1.
D) 103.8% for Year 2 and 100.0% for Year 1.
E) 20.0% for Year 2 and 23.0% for Year 1.

179) Use the following selected information from Corolla to determine the Year 1 and Year 2 trend percentages for net sales using Year 1 as the base.

A) 36.3% for Year 2 and 40.9% for Year 1.
B) 54.7% for Year 2 and 56.0% for Year 1.
C) 116.9% for Year 2 and 100.0% for Year 1.
D) 65.4% for Year 2 and 64.6% for Year 1.
E) 119.7% for Year 2 and 100.0% for Year 1.

180) Use the following selected information from Corolla to determine the Year 1 and Year 2 trend percentages for net sales using Year 1 as the base.

A) 36.4% for Year 2 and 41.1% for Year 1.
B) 55.0% for Year 2 and 56.0% for Year 1.
C) 119.5% for Year 2 and 100.0% for Year 1.
D) 117.2% for Year 2 and 100.0% for Year 1.
E) 65.1% for Year 2 and 64.6% for Year 1.

181) Use the following selected information from Carleton Incorporated to determine the Year 1 and Year 2 trend percentages for cost of goods sold using Year 1 as the base.

A) 53.3% for Year 2 and 56.2% for Year 1.
B) 35.8% for Year 2 and 39.7% for Year 1.
C) 121.5% for Year 2 and 100.0% for Year 1.
D) 67.2% for Year 2 and 64.6% for Year 1.
E) 115.1% for Year 2 and 100.0% for Year 1.

182) Use the following selected information from Carleton Incorporated to determine the Year 1 and Year 2 trend percentages for cost of goods sold using Year 1 as the base.

A) 36.4% for Year 2 and 41.1% for Year 1.
B) 55.0% for Year 2 and 56.0% for Year 1.
C) 119.4% for Year 2 and 100.0% for Year 1.
D) 117.5% for Year 2 and 100.0% for Year 1.
E) 65.1% for Year 2 and 64.6% for Year 1.

183) Refer to the following selected financial information from Texas Electronics. Compute the company’s working capital for Year 2.

A) $164,800.
B) $241,400.
C) $129,300.
D) $156,300.
E) $254,300.

184) Refer to the following selected financial information from Texas Electronics. Compute the company's working capital for Year 2.

A) $232,700.
B) $220,600.
C) $147,200.
D) $111,700.
E) $142,700.

185) Refer to the following selected financial information from Texas Electronics. Compute the company’s current ratio for Year 2.

A) 2.02.
B) 2.13.
C) 3.25.
D) 3.14.
E) 2.38.

186) Refer to the following selected financial information from Texas Electronics. Compute the company's current ratio for Year 2. (Round your answer to 2 decimal places).

A) 2.26.
B) 1.98.
C) 2.95.
D) 3.05.
E) 1.88.

187) Refer to the following selected financial information from Texas Electronics. Compute the company’s acid-test ratio for Year 2.

A) 2.31.
B) 3.38.
C) 3.51.
D) 2.19.
E) 2.54.

188) Refer to the following selected financial information from Texas Electronics. Compute the company's acid-test ratio for Year 2. (Round your answer to 2 decimal places.)

A) 2.26.
B) 1.98.
C) 2.95.
D) 3.05.
E) 1.88.

189) Refer to the following selected financial information from Texas Electronics. Compute the company’s accounts receivable turnover for Year 2.

A) 8.48.
B) 5.82.
C) 8.80.
D) 7.66.
E) 8.19.

190) Refer to the following selected financial information from Texas Electronics. Compute the company’s accounts receivable turnover for Year 2. (Round your answer to 2 decimal places.)

A) 8.62.
B) 8.28.
C) 8.94.
D) 5.78.
E) 7.90.

191) Refer to the following selected financial information from Texas Electronics. Compute the company’s inventory turnover for Year 2.

A) 5.57.
B) 3.09.
C) 3.04.
D) 2.99.
E) 3.60.

192) Refer to the following selected financial information from Texas Electronics. Compute the company's inventory turnover for Year 2. (Round your answer to 2 decimal places.)

A) 4.72.
B) 4.33.
C) 3.28.
D) 5.78.
E) 3.86.

193) Refer to the following selected financial information from Texas Electronics. Compute the company’s days’ sales uncollected for Year 2. (Use 365 days a year.)

A) 85.4.
B) 53.3.
C) 45.6.
D) 47.2.
E) 118.0.

194) Refer to the following selected financial information from Texas Electronics. Compute the company's days' sales uncollected for Year 2. (Round your answer to 1 decimal place.)

A) 43.9.
B) 42.3.
C) 46.2.
D) 80.0.
E) 113.3.

195) Refer to the following selected financial information from Texas Electronics. Compute the company’s days’ sales in inventory for Year 2. (Use 365 days a year.)

A) 50.0.
B) 44.1.
C) 115.8.
D) 45.7.
E) 82.9.

196) Refer to the following selected financial information from Texas Electronics. Compute the company's days' sales in inventory for Year 2. (Round your answer to 1 decimal place.)

A) 43.9.
B) 42.3.
C) 46.2.
D) 80.0.
E) 113.2.

197) Refer to the following selected financial information from Troy Manufacturing. Compute the company's working capital.

A) $536,650.
B) $230,200.
C) $568,200.
D) $198,650.
E) $231,450.

198) Refer to the following selected financial information from Sammy Company Compute the company's current ratio.

A) 5.63.
B) 2.84.
C) 6.07.
D) 3.60.
E) 3.23.

199) Refer to the following selected financial information from WorkFit Corporation. Compute the company's acid-test ratio.

A) 2.76.
B) 2.67.
C) 0.91.
D) 1.10.
E) 1.63.

200) Refer to the following selected financial information from Whirlpool Company. Compute the company's accounts receivable turnover for Year 2.

A) 8.36.
B) 8.38.
C) 4.78.
D) 8.20.
E) 8.54.

201) Refer to the following selected financial information from Weekend Getaways Incorporated Compute the company's days' sales uncollected for Year 2. (Use 365 days a year.)

A) 39.9.
B) 43.8.
C) 45.5.
D) 38.4.
E) 42.7.

202) Refer to the following selected financial information from Phantom Corporation Compute the company's inventory turnover for Year 2.

A) 1.65.
B) 1.79.
C) 1.85.
D) 0.89.
E) 1.71.

203) Refer to the following selected financial information from Helpful Hardware. Compute the company’s days’ sales in inventory for Year 2. (Use 365 days a year.)

A) 209.3.
B) 235.3.
C) 220.4.
D) 196.0.
E) 214.5.

204) Refer to the following selected financial information from Helpful Hardware. Compute the company's days' sales in inventory for Year 2. (Use 365 days a year.)

A) 204.4.
B) 276.1.
C) 179.5.
D) 215.1.
E) 213.6.

205) Refer to the following selected financial information from Gomez Electronics. Compute the company’s profit margin for Year 2.

A) 32.8%.
B) 14.1%.
C) 9.8%.
D) 12.0%.
E) 17.0%.

206) Refer to the following selected financial information from Gomez Electronics. Compute the company's profit margin for Year 2.

A) 14.0%.
B) 12.4%.
C) 9.5%.
D) 16.0%.
E) 33.9%.

207) Refer to the following selected financial information from Gomez Electronics. Compute the company’s return on total assets for Year 2.

A) 15.3%.
B) 2.7%.
C) 14.7%.
D) 22.3%.
E) 9.7%.

208) Refer to the following selected financial information from Gomez Electronics. Compute the company's return on total assets for Year 2.

A) 13.4%.
B) 15.2%.
C) 2.6%.
D) 22.2%.
E) 14.3%.

209) Refer to the following selected financial information from Gomez Electronics. Compute the company’s debt-to-equity ratio for Year 2.

A) 0.87.
B) 3.28.
C) 1.87.
D) 1.15.
E) 2.15.

210) Refer to the following selected financial information from Gomez Electronics. Compute the company's debt-to-equity ratio for Year 2.

A) 1.48.
B) 2.34.
C) 0.67.
D) 1.50.
E) 0.60.

211) Refer to the following selected financial information from Gomez Electronics. Compute the company’s times interest earned for Year 2.

A) 5.3.
B) 7.3.
C) 13.2.
D) 6.3.
E) 4.3.

212) Refer to the following selected financial information from Gomez Electronics. Compute the company's times interest earned for Year 2. (Round your answer to 1 decimal place.)

A) 6.9.
B) 4.7.
C) 5.7.
D) 14.0.
E) 7.9.

213) Refer to the following selected financial information from Mojave Corporation. Compute the company's times interest earned.

A) 6.2.
B) 2.5.
C) 8.7.
D) 9.7.
E) 3.7.

214) Refer to the following selected financial information from Winterfell Company. Compute the company's debt to equity ratio for Year 2.

A) 0.9.
B) 1.1.
C) 0.5.
D) 1.3.
E) 2.1.

Answer Key

Test name: John Wild Ch13 Algorithmic and Static

1) TRUE

2) FALSE

3) FALSE

4) TRUE

5) TRUE

6) TRUE

7) TRUE

8) FALSE

9) TRUE

10) TRUE

11) FALSE

12) FALSE

13) TRUE

14) TRUE

15) FALSE

16) TRUE

17) FALSE

18) TRUE

19) FALSE

20) TRUE

21) TRUE

22) FALSE

23) TRUE

24) TRUE

25) FALSE

26) TRUE

27) TRUE

28) FALSE

29) TRUE

30) TRUE

31) FALSE

32) TRUE

33) TRUE

34) TRUE

35) TRUE

36) FALSE

37) TRUE

38) TRUE

39) FALSE

40) TRUE

41) FALSE

42) TRUE

43) TRUE

44) FALSE

45) TRUE

46) TRUE

47) TRUE

48) TRUE

49) TRUE

50) FALSE

51) TRUE

52) TRUE

53) FALSE

54) TRUE

55) FALSE

56) TRUE

57) TRUE

58) TRUE

59) TRUE

60) TRUE

61) FALSE

62) FALSE

63) TRUE

64) FALSE

65) TRUE

66) FALSE

67) TRUE

68) FALSE

69) TRUE

70) FALSE

71) FALSE

72) TRUE

73) TRUE

74) TRUE

75) TRUE

76) FALSE

77) E

78) E

79) C

80) B

81) A

82) B

83) A

84) B

85) C

86) D

87) D

88) A

89) C

90) B

91) C

92) A

93) D

94) E

95) A

96) B

97) A

98) A

99) E

100) A

101) D

102) A

103) B

104) C

105) D

106) C

107) C

108) D

109) D

110) A

111) C

112) A

113) C

114) C

115) B

116) D

117) D

118) D

119) D

120) D

121) A

122) B

123) B

124) A

125) A

126) E

127) D

128) D

129) A

130) B

131) C

132) D

133) D

134) C

135) A

136) B

137) B

138) E

139) E

140) B

141) E

142) E

143) C

144) D

145) D

146) E

147) B

148) E

149) C

150) B

151) B

152) E

153) A

154) D

155) D

156) A

157) A

158) A

159) A

160) B

161) B

162) C

163) C

164) C

165) D

166) E

167) E

168) A

169) A

170) B

171) B

172) B

173) E

174) D

175) B

176) B

177) C

178) E

179) E

180) C

181) E

182) D

183) E

184) A

185) C

186) D

187) D

188) E

189) A

190) B

191) C

192) C

193) D

194) A

195) C

196) E

197) D

198) B

199) E

200) E

201) B

202) C

203) A

204) A

205) C

206) C

207) A

208) B

209) D

210) D

211) B

212) E

213) D

214) B