Question 1

Short-term creditors are usually most interested in assessing

Accepted Answer

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

Question 2

Cochran Corporation, Inc.has the following income statement (in millions) :  Using vertical analysis, what percentage is assigned to Cost of goods sold?

Accepted Answer

A)  37%
B)  63%
C)  100%
D)  50%E) B) and C)
F) A) and B)

Question 3

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is the best definition of sustainable income?

Accepted Answer

A)  Sustainable income is a measure of solvency that excludes capital expenditures.
B)  Sustainable income is the same as net income.
C)  Sustainable income is income that is unusual in nature and infrequent in occurrence.
D)  Sustainable income is the most likely level of income to be obtained in the future.E) A) and B)
F) None of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

In a common-size balance sheet, the 100% figure is

Accepted Answer

A)  total current assets.
B)  total property, plant and equipment.
C)  total liabilities.
D)  total assets.E) A) and C)
F) A) and D)

Question 7

A general rule to use in assessing the average collection period is that it

Accepted Answer

A)  should not exceed 30 days.
B)  can be any length as long as the customer continues to buy merchandise.
C)  should not greatly exceed the return period.
D)  should not greatly exceed the credit term period.E) A) and B)
F) B) and D)

Question 8

Which one of the following would not be considered a liquidity ratio?

Accepted Answer

A)  Current ratio
B)  Inventory turnover
C)  Average collection period
D)  Return on assetsE) None of the above
F) A) and D)

Question 9

Inventory turnover is a measure of liquidity that focuses on the efficient use of inventory.

Accepted Answer

A) True 
 B)False

Question 10

The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit.  What is the return on assets for this company?

Accepted Answer

A)  6.8%
B)  10.0%
C)  11.7%
D)  26.7%E) B) and C)
F) All of the above

Question 11

In analyzing financial statements, horizontal analysis is a

Accepted Answer

A)  requirement.
B)  tool.
C)  principle.
D)  theory.E) B) and C)
F) None of the above

Question 12

Assume the following cost of goods sold data for a company:  If 2019 is the base year, what is the percentage increase in cost of goods sold from 2019 to 2021?

Accepted Answer

A)  140%
B)  40%
C)  20%
D)  17%E) B) and D)
F) B) and C)

Question 13

Using these data from the comparative balance sheet of Sunta Fe Spice Company, perform horizontal analysis.

Accepted Answer

The answer of Using these data from the comparative balance...

Question 14

Bill's Dollar Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year.Net credit sales during the year amounted to $6,400,000.The accounts receivable turnover was

Accepted Answer

A)  7.6 times.
B)  8.4 times.
C)  8.0 times.
D)  4.0 times.E) C) and D)
F) A) and B)

Question 15

Inventory turnover measures the number of times on average the inventory was sold during the period.

Accepted Answer

A) True 
 B)False

Question 16

The current assets of Orangette Company are $292,500.The current liabilities are $130,000.The current ratio expressed as a proportion is

Accepted Answer

A)  225%.
B)  2.25:1.
C)  .44:1.
D)  $130,000 ÷ $292,500.E) A) and D)
F) C) and D)

Question 17

Which one of the following would be considered a long-term solvency ratio?

Accepted Answer

A)  Accounts receivable turnover
B)  Return on assets
C)  Current ratio
D)  Debt to assets ratioE) B) and C)
F) All of the above

Question 18

In performing a vertical analysis, the base for prepaid expenses is

Accepted Answer

A)  total current assets.
B)  total assets.
C)  total liabilities.
D)  prepaid expenses in a previous year.E) C) and D)
F) B) and C)

Question 19

If Hard in Parle Company had net income of $620,000 in 2020 and it experienced a 19% increase in net income over 2019, what was its 2019 net income?

Accepted Answer

The answer of If Hard in Parle Company had net...

Question 20

In performing a vertical analysis, the base for sales revenues on the income statement is

Accepted Answer

A)  net sales.
B)  sales revenue.
C)  net income.
D)  cost of goods available for sale.E) All of the above
F) B) and C)

Exam 13: Financial Analysis: the Big Picture

Short-term creditors are usually most interested in assessing

Correct AnswerverifiedShow Answer

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

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The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. What is the return on assets for this company?

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Which one of the following would not be considered a liquidity ratio?

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The current assets of Orangette Company are $292,500.The current liabilities are $130,000.The current ratio expressed as a proportion is

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Bill's Dollar Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year.Net credit sales during the year amounted to $6,400,000.The accounts receivable turnover was

Correct AnswerverifiedShow Answer

Assume the following cost of goods sold data for a company: If 2019 is the base year, what is the percentage increase in cost of goods sold from 2019 to 2021?

Correct AnswerverifiedShow Answer

Using these data from the comparative balance sheet of Sunta Fe Spice Company, perform horizontal analysis.

Correct AnswerverifiedShow Answer

In analyzing financial statements, horizontal analysis is a

Correct AnswerverifiedShow Answer

In performing a vertical analysis, the base for prepaid expenses is

Correct AnswerverifiedShow Answer

Inventory turnover measures the number of times on average the inventory was sold during the period.

Correct AnswerverifiedShow Answer

Cochran Corporation, Inc.has the following income statement (in millions) : Using vertical analysis, what percentage is assigned to Cost of goods sold?

Correct AnswerverifiedShow Answer

Inventory turnover is a measure of liquidity that focuses on the efficient use of inventory.

Correct AnswerverifiedShow Answer

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Correct AnswerverifiedShow Answer

In a common-size balance sheet, the 100% figure is

Correct AnswerverifiedShow Answer

Which one of the following would be considered a long-term solvency ratio?

Correct AnswerverifiedShow Answer

In performing a vertical analysis, the base for sales revenues on the income statement is

Correct AnswerverifiedShow Answer

Which of the following is the best definition of sustainable income?

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If Hard in Parle Company had net income of $620,000 in 2020 and it experienced a 19% increase in net income over 2019, what was its 2019 net income?

Correct AnswerverifiedShow Answer

A general rule to use in assessing the average collection period is that it

Correct AnswerverifiedShow Answer

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