Question 1

Hornish Co. had net sales of $5,265 million and accounts receivable of $225 million. Its days' sales uncollected was:

Accepted Answer

A)   81.8.
B)   19.4.
C)   2.98.
D)   65.2.
E)   15.6.F) C) and D)
G) A) and B)

Question 2

The days' sales in inventory is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Accepted Answer

A) True 
 B)False

Question 3

Firms with an accounts payable turnover rate that is faster than the industry norm are:

Accepted Answer

A)   Paying creditors faster than the norm.
B)   Paying creditors faster than the norm and managing their payments to suppliers well.
C)   In financial difficulty.
D)   Paying creditors faster than the norm and are in financial difficulty.
E)   Managing their payments to suppliers well.F) A) and E)
G) None of the above

Question 4

The acid-test ratio is a more accurate measure of a company's liquidity than the current ratio.

Accepted Answer

A) True 
 B)False

Question 5

Industry standards for financial statement analysis:

Accepted Answer

A)   Are based on rules of thumb.
B)   Are set by the company's industry.
C)   Are based on a company's prior performance.
D)   Are set by competitors.
E)   Are based on a company's prior performance and on rules of thumb.F) B) and E)
G) C) and D)

Question 6

Evaluation of company performance includes:

Accepted Answer

A)   Current financial position.
B)   Future performance and risk.
C)   Current performance.
D)   Past performance.
E)   All of these answers are correct.F) D) and E)
G) None of the above

Question 7

Common-size financial statements are useful in:

Accepted Answer

A)   Analyzing income statements.
B)   Analyzing companies of different sizes.
C)   Comparing different geographical regions of a company.
D)   Alerting users of differences that should be explored and explained.
E)   All of these answers are correct.F) B) and C)
G) C) and E)

Question 8

For trend analysis, the percent change is completed by subtracting the analysis periodamount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

Accepted Answer

A) True 
 B)False

Question 9

General-purpose financial statements include the 1) income statement, 2) balance sheet, 3) statement of changes in equity, 4) statement of cash flows, and 5) notes related to the statements.

Accepted Answer

A) True 
 B)False

Question 10

CompUS has pledged $275,000 worth of its assets. The total book value of its assets is$625,000. The firm's total liabilities are $750,000. The secured liabilities are $150,000. The pledged assets to secured liabilities is:

Accepted Answer

A)   2.3.
B)   2.7.
C)   5.0.
D)   1.8.
E)   1.2.F) A) and C)
G) A) and B)

Question 11

The building blocks of financial statement analysis include:

Accepted Answer

A)   Solvency.
B)   Liquidity and efficiency.
C)   Profitability.
D)   Market.
E)   All of these answers are correct.F) All of the above
G) B) and D)

Question 12

Analytical tools comparing a company's financial condition and performance across time are:

Accepted Answer

A)   Financial analysis.
B)   Horizontal analysis.
C)   Vertical analysis.
D)   Investment analysis.
E)   Ratio analysis.F) B) and C)
G) C) and E)

Question 13

The current ratio is used to evaluate the ability of a business to meet its short-term obligations.

Accepted Answer

A) True 
 B)False

Question 14

Comparative financial statements are reports where financial amounts are placed side by side in columns on a single statement for analysis purposes.

Accepted Answer

A) True 
 B)False

Question 15

The number of days' sales uncollected:

Accepted Answer

A)   Is used to compare a company to other companies in the same industry and is used to compare between current and prior periods.
B)   Is used to compare between current and prior periods.
C)   Is used to compare a company to other companies in the same industry.
D)   Measures how much time is likely to pass before a company receives cash receipts from credit sales equal to the current amount of accounts receivable.
E)   All of these answers are correct.F) B) and E)
G) A) and D)

Question 16

A share's market value is affected by:

Accepted Answer

A)   Expected growth in dividends.
B)   Expected business opportunities.
C)   Expected growth in earnings and dividends.
D)   Expected growth in earnings.
E)   All of these answers are correct.F) C) and E)
G) D) and E)

Question 17

The pledged assets to secured liabilities ratio is calculated by dividing secured liabilities by pledged assets.

Accepted Answer

A) True 
 B)False

Question 18

Comparison standards for financial statement analysis include:

Accepted Answer

A)   Industry.
B)   Competition.
C)   Intracompany.
D)   Guidelines.
E)   All of these answers are correct.F) A) and B)
G) A) and D)

Question 19

Seinfield Corporation had cash of $16,000 and total assets of $178,300. The common-size percent for cash was 7.85%.

Accepted Answer

A) True 
 B)False

Question 20

CrossSport had average total assets of $697,000. Its gross sales were $3,090,000 and its net sales were $2,000,000. CrossSport's total asset turnover was:

Accepted Answer

A)   2.87.
B)   .64.
C)   .34.
D)   1.2.
E)   .82.F) A) and B)
G) A) and C)

Exam 17: Analyzing Financial Statements

Firms with an accounts payable turnover rate that is faster than the industry norm are:

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The building blocks of financial statement analysis include:

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For trend analysis, the percent change is completed by subtracting the analysis periodamount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

Correct AnswerverifiedShow Answer

The current ratio is used to evaluate the ability of a business to meet its short-term obligations.

Correct AnswerverifiedShow Answer

Evaluation of company performance includes:

Correct AnswerverifiedShow Answer

Common-size financial statements are useful in:

Correct AnswerverifiedShow Answer

Analytical tools comparing a company's financial condition and performance across time are:

Correct AnswerverifiedShow Answer

General-purpose financial statements include the 1) income statement, 2) balance sheet, 3) statement of changes in equity, 4) statement of cash flows, and 5) notes related to the statements.

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The number of days' sales uncollected:

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The pledged assets to secured liabilities ratio is calculated by dividing secured liabilities by pledged assets.

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The days' sales in inventory is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

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Comparison standards for financial statement analysis include:

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CrossSport had average total assets of $697,000. Its gross sales were $3,090,000 and its net sales were $2,000,000. CrossSport's total asset turnover was:

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CompUS has pledged $275,000 worth of its assets. The total book value of its assets is$625,000. The firm's total liabilities are $750,000. The secured liabilities are $150,000. The pledged assets to secured liabilities is:

Correct AnswerverifiedShow Answer

Seinfield Corporation had cash of $16,000 and total assets of $178,300. The common-size percent for cash was 7.85%.

Correct AnswerverifiedShow Answer

Industry standards for financial statement analysis:

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Comparative financial statements are reports where financial amounts are placed side by side in columns on a single statement for analysis purposes.

Correct AnswerverifiedShow Answer

The acid-test ratio is a more accurate measure of a company's liquidity than the current ratio.

Correct AnswerverifiedShow Answer

Hornish Co. had net sales of $5,265 million and accounts receivable of $225 million. Its days' sales uncollected was:

Correct AnswerverifiedShow Answer

A share's market value is affected by:

Correct AnswerverifiedShow Answer

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