Question 1

A common measure of liquidity is

Accepted Answer

A)  return on assets.
B)  receivables turnover.
C)  profit margin.
D)  debt to total assets.E) A) and C)
F) A) and B)

Question 2

On a statement of financial position analyzed vertically, total assets are represented by 100%.

Accepted Answer

A) True 
 B)False

Question 3

In horizontal analysis, the percentage of a base-period amount is calculated by

Accepted Answer

A)  dividing the analysis period amount by the base period amount.
B)  dividing the dollar amount of the change since the base period by the base period amount.
C)  dividing the item under analysis by sales.
D)  dividing the item under analysis by total assets.E) None of the above
F) All of the above

Question 4

A supplier to a company would be most interested in the

Accepted Answer

A)  asset turnover ratio.
B)  profit margin ratio.
C)  current ratio.
D)  free cash flow.E) A) and D)
F) A) and B)

Question 5

In the vertical analysis of a statement of financial position, the base for current liabilities is total liabilities.

Accepted Answer

A) True 
 B)False

Question 6

In horizontal analysis, each item is expressed as a percentage of the

Accepted Answer

A)  retained earnings amount.
B)  total assets amount.
C)  net income amount.
D)  base year amount.E) A) and B)
F) A) and C)

Question 7

A component of an entity, for the purpose of discontinued operations, represents all of the following except

Accepted Answer

A)  a major line of business.
B)  major geographical area of operations.
C)  a clearly distinguishable component from the rest of the company.
D)  a major line of business held for future use.E) B) and C)
F) B) and D)

Question 8

Vertical analysis

Accepted Answer

A)  is a technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place.
B)  expresses each item in a financial statement as a percent of a base amount.
C)  makes it more difficult to compare different companies.
D)  is also called trend analysis.E) A) and B)
F) A) and C)

Question 9

Horizontal analysis is also called

Accepted Answer

A)  percentage analysis.
B)  trend analysis.
C)  vertical analysis.
D)  economic analysis.E) B) and D)
F) A) and B)

Question 10

Profit margin is calculated by dividing

Accepted Answer

A)  sales by cost of goods sold.
B)  gross profit by sales.
C)  net income by shareholders' equity.
D)  net income by sales.E) None of the above
F) B) and D)

Question 11

The receivables turnover ratio is useful in assessing the profitability of receivables.

Accepted Answer

A) True 
 B)False

Question 12

The receivables turnover and inventory turnover ratios are used to analyze

Accepted Answer

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

Question 13

Factors that may limit the usefulness of financial analysis include alternative accounting policies, professional judgement, other comprehensive income, diversification, inflation, and economic factors.

Accepted Answer

A) True 
 B)False

Question 14

Use the following information for questions 
Nelly Inc.reported credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year.The average inventory for the year was $6,000,000.
-The days in inventory during the year was

Accepted Answer

A)  15 days.
B)  11 days.
C)  91 days.
D)  122 days.E) All of the above
F) B) and C)

Question 15

A receivables turnover ratio that is significantly higher than the industry average may indicate

Accepted Answer

A)  a collection problem.
B)  that a company's credit-granting policies are too loose.
C)  that a company's collection period is higher than the industry.
D)  that a company's credit-granting policies are too tight.E) B) and D)
F) C) and D)

Question 16

Consider the following information:  The dividend yield is

Accepted Answer

A)  1.5%.
B)  6.2%.
C)  8.6%.
D)  50.0%.E) B) and C)
F) None of the above

Question 17

Horizontal analysis of comparative financial statements includes the

Accepted Answer

A)  development of vertically analyzed statements.
B)  calculation of liquidity ratios.
C)  calculation of dollar amount changes and percentage changes from the previous to the current year.
D)  evaluation of financial statement data that expresses each item in the current period's financial statement as a percentage of a base amount.E) All of the above
F) A) and C)

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) B) and C)
F) C) and D)

Question 19

On a statement of income analyzed vertically, each item is expressed as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 20

A company has average inventory on hand of $40,000 and its average days in inventory is 26.4 days.What is the cost of goods sold?

Accepted Answer

A)  $1,056,000
B)  $553,030
C)  $486,667
D)  $480,000E) All of the above
F) B) and C)

Exam 14: Performance Measurement

Use the following information for questions Nelly Inc.reported credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year.The average inventory for the year was $6,000,000. -The days in inventory during the year was

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A common measure of liquidity is

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Vertical analysis

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Profit margin is calculated by dividing

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On a statement of income analyzed vertically, each item is expressed as a percentage of net income.

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Consider the following information: The dividend yield is

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In the vertical analysis of a statement of financial position, the base for current liabilities is total liabilities.

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The receivables turnover ratio is useful in assessing the profitability of receivables.

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Factors that may limit the usefulness of financial analysis include alternative accounting policies, professional judgement, other comprehensive income, diversification, inflation, and economic factors.

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The receivables turnover and inventory turnover ratios are used to analyze

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In horizontal analysis, the percentage of a base-period amount is calculated by

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

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A company has average inventory on hand of $40,000 and its average days in inventory is 26.4 days.What is the cost of goods sold?

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Horizontal analysis of comparative financial statements includes the

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A receivables turnover ratio that is significantly higher than the industry average may indicate

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Horizontal analysis is also called

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In horizontal analysis, each item is expressed as a percentage of the

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A supplier to a company would be most interested in the

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A component of an entity, for the purpose of discontinued operations, represents all of the following except

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On a statement of financial position analyzed vertically, total assets are represented by 100%.

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