Question 1

Sleep Sack had net sales of $650,500, its cost of goods sold was $357,000, and its profit was $13,750. The gross margin ratio was 45.1%.

Accepted Answer

A) True 
 B)False

Question 2

Tools comparing a company's financial condition and performance to a base amount are:

Accepted Answer

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

Question 3

Holding Co. had cost of goods sold of $600,000. Its ending inventory was $200,000. Therefore its days' sales in inventory was 90 days.

Accepted Answer

A) True 
 B)False

Question 4

Lottery Corp had a market price of $56.50, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio was:

Accepted Answer

A)   48.6.
B)   3.1.
C)   51.2
D)   45.2.
E)   49.3.F) A) and B)
G) All of the above

Question 5

Accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

Accepted Answer

A) True 
 B)False

Question 6

The ability to meet positive market expectations relates to which of the following building blocks of financial statement analysis:

Accepted Answer

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

Question 7

Off the Record's current ratio is .9 to 1. The industry average current ratio is 1.2. Off the Record does not have a problem in covering liabilities because of its strong sales andposition in its industry.

Accepted Answer

A) True 
 B)False

Question 8

An advantage of common-size statements is that they reflect the relative sizes of companies under analysis.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is false when describing the debt ratio?

Accepted Answer

A)   A relatively high ratio is desirable.
B)   Many factors such as company's age, stability, profitability, and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
C)   The ratio might be used to help determine if a company could be capable of increasing its income by going into further debt.
D)   It is of use to both internal and external users of accounting information.
E)   The dividing line between a high and low ratio varies from industry to industry.F) A) and C)
G) A) and D)

Question 10

Liquidity problems are likely to exist for a company when its acid-test ratio:

Accepted Answer

A)   Is both less than the industry average and lower than 1 to 1.
B)   Is higher than 1 to 1.
C)   Is less than the industry average.
D)   Is 1 to 1.
E)   Is lower than 1 to 1.F) A) and E)
G) A) and B)

Question 11

Targot's current assets were $16,825. Its quick assets were $11,220. Its current liabilities were $13,190. The quick ratio is:

Accepted Answer

A)   0.85.
B)   1.18.
C)   0.65.
D)   0.78.
E)   1.28.F) B) and C)
G) All of the above

Question 12

The pledged assets to secured liabilities measures whether or not the pledged assets of the debtor provide adequate security for secured creditors.

Accepted Answer

A) True 
 B)False

Question 13

Quickcom has net sales of $135,000 and average accounts receivable of $67,000. What is the accounts receivable turnover for the period?

Accepted Answer

A)   1,825.
B)   2.
C)   73.
D)   20.
E)   25.F) C) and D)
G) A) and E)

Question 14

Financial statement analysis lessens the need for expert judgment.

Accepted Answer

A) True 
 B)False

Question 15

Stride Rite has liabilities of $112 million and total assets of $350 million. Its debt ratio is 30.4%.

Accepted Answer

A) True 
 B)False

Question 16

Guidelines rules of thumb)  are developed from:

Accepted Answer

A)   Past experience and relations between financial items.
B)   Relations between financial items.
C)   Past experience.
D)   Analysis of competitors.
E)   Industry statistics.F) A) and C)
G) A) and E)

Question 17

The formula for times interest earned is:

Accepted Answer

A)   profit- Interest expense - Income taxes divided by Interest expense.
B)   profit+ Interest expense + Income taxes divided by Interest expense.
C)   profit+ Interest expense - Income taxes divided by Interest expense.
D)   Interest expense divided by profit + Interest expense + Income taxes expense.
E)   profit- Interest expense + Income taxes divided by Interest expense.F) A) and B)
G) A) and E)

Question 18

Kreuger Corp has earnings per share of $4.50, dividends per share of $0.85, and a market price of $64.75. Its dividend yield is 21.4%.

Accepted Answer

A) True 
 B)False

Question 19

FastForward had $3,000 of profit for October. Total revenues were $10,000. Calculate the profit margin.

Accepted Answer

A)   45%.
B)   15%.
C)   30%.
D)   $7,000.
E)   $1,500.F) A) and D)
G) A) and E)

Question 20

Total asset turnover is calculated by dividing average total assets by net sales.

Accepted Answer

A) True 
 B)False

Exam 17: Analyzing Financial Statements

The pledged assets to secured liabilities measures whether or not the pledged assets of the debtor provide adequate security for secured creditors.

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Kreuger Corp has earnings per share of $4.50, dividends per share of $0.85, and a market price of $64.75. Its dividend yield is 21.4%.

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Guidelines rules of thumb) are developed from:

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Which of the following statements is false when describing the debt ratio?

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Targot's current assets were $16,825. Its quick assets were $11,220. Its current liabilities were $13,190. The quick ratio is:

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The ability to meet positive market expectations relates to which of the following building blocks of financial statement analysis:

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Quickcom has net sales of $135,000 and average accounts receivable of $67,000. What is the accounts receivable turnover for the period?

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Holding Co. had cost of goods sold of $600,000. Its ending inventory was $200,000. Therefore its days' sales in inventory was 90 days.

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FastForward had $3,000 of profit for October. Total revenues were $10,000. Calculate the profit margin.

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Off the Record's current ratio is .9 to 1. The industry average current ratio is 1.2. Off the Record does not have a problem in covering liabilities because of its strong sales andposition in its industry.

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Lottery Corp had a market price of $56.50, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio was:

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Stride Rite has liabilities of $112 million and total assets of $350 million. Its debt ratio is 30.4%.

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Sleep Sack had net sales of $650,500, its cost of goods sold was $357,000, and its profit was $13,750. The gross margin ratio was 45.1%.

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An advantage of common-size statements is that they reflect the relative sizes of companies under analysis.

Correct AnswerverifiedShow Answer

Liquidity problems are likely to exist for a company when its acid-test ratio:

Correct AnswerverifiedShow Answer

Tools comparing a company's financial condition and performance to a base amount are:

Correct AnswerverifiedShow Answer

Total asset turnover is calculated by dividing average total assets by net sales.

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Accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

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The formula for times interest earned is:

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Financial statement analysis lessens the need for expert judgment.

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