Question 1

The comparative income statements for Golden Company are shown below. Calculate the following ratios for 2012:
(a) profit margin.
(b) gross margin.
(c) times interest earned.

Accepted Answer

The answer of The comparative income statements for Golden Company...

Question 2

Standards for comparison are necessary when making judgments about a company's performance.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The current ratio is calculated as current liabilities divided by current assets.

Accepted Answer

A) True 
 B)False

Question 5

Selected current year company information follows:  Total shareholders' equity, beginning-year.. 198,935
Total shareholders' equity, end-of-year…… 121,851
The return on total assets is:

Accepted Answer

A)   2.24%
B)   2.81%
C)   3.64%
D)   4.67%
E)   6.28%F) A) and E)
G) None of the above

Question 6

Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
(g) Accounts payable turnover.

Accepted Answer

(a) Current ratio:
($19,500 + $65,000 + ...

Question 7

A high level of expected risk suggests a low price-earnings ratio.

Accepted Answer

A) True 
 B)False

Question 8

The building blocks of financial statement analysis include:

Accepted Answer

A)   Liquidity and efficiency.
B)   Solvency.
C)   Profitability.
D)   Market prospects.
E)   All of these.F) A) and E)
G) A) and D)

Question 9

Profitability is the ability to generate positive market expectations.

Accepted Answer

A) True 
 B)False

Question 10

Guidelines (rules-of-thumb)  are developed from:

Accepted Answer

A)   Industry statistics from the government.
B)   Past experience.
C)   Analysis of competitors.
D)   Relations between financial items.
E)   Dun and Bradstreet.F) A) and D)
G) C) and D)

Question 11

The return on total assets ratio is a profitability measure.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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 base amount.F) A) and B)
G) A) and E)

Question 13

One of several ratios that reflects solvency includes the:

Accepted Answer

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

Question 14

A financial statement analysis report usually includes:

Accepted Answer

A)   An executive summary.
B)   An analysis overview.
C)   Evidential matter.
D)   Assumptions.
E)   All of these.F) A) and C)
G) A) and D)

Question 15

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

A) True 
 B)False

Question 16

Industry standards for financial statement analysis:

Accepted Answer

A)   Are based on a company's prior performance.
B)   Are set by the government.
C)   Are set by the financial performance and condition of the company's industry.
D)   Are based on rules of thumb.
E)   Compare a company's income with the prior year's income.F) A) and C)
G) A) and E)

Question 17

What is the purpose of a good financial statement analysis report? What are the key components?

Accepted Answer

A good financial statement analysis repo...

Question 18

To compute trend percents the analyst should:

Accepted Answer

A)   Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number.
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)   All of these.F) A) and D)
G) A) and C)

Question 19

Standards for comparisons in financial statement analysis include:

Accepted Answer

A)   Intracompany standards.
B)   Competitors' standards.
C)   Industry standards.
D)   Guidelines (rules of thumb) .
E)   All of these.F) C) and D)
G) A) and D)

Question 20

Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions.

Accepted Answer

A) True 
 B)False

Exam 17: Analysis of Financial Statements

Industry standards for financial statement analysis:

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Standards for comparisons in financial statement analysis include:

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Use the financial data shown below to calculate the following ratios for the current year: (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days' sales uncollected. (e) Inventory turnover. (f) Days' sales in inventory. (g) Accounts payable turnover.

Correct Answerverified(a) Current ratio:($19,500 + $65,000 + ...View AnswerShow Answer

A financial statement analysis report usually includes:

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The comparative income statements for Golden Company are shown below. Calculate the following ratios for 2012: (a) profit margin. (b) gross margin. (c) times interest earned.

Correct AnswerverifiedShow Answer

Standards for comparison are necessary when making judgments about a company's performance.

Correct AnswerverifiedShow Answer

Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the purpose of a good financial statement analysis report? What are the key components?

Correct AnswerverifiedA good financial statement analysis repo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The building blocks of financial statement analysis include:

Correct AnswerverifiedShow Answer

The current ratio is calculated as current liabilities divided by current assets.

Correct AnswerverifiedShow Answer

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Correct AnswerverifiedShow Answer

To compute trend percents the analyst should:

Correct AnswerverifiedShow Answer

Guidelines (rules-of-thumb) are developed from:

Correct AnswerverifiedShow Answer

One of several ratios that reflects solvency includes the:

Correct AnswerverifiedShow Answer

A high level of expected risk suggests a low price-earnings ratio.

Correct AnswerverifiedShow Answer

Selected current year company information follows: Total shareholders' equity, beginning-year.. 198,935 Total shareholders' equity, end-of-year…… 121,851 The return on total assets is:

Correct AnswerverifiedShow Answer

Profitability is the ability to generate positive market expectations.

Correct AnswerverifiedShow Answer

The return on total assets ratio is a profitability measure.

Correct AnswerverifiedShow Answer

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(a) Current ratio:
($19,500 + $65,000 + ...
View Answer

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A good financial statement analysis repo...
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