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

Financial statement analysis lessens the need for expert judgment.

Accepted Answer

A) True 
 B)False

Question 3

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) C) and D)
G) A) and E)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 B)
G) None of the above

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

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) C) and D)
G) D) and E)

Question 9

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 10

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) A) and D)
G) B) and E)

Question 11

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) A) and B)
G) B) and C)

Question 12

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 E)
G) A) and D)

Question 13

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) B) and E)
G) C) and E)

Question 14

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 15

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) B) and D)
G) B) and E)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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) None of the above
G) A) and B)

Question 19

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) A) and B)
G) B) and E)

Question 20

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

Exam 17: Analyzing Financial Statements

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

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The formula for times interest earned is:

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

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

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

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

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

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

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

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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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Financial statement analysis lessens the need for expert judgment.

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Guidelines rules of thumb) are developed from:

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