Question 1

The book value of assets is an accurate measure of current market values.

Accepted Answer

A) True 
 B)False

Question 2

Francesco earned $3,000 net income for October.Its net revenues were $10,000.Its profit margin is:

Accepted Answer

A)   $7,000.
B)   30%.
C)   500%.
D)   2%.
E)   200%.F) C) and D)
G) A) and B)

Question 3

The gross profit ratio measures the relationship between sales and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

The debt ratio is the relationship between a company's:

Accepted Answer

A)   Equity and liabilities.
B)   Liabilities and equity.
C)   Liabilities and assets.
D)   Assets and liabilities.
E)   Equity and assets.F) A) and C)
G) B) and D)

Question 5

The current ratio is calculated by dividing current liabilities by current assets.

Accepted Answer

A) True 
 B)False

Question 6

Current assets divided by current liabilities is called the:

Accepted Answer

A)   Current ratio.
B)   Quick ratio.
C)   Working ratio.
D)   Liquidity ratio.
E)   Solvency ratio.F) All of the above
G) A) and B)

Question 7

Profit margin is calculated by dividing revenues by net income.

Accepted Answer

A) True 
 B)False

Question 8

Discuss the purpose of the accounts receivable turnover ratio and explain how it is calculated.

Accepted Answer

The accounts receivable turnover ratio i...

Question 9

Guido Corporation's shares are selling for $67.85 per share.Its earnings per share is $4.29.Calculate the price-earnings ratio.

Accepted Answer

The answer of Guido Corporation's shares are selling for $67.85...

Question 10

The common rule of thumb is that a company's acid-test ratio should be at least 1.5 to 1.

Accepted Answer

A) True 
 B)False

Question 11

The common-size percent is calculated by:

Accepted Answer

A)   Dividing the analysis amount by the base amount.
B)   Dividing the base amount by the analysis amount.
C)   Dividing the analysis amount by the base amount and multiplying the result by 100.
D)   Dividing the base amount by the analysis amount and multiplying the result by 100.
E)   Subtracting the base amount from the analysis amount and multiplying the result by 100.F) B) and D)
G) C) and D)

Question 12

Explain the debt ratio and its use in analyzing a company's performance.

Accepted Answer

The debt ratio is calculated by dividing...

Question 13

Profit margin reflects the portion of profit in each dollar of revenue.

Accepted Answer

A) True 
 B)False

Question 14

Anheuser-Busch had average total assets of $109,650 and net sales of $114,330.Its total asset turnover was 0.96.

Accepted Answer

A) True 
 B)False

Question 15

Explain how to calculate the price-earnings ratio and explain how it is used in the analysis of a company's financial condition.

Accepted Answer

The price-earnings ratio is calculated b...

Question 16

X-Caliber had income before interest and income tax expense of $225,000 in Year 1,and $200,000 in Year 2.Its interest expense was $45,000 for both years.Calculate the times interest earned ratio for both years,and comment on the company's level of risk.

Accepted Answer

Year 1 $225,000/45,000 = 5 Yea...

Question 17

The times interest earned ratio measures:

Accepted Answer

A)   A firm's ability to pay its bills on time.
B)   A company's profitability.
C)   A company's ability to pay interest even if sales decline.
D)   The relationship between income and debt.
E)   The relationship between assets and liabilities.F) A) and D)
G) C) and D)

Question 18

Explain how inventory management is evaluated using the merchandise turnover and days' sales in inventory ratios.

Accepted Answer

The goal in inventory management is to h...

Question 19

The days' sales uncollected ratio measures a company's ability to manage its debt.

Accepted Answer

A) True 
 B)False

Question 20

The higher the debt ratio the higher the level of risk of not being able to meet obligations.

Accepted Answer

A) True 
 B)False

Exam 18: Analyzing Financial Statements

The common rule of thumb is that a company's acid-test ratio should be at least 1.5 to 1.

Correct AnswerverifiedShow Answer

Explain how inventory management is evaluated using the merchandise turnover and days' sales in inventory ratios.

Correct AnswerverifiedThe goal in inventory management is to h...View AnswerShow Answer

Discuss the purpose of the accounts receivable turnover ratio and explain how it is calculated.

Correct AnswerverifiedThe accounts receivable turnover ratio i...View AnswerShow Answer

Profit margin is calculated by dividing revenues by net income.

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The higher the debt ratio the higher the level of risk of not being able to meet obligations.

Correct AnswerverifiedShow Answer

Current assets divided by current liabilities is called the:

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X-Caliber had income before interest and income tax expense of $225,000 in Year 1,and $200,000 in Year 2.Its interest expense was $45,000 for both years.Calculate the times interest earned ratio for both years,and comment on the company's level of risk.

Correct AnswerverifiedYear 1 $225,000/45,000 = 5 Yea...View AnswerShow Answer

Francesco earned $3,000 net income for October.Its net revenues were $10,000.Its profit margin is:

Correct AnswerverifiedShow Answer

Guido Corporation's shares are selling for $67.85 per share.Its earnings per share is $4.29.Calculate the price-earnings ratio.

Correct AnswerverifiedShow Answer

Profit margin reflects the portion of profit in each dollar of revenue.

Correct AnswerverifiedShow Answer

The current ratio is calculated by dividing current liabilities by current assets.

Correct AnswerverifiedShow Answer

Anheuser-Busch had average total assets of $109,650 and net sales of $114,330.Its total asset turnover was 0.96.

Correct AnswerverifiedShow Answer

The common-size percent is calculated by:

Correct AnswerverifiedShow Answer

Explain how to calculate the price-earnings ratio and explain how it is used in the analysis of a company's financial condition.

Correct AnswerverifiedThe price-earnings ratio is calculated b...View AnswerShow Answer

The debt ratio is the relationship between a company's:

Correct AnswerverifiedShow Answer

The times interest earned ratio measures:

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The book value of assets is an accurate measure of current market values.

Correct AnswerverifiedShow Answer

The days' sales uncollected ratio measures a company's ability to manage its debt.

Correct AnswerverifiedShow Answer

Explain the debt ratio and its use in analyzing a company's performance.

Correct AnswerverifiedThe debt ratio is calculated by dividing...View AnswerShow Answer

The gross profit ratio measures the relationship between sales and cost of goods sold.

Correct AnswerverifiedShow Answer

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The goal in inventory management is to h...
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The accounts receivable turnover ratio i...
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Year 1 $225,000/45,000 = 5 Yea...
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The price-earnings ratio is calculated b...
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The debt ratio is calculated by dividing...
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