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Common methods of financial statement analysis include all of the following except:


A) Incremental analysis.
B) Horizontal analysis.
C) Vertical analysis.
D) Ratio analysis.

E) A) and D)
F) A) and C)

Correct Answer

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Select the incorrect statement regarding the quick ratio:


A) The quick ratio equals quick assets divided by total liabilities.
B) The quick ratio is also known as the acid-test ratio.
C) The quick ratio is a conservative variation of the current ratio.
D) The quick ratio ignores some current assets that are less liquid than others.

E) All of the above
F) C) and D)

Correct Answer

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Accrual accounting requires the use of many estimates,including:


A) Uncollectible accounts expense.
B) Warranty costs.
C) Assets' useful lives.
D) All of these answer choices are correct.

E) C) and D)
F) None of the above

Correct Answer

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Which of the following statement is correct regarding the quick ratio?


A) The numerator for the quick ratio is current assets.
B) The quick ratio is a less conservative variation of the current ratio.
C) The quick ratio is also called the working capital ratio.
D) The numerator for the quick ratio is current assets minus inventory minus prepaid expenses.

E) A) and D)
F) All of the above

Correct Answer

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On January 1,2015,Gatewood collected $8,200 of accounts receivable.As a result of this transaction,Gatewood's working capital will:


A) Increase.
B) Decrease.
C) Remain the same.
D) Cannot be determined.

E) A) and D)
F) None of the above

Correct Answer

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Profitability ratios attempt to assess the company's ability to generate earnings.

A) True
B) False

Correct Answer

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Two ratios that provide insight on the relationship between credit sales and receivables are:


A) Current ratio and inventory turnover ratio.
B) Accounts receivable turnover and current ratio.
C) Average days to collect receivables and asset turnover.
D) Accounts receivable turnover and average days to collect receivables.

E) None of the above
F) A) and C)

Correct Answer

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Select the incorrect statement regarding ratio analysis.


A) Ratio analysis involves making comparisons between different accounts in the same set of financial statements.
B) There are many different ratios available for evaluating a firm's performance.
C) Some ratios involve an account from the balance sheet and one from the income statement.
D) Ratio analysis is a specific form of horizontal analysis.

E) C) and D)
F) None of the above

Correct Answer

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Financial ratios can be used to assess which of the following aspects of a firm's performance?


A) Liquidity
B) Solvency
C) Profitability
D) All of these answer choices are correct.

E) All of the above
F) None of the above

Correct Answer

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