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Exam 13: Financial Statement Analysis

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Question 51

Multiple Choice

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Factor(s) involved in communicating useful information is (are) :

A) Attributes of the users
B) Purpose for which the information will be used
C) Process by which the information is analyzed
D) All of these answers are correct.

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

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Question 52

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Which ratio measures the percentage of a company's assets that are financed by debt?

A) Debt to assets ratio
B) Asset turnover
C) Debt to equity
D) Return on investment

E) A) and B)
F) B) and C)

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Question 53

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As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2 Gant paid $3,600 on accounts payable.Which of the following statements is not true?

In vertical analysis,each item is expressed as a percentage of:

The following balance sheet information is provided for Apex Company for Year 2: What is the company's working capital?

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant paid $250 for transportation-in cost on merchandise it had received.Which of the following statements is not true?

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

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

Which of the following is not included in the computation of the quick ratio?

The quick ratio although similar to the current ratio is more conservative.

Long-term creditors are usually most interested in evaluating:

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

Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares.Preferred dividends total $12,000.On the most recent trading day,the preferred shares sold at $50 and the common shares sold at $95.What is this company's current price-earnings ratio?

The study of an individual item or account over several periods in the same financial year or over many years is known as:

Which of the following statements about financial statements is not true?

The Fortune Company reported the following income for Year 2: What is the company's number of times interest is earned ratio?

Which of the following statements regarding the analysis of absolute amounts of various accounts reported on the financial statements is not true?

As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant purchased merchandise on account for $4,000.Which of the following statements is true?