Question 1

What is the asset turnover ratio for 2015?

Accepted Answer

A)  1.30
B)  0.13
C)  0.77
D)  9.75E) A) and B)
F) B) and C)

Question 2

Which of the following is true of a company's quarterly report?

Accepted Answer

A)  Contains the same detail as is found in the annual report.
B)  Is an audited report.
C)  Does not include any discussion of financial results.
D)  Has the benefit of being released on a timelier basis.E) B) and C)
F) All of the above

Question 3

If a publicly traded company is trying to appear attractive to external users,the company is most likely to understate which of the following on its balance sheet?

Accepted Answer

A)  Assets.
B)  Liabilities.
C)  Retained earnings.
D)  Contributed capital.E) B) and D)
F) A) and B)

Question 4

The following single-step income statement was prepared:  Prepare a multiple-step income statement for Creative Tax Service for the year ended December 31,2014.

Accepted Answer

The answer of The following single-step income statement was prepared:...

Question 5

Which of the following is NOT true about the role of the external auditors?

Accepted Answer

A)  Must test the effectiveness of the company's internal controls.
B)  Must issue a report that gives an opinion about the company's internal controls.
C)  Must examine the company's financial statements by performing adequate tests of the underlying financial information.
D)  Must issue a qualified opinion on the financial statements if any misstatements are found.E) B) and C)
F) A) and D)

Question 6

Scandals involving Enron and WorldCom drew heightened attention to the possibility that financial statements might be misreported to portray a favorable impression of a company's financial results.Which of the following false impressions could be suggested by the ratio indicated?

Accepted Answer

A)  Greater control of expenses might be suggested by the net profit margin ratio.
B)  Greater efficiency in asset use might be suggested by the debt-to-assets ratio.
C)  Greater control of expenses might be suggested by the debt-to-assets ratio.
D)  Less financing risk might be suggested by the asset turnover ratio.E) B) and C)
F) A) and D)

Question 7

Which of the following statements is true of a multiple-step income statement?

Accepted Answer

A)  It groups all revenues together.
B)  It reports a different amount of net income than a single-step income statement.
C)  It includes expenses that would not appear on a single-step income statement.
D)  Net income is probably not the number that investors and creditors care most about.E) All of the above
F) B) and C)

Question 8

Which of the following statements regarding ratios is true?

Accepted Answer

A)  All other things being equal,a lower debt-to-assets ratio indicates a riskier financing strategy.
B)  A lower asset turnover ratio is a favorable indicator of how efficiently a company is utilizing its resources.
C)  The net profit margin ratio cannot be used to indicate how well a company is controlling its expenses.
D)  Ratios can be used to compare companies of different sizes.E) A) and B)
F) B) and D)

Question 9

Which of the following is not true?

Accepted Answer

A)  The multiple-step income statement includes subtotals which separate core and peripheral results.
B)  The multiple-step income statement includes the subtotal of income before income tax expense.
C)  The statement of stockholders' equity is another name for the statement of retained earnings.
D)  Comparative financial statements report numbers for two or more periods.E) A) and D)
F) None of the above

Question 10

An asset turnover ratio of 0.4 means that $4 in net income is generated for every $10 in assets.

Accepted Answer

A) True 
 B)False

Question 11

The Grass is Greener Company borrows money from a bank.Part of the loan agreement requires Grass is Greener to maintain stockholders' equity of at least 40% of assets or otherwise to pay a higher interest rate.This requirement is referred to as a:

Accepted Answer

A)  loan covenant.
B)  credit rating.
C)  bond rating.
D)  call feature.E) None of the above
F) A) and B)

Question 12

What is the net profit margin ratio for each year?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) A) and B)
F) A) and C)

Question 13

What would happen to the net profit margin ratio if the company recorded depreciation at the end of 2015 for depreciation of $500 on one of its assets?

Accepted Answer

A)  Net profit margin would increase indicating an improvement in performance.
B)  Net profit margin would decrease indicating less control over expenses.
C)  Net profit margin would not change.
D)  Net profit margin would have decreased in 2015 without this journal entry.E) All of the above
F) C) and D)

Question 14

The debt-to-assets ratio at the beginning of 2013 was closest to:

Accepted Answer

A)  0.23
B)  0.30
C)  0.33
D)  0.25E) B) and D)
F) A) and D)

Question 15

Which of the following accurately describes how the collection of cash on account from a customer would affect the ratios indicated?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) A) and B)
F) A) and D)

Question 16

Which of the following statements regarding distribution of financial information is not true?

Accepted Answer

A)  A company does not issue a press release containing financial data until the data have been checked by management.
B)  Company filings with the SEC,such as Forms 10-K and 10-Q,are available to the public.
C)  SEC filings are available to the public after they are received by the SEC's EDGAR service.
D)  An audit involves an examination of every transaction that occurred during the year by an independent auditor.E) A) and D)
F) C) and D)

Question 17

Which of the following accurately describes how recording depreciation for an existing building would affect the ratios indicated?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) A) and C)
F) B) and C)

Question 18

Form 8-K,which is filed with the SEC,is also known as a(n) :

Accepted Answer

A)  quarterly report.
B)  annual report.
C)  current events report.
D)  audit report.E) A) and B)
F) C) and D)

Question 19

Refer to the summary financial information for Momentum Clothing Distributors.Which of the following statements is true?

Accepted Answer

A)  The company's level of financing risk was greater in 2014 than it was in 2013.
B)  In comparison to 2013,the company became less efficient in 2014 in generating revenues from its investment in assets.
C)  Despite the increase in sales in 2014,the company controlled its expenses just as well as it had in 2012.
D)  The company's level of financing risk was less in 2013 than it was in 2012.E) C) and D)
F) B) and C)

Question 20

Which of the following statements regarding the roles of accounting information is not true?

Accepted Answer

A)  When creditors use accounting information to administer contracts,it serves a contracting role.
B)  When accounting data are used to assess the worth of a company or its stock,the data are said to be used in a valuation role.
C)  When accounting information is used in managing the business,it is being used in a management function.
D)  When directors use financial information,the information is being used in an audit function.E) B) and D)
F) All of the above

Exam 5: Financial Reporting and Analysis

Which of the following statements regarding ratios is true?

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Which of the following accurately describes how recording depreciation for an existing building would affect the ratios indicated?

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Which of the following accurately describes how the collection of cash on account from a customer would affect the ratios indicated?

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Refer to the summary financial information for Momentum Clothing Distributors.Which of the following statements is true?

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What would happen to the net profit margin ratio if the company recorded depreciation at the end of 2015 for depreciation of $500 on one of its assets?

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What is the asset turnover ratio for 2015?

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Which of the following is not true?

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Which of the following statements regarding the roles of accounting information is not true?

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If a publicly traded company is trying to appear attractive to external users,the company is most likely to understate which of the following on its balance sheet?

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Which of the following is true of a company's quarterly report?

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Scandals involving Enron and WorldCom drew heightened attention to the possibility that financial statements might be misreported to portray a favorable impression of a company's financial results.Which of the following false impressions could be suggested by the ratio indicated?

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Which of the following is NOT true about the role of the external auditors?

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What is the net profit margin ratio for each year?

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The Grass is Greener Company borrows money from a bank.Part of the loan agreement requires Grass is Greener to maintain stockholders' equity of at least 40% of assets or otherwise to pay a higher interest rate.This requirement is referred to as a:

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Which of the following statements is true of a multiple-step income statement?

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The following single-step income statement was prepared: Prepare a multiple-step income statement for Creative Tax Service for the year ended December 31,2014.

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Which of the following statements regarding distribution of financial information is not true?

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The debt-to-assets ratio at the beginning of 2013 was closest to:

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An asset turnover ratio of 0.4 means that $4 in net income is generated for every $10 in assets.

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Form 8-K,which is filed with the SEC,is also known as a(n) :

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