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Exam 12: Financial Statement Analysis

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Question 61

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The acid-test ratio is most similar to the:

A) Current ratio.
B) Debt to equity ratio.
C) Times interest earned ratio.
D) Inventory turnover ratio.

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

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Question 62

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Stealth Company's 2013 gross profit ratio is:

A) 77.1%.
B) 80.0%.
C) 40.0%.
D) 60.0%.

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

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Question 63

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What is the correct order to present the following items on the income statement?

Horizontal analysis examines trends in a company:

When a company pays a bill from a plumber for previous services on account:

The acid-test ratio is:

Nerf Mania reports net income of $500,000,net sales of $4,000,000,and average assets of $2,000,000.The return on assets is:

The average days in inventory converts the inventory turnover ratio into days.

The gross profit ratio is calculated as gross profit divided by net sales.

Richard's Sporting Goods reports net income of $100,000,net sales of $500,000,and average assets of $1,000,000.The return on assets is:

Which of the following is an example of vertical analysis?

Which of the following is a sign that a company cannot quickly turn its receivables into cash?

Stealth Company's 2013 debt to equity ratio is:

Given the information below,what is the company's gross profit? $\begin{array} { | l | r | } \hline \text { Sales Revenue } & \$ 320,000 \\\hline \text { Accounts Receivable } & \$ 50,000 \\\hline \text { Ending Inventory } & \$ 100,000 \\\hline \text { Cost of Goods Sold } & \$ 250,000 \\\hline \text { Sales Returns } & \$ 20,000 \\\hline\end{array}$

We use horizontal analysis to analyze trends in financial statement data,such as the dollar amount of change and the percentage change,for one company over time.

An extraordinary item must meet which of the following criteria?

Which of the following is a conservative accounting practice?

LeBron's Kids Camps has a current ratio of 0.75 to 1,based on current assets of $3 million and current liabilities of $4 million.How,if at all,will a $500,000 cash purchase of inventory affect the current ratio? How,if at all,will a $500,000 purchase of inventory on account affect the current ratio?

The following is an example of: $\begin{array} { | l | r | r | r | r | } \hline & { \text { Year } } & { \text { Increase (Decrease) } } \\\hline & \mathbf { 2 0 1 2 } & \mathbf { 2 0 1 1 } & \text { Amount } & { \% } \\\hline \text { Cash } & \$ 300,000 & \$ 800,000 & \$ ( 500,000 ) & ( 62.5 ) \\\hline \text { Accounts receivable } & 500,000 & 200,000 & 300,000 & 150.0 \\\hline \text { Inventory } & 800,000 & 700,000 & 100,000 & 14.3 \\\hline \text { Long-term assets } & 3,400,000 & 2,300,000 & 1,100,000 & 47.8 \\\hline \text { Total assets } & \$ 5,000,000 & \$ 4,000,000 & \$ 1,000,000 & 25.0 \\\hline & & & & \\\hline\end{array}$

Excerpts from TPX Company's December 31, 2013 and 2012, financial statements are presented below: $\begin{array}{lrr}&2013&2012\\\text { Accounts receivable } & \$ 80,000 & \$ 72,000 \\\text { Inventory } & 84,000 & 70,000 \\\text { Net sales } & 400,000 & 372,000 \\\text { Cost of goods sold } & 254,000 & 216,000 \\\text { Total assets } & 850,000 & 810,000 \\\text { Total stockholders' equity } & 500,000 & 450,000 \\\text { Net income } & 75,000 & 56,000\end{array}$ -TPX Company's 2013 average days in inventory is: