Question 1

When a company sells land for cash and makes a $25,000 gain:

Accepted Answer

A)  Its acid-test ratio decreases.
B)  Its current ratio decreases.
C)  Its debt to equity ratio decreases.
D)  Cannot determine from the given information.E) None of the above
F) A) and D)

Question 2

Which of the following ratios is most useful in evaluating liquidity?

Accepted Answer

A)  Acid-test ratio.
B)  Return on equity.
C)  Profit marginy ratio.
D)  Asset turnover.E) A) and C)
F) A) and B)

Question 3

The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

Accepted Answer

A)  	Higher profitability.
B)  	Higher dividends.
C)  	Higher liabilities.
D)  	Fewer total assets.E) B) and D)
F) None of the above

Question 4

Return on equity is calculated by dividing the stock return by average stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 5

The sale or disposal of a significant component of a company's operations is referred to as:

Accepted Answer

A)  A discontinued operation.
B)  An extraordinary item.
C)  Other revenues and expenses.
D)  Gain or loss on sale of assets.E) C) and D)
F) B) and C)

Question 6

Use the following information to answer the next ten questions:
Excerpts from Stealth Company's December 31,2015 and 2014,financial statements are presented below:
 
-Stealth Company's 2015 return on assets is:

Accepted Answer

A)  7.1%.
B)  7.8%.
C)  13.5%.
D)  44.7%.E) B) and C)
F) None of the above

Question 7

Which of the following is a positive sign that a company is selling its inventory quickly?

Accepted Answer

A)  A low inventory turnover ratio.
B)  A high inventory turnover ratio.
C)  A low average days in inventory.
D)  Both a high inventory turnover ratio and a low average days in inventory.E) A) and C)
F) B) and C)

Question 8

Conservative accounting practices are those that result in reporting lower income,lower assets,and higher liabilities.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a sign that a company can quickly turn its receivables into cash?

Accepted Answer

A)  A low receivables turnover ratio.
B)  A high receivables turnover ratio.
C)  A high average collection period.
D)  Both a low receivables turnover ratio and a high average collection period.E) C) and D)
F) A) and D)

Question 10

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

Accepted Answer

A)  10%.
B)  20%.
C)  50%.
D)  5 times.E) A) and B)
F) All of the above

Question 11

We report extraordinary items separately,net of taxes,near the bottom of the income statement just below discontinued operations.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following items is most likely to be reported as an extraordinary loss?

Accepted Answer

A)  	Losses due to the write-down of inventory.
B)  	Losses on the sale of long-term assets.
C)  	Losses due to business restructuring.
D)  	Uninsured losses from a natural disaster.E) None of the above
F) A) and D)

Question 13

The average collection period converts the receivables turnover ratio into days.

Accepted Answer

A) True 
 B)False

Question 14

Barry's BBQ had sales revenue for the year of $200 million and net income of $20 million..Total assets were $70 million at the beginning of the year,and $80 million at the end of the year.Calculate Barry's return on assets,profit margin,and asset turnover ratios.

Accepted Answer

The answer of Barry's BBQ had sales revenue for the...

Question 15

Which of the following is an aggressive accounting practice?

Accepted Answer

A)  Change from straight-line to double-declining balance depreciation.
B)  Record sales revenue before it is actually earned.
C)  Adjust the allowance for uncollectible accounts to a larger amount.
D)  Record inventory at lower of cost or market rather than at cost.E) B) and D)
F) C) and D)

Question 16

Use the following information to answer the next three questions:
A partial balance sheet ($s in thousands) for Captain D's Sportswear is shown below.
 
-The debt to equity ratio is:

Accepted Answer

A)  0.33.
B)  0.77.
C)  1.17.
D)  1.30.E) All of the above
F) A) and C)

Question 17

Which of the following is a conservative accounting practice?

Accepted Answer

A)  Change from double-declining balance to straight-line depreciation.
B)  Record sales revenue before it is actually earned.
C)  Adjust the allowance for uncollectible accounts to a larger amount.
D)  Record inventory at market rather than lower of cost or market.E) All of the above
F) A) and D)

Question 18

Use the following information to answer the next three questions:
A partial balance sheet ($s in thousands) for Captain D's Sportswear is shown below.
 
-The current ratio is:

Accepted Answer

A)  1.98.
B)  1.58.
C)  1.17.
D)  0.66.E) C) and D)
F) None of the above

Question 19

Use the following information to answer the next ten questions:
Excerpts from TPX Company's December 31,2015 and 2014,financial statements are presented below:
 
-TPX Company's 2015 average collection period is:

Accepted Answer

A)  69 days.
B)  65 days.
C)  73 days.
D)  1,825 days.E) B) and D)
F) A) and D)

Question 20

Use the following information to answer the next ten questions:
Excerpts from Stealth Company's December 31,2015 and 2014,financial statements are presented below:
 
-Stealth Company's 2015 return on equity is:

Accepted Answer

A)  17.1%.
B)  14.0%.
C)  12.6%.
D)  7.1%.E) All of the above
F) A) and B)

Exam 12: Financial Statement Analysis

Barry's BBQ had sales revenue for the year of $200 million and net income of $20 million..Total assets were $70 million at the beginning of the year,and $80 million at the end of the year.Calculate Barry's return on assets,profit margin,and asset turnover ratios.

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Which of the following is a sign that a company can quickly turn its receivables into cash?

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Which of the following items is most likely to be reported as an extraordinary loss?

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Return on equity is calculated by dividing the stock return by average stockholders' equity.

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Use the following information to answer the next ten questions: Excerpts from Stealth Company's December 31,2015 and 2014,financial statements are presented below: -Stealth Company's 2015 return on equity is:

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Use the following information to answer the next three questions: A partial balance sheet ($s in thousands) for Captain D's Sportswear is shown below. -The current ratio is:

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Which of the following is a positive sign that a company is selling its inventory quickly?

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The average collection period converts the receivables turnover ratio into days.

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Which of the following ratios is most useful in evaluating liquidity?

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Use the following information to answer the next ten questions: Excerpts from TPX Company's December 31,2015 and 2014,financial statements are presented below: -TPX Company's 2015 average collection period is:

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The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

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Use the following information to answer the next three questions: A partial balance sheet ($s in thousands) for Captain D's Sportswear is shown below. -The debt to equity ratio is:

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When a company sells land for cash and makes a $25,000 gain:

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Conservative accounting practices are those that result in reporting lower income,lower assets,and higher liabilities.

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Use the following information to answer the next ten questions: Excerpts from Stealth Company's December 31,2015 and 2014,financial statements are presented below: -Stealth Company's 2015 return on assets is:

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Which of the following is a conservative accounting practice?

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Which of the following is an aggressive accounting practice?

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We report extraordinary items separately,net of taxes,near the bottom of the income statement just below discontinued operations.

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The sale or disposal of a significant component of a company's operations is referred to as:

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

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