54.
Efficiency refers to how productive a company is in using its assets, and is usually
measured relative to how much revenue is generated from a certain level of assets.
55.
The higher the accounts receivable turnover, the less quickly accounts receivable are
collected.
56.
A company with a high inventory turnover requires a smaller investment in inventory than
one producing the same sales with a lower turnover.
57.
A rough guideline states that for a company with no discounts offered, days’ sales
uncollected should not exceed 1 1/3 times the days in its credit period.
58.
A company that has days’ sales uncollected of 30 days and days’ sales in inventory of 18
days implies that inventory will be converted to cash in about 12 days.
59.
The return on total assets can be calculated as profit margin times total asset turnover.
60.
The return on common stockholder’s equity measures a company’s success in earning net
income for its owners.
61.
A high level of expected risk suggests a low price–earnings (PE) ratio.
13–24
62.
The return on total assets ratio is a profitability measure.
63.
A company reports basic earnings per share of $3.50, cash dividends per share of $0.75,
and a market price per share of $64.75. The company’s dividend yield equals 21.4%.
Multiple Choice Questions
64.
Financial statement analysis involves all of the following
except
:
65.
Evaluation of company performance can include comparison and/or assessment of all but
which of the following?
66.
External users of financial information:
67.
Internal users of financial information:
68.
The building blocks of financial statement analysis do not include:
69.
Financial reporting refers to:
70.
The ability to meet short-term obligations and to efficiently generate revenues is called:
71.
The ability to generate future revenues and meet long-term obligations is referred to as:
72.
The ability to provide financial rewards sufficient to attract and retain financing is called:
73.
The ability to generate positive market expectations is called:
74.
Standards for comparisons in financial statement analysis do not include:
75.
Intra-company standards for financial statement analysis:
76.
Industry standards for financial statement analysis:
77.
Guidelines (rules-of-thumb) are general standards of comparison developed from:
78.
Three of the most common tools of financial analysis are:
79.
The comparison of a company’s financial condition and performance across time is known
as:
80.
The measurement of key relations among financial statement items is known as:
81.
The comparison of a company’s financial condition and performance to a base amount is
known as:
82.
A financial statement analysis report does not include:
83.
The background on a company, its industry, and its economic setting is usually included in
which of the following sections of a financial statement analysis report?
84.
All of the following are true of financial statement analysis reports, except:
85.
When a company’s activities include income-related events not part of normal, continuing
operations, the complete income statement could potentially have the following sections:
86.
Financial statements with data for two or more successive accounting periods placed in
columns side by side, sometimes with changes shown in both dollar amounts and
percentages, are referred to as:
87.
Horizontal analysis:
88.
The dollar change for a comparative financial statement item is calculated by:
89.
A company’s sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as
the base year, the percent change for Year 2 compared to the base year is:
90.
Yeats Corporation’s sales in Year 1 were $396,000 and in Year 2 were $380,000. Using
Year 1 as the base year, the percent change for Year 2 compared to the base year is:
91.
Ash Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for
Year 3. Using Year 1 as the base year, what were the trend percents for Years 2 and 3
compared to the base year?
92.
In horizontal analysis the percent change is computed by:
93.
To compute trend percentages the analyst should: