80) Internal users of financial information:
A) Are not directly involved in operating a company.
B) Are those individuals involved in managing and operating the company.
C) Include shareholders and lenders.
D) Include directors and customers.
E) Include suppliers, regulators, and the press.
81) The building blocks of financial statement analysis do not include:
A) Industry analysis.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Liquidity and efficiency.
82) Financial reporting refers to:
A) The application of analytical tools to general-purpose financial statements.
B) The communication of financial information useful for decision making.
C) General-purpose financial statements only.
D) Ratio analysis only.
E) Profitability.
83) The ability to meet short-term obligations and to efficiently generate revenues is called:
A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.
84) The ability to generate future revenues and meet long-term obligations is referred to as:
A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.
85) The ability to provide financial rewards sufficient to attract and retain financing is called:
A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.
86) The ability to generate positive market expectations is called:
A) Liquidity and efficiency.
B) Liquidity and solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.
87) Standards for comparisons in financial statement analysis do not include:
A) Intra-company standards.
B) Competitor standards.
C) Industry standards.
D) Management standards.
E) Guidelines (rules of thumb).
88) Intra-company standards for financial statement analysis:
A) Are based on a company’s prior performance and relations between its financial items.
B) Are often set by competitors.
C) Are set by the company’s industry through published statistics.
D) Are based on rules of thumb.
E) Are published by analyst services such as Standard & Poor’s.
89) Industry standards for financial statement analysis:
A) Are based on a single competitor’s financial performance.
B) Are set by the government.
C) Are used to compare a company’s performance to industry performance.
D) Are based on rules of thumb.
E) Compare a company’s income with its prior year’s income.
90) Guidelines (rules-of-thumb) are general standards of comparison developed from:
A) Industry guidelines.
B) Past experience.
C) Analysis of competitors.
D) Relations between financial items.
E) Dun and Bradstreet.
91) Three of the most common tools of financial analysis are:
A) Financial reporting, sensitivity analysis, transactional analysis.
B) Fair presentation, variance analysis, financial reporting.
C) Horizontal analysis, vertical analysis, ratio analysis.
D) Relativity analysis, financial reporting, fair value analysis.
E) Liquidation analysis, political analysis, fair value analysis.
92) The comparison of a company’s financial condition and performance across time is known
as:
A) Horizontal analysis.
B) Vertical analysis.
C) Political analysis.
D) Fair value reporting.
E) Liquidation analysis.
93) The measurement of key relations among financial statement items is known as:
A) Financial reporting.
B) Horizontal analysis.
C) Investment analysis.
D) Ratio analysis.
E) Risk analysis.
94) The comparison of a company’s financial condition and performance to a base amount is
known as:
A) Financial reporting.
B) Horizontal ratios.
C) Liquidation analysis.
D) Sensitivity analysis.
E) Vertical analysis.
95) A financial statement analysis report does not include:
A) An auditor statement.
B) An analysis overview.
C) An executive summary.
D) Qualitative and quantitative key factors.
E) Inferences such as forecasts.
96) 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?
A) Executive summary.
B) Analysis overview.
C) Evidential conclusions.
D) Factor analysis.
E) Inferences.
97) A brief focus on important analysis results and conclusions is usually included in which of
the following sections of a financial statement analysis report:
A) Executive summary.
B) Analysis overview.
C) Evidential conclusions.
D) Factor analysis.
E) Inferences.
98) All of the following are true of a financial statement analysis report, except:
A) Accounting standards determine which ratios are relevant and useful for the analysis.
B) The executive summary provides a brief analysis of results.
C) The analysis overview includes background on the company, its industry, and the economy.
D) Evidential matter includes ratios, trends, comparisons and all analytical measures.
E) Background on the company, its industry, and the economy is part of the analysis overview.
99) Gains and losses that are neither unusual nor infrequent are reported as:
A) A separate line item when computing earnings per share.
B) A prior period adjustment on the statement of retained earnings.
C) A gain or loss from disposing of the discontinued segment’s net assets.
D) A gain or loss from operation of a discontinued segment.
E) Part of continuing operations.
100) Which of the following items is typically not included as a separate item after normal
revenues and expenses?
A) Write down of inventories.
B) Condemnation of property by the city government.
C) Loss of use of property due to a new and unexpected environmental regulation.
D) Loss due to an unusual and infrequent calamity.
E) Expropriation of property by a foreign government.
101) 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:
A) Period-to-period statements.
B) Controlling statements.
C) Successive statements.
D) Comparative statements.
E) Serial statements.
102) Horizontal analysis:
A) Is a method used to evaluate changes in financial data across time.
B) Is also called vertical analysis.
C) Is the presentation of financial ratios.
D) Is a tool used to evaluate financial statement items relative to industry statistics.
E) Evaluates financial data across industries.
103) The dollar change for a comparative financial statement item is calculated by:
A) Subtracting the analysis period amount from the fair value amount.
B) Subtracting the base period amount from the analysis period amount.
C) Subtracting the analysis period amount from the base period amount, dividing the result by
the base period amount, then multiplying that amount by 100.
D) Subtracting the base period amount from the analysis period amount, dividing the result by
the base period amount, then multiplying that amount by 100.
E) Subtracting the base period amount from the analysis amount, then dividing the result by the
base amount
104) 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:
A) 87%.
B) 100%.
C) 115%.
D) 15%.
E) 13%.
105) 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:
A) −104%
B) 100%
C) −4.0
D) 96%
E) 4.2%
106) 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 is the revenue trend percent for Years 2 and 3?
A) 80% for Year 2 and 90% for Year 3.
B) 88% for Year 2 and 80% for Year 3.
C) 88% for Year 2 and 90% for Year 3.
D) 112.5% for Year 2 and 125% for Year 3.
E) 125% for Year 2 and 112.5% for Year 3.
107) In horizontal analysis the percent change is computed by:
A) Subtracting the analysis period amount from the base period amount.
B) Subtracting the base period amount from the analysis period amount.
C) Subtracting the analysis period amount from the base period amount, dividing the result by
the base period amount, then multiplying that amount by 100.
D) Subtracting the base period amount from the analysis period amount, dividing the result by
the base period amount, then multiplying that amount by 100.
E) Subtracting the base period amount from the analysis amount, then dividing the result by the
analysis period amount.
108) To compute trend percentages the analyst should:
A) Select a base period, divide analysis period amount by the base period amount and multiply
that amount by 100.
B) Subtract the analysis period number from the base period number.
C) Subtract the base period amount from the analysis period amount, divide the result by the
analysis period amount, then multiply that amount by 100.
D) Compare amounts across industries using Dun and Bradstreet.
E) Compare amounts to a competitor.
109) Comparative financial statements in which each individual financial statement amount is
expressed as a percentage of a base amount are called:
A) Asset comparative statements.
B) Percentage comparative statements.
C) Common-size comparative statements.
D) Sales comparative statements.
E) General-purpose financial statements.
110) Common-size statements:
A) Reveal changes in the relative importance of each financial statement item to a base amount.
B) Do not emphasize the relative importance of each item.
C) Compare financial statements over time.
D) Show the dollar amount of change for financial statement items.
E) Reveal patterns in data across successive periods.
111) The common-size percent is computed by:
A) Dividing the analysis amount by the base amount.
B) Dividing the base amount by the analysis amount.
C) Dividing the analysis amount by the base amount and multiplying the result by 100.
D) Dividing the base amount by the analysis amount and multiplying the result by 1,000.
E) Subtracting the base amount from the analysis amount and multiplying the result by 100.
112) A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its
common-size percent for cash equals:
A) 0.0785%.
B) 7.85%.
C) 12.73%.
D) 1273%.
E) 7850%.
113) A corporation reported cash of $27,000, total assets of $461,000, and total equity of $157,
895 on its balance sheet. Its common-size percent for cash equals:
A) 17.1%.
B) 58.6%.
C) 100%.
D) 5.86%.
E) 1707%.
114) Current assets minus current liabilities is:
A) Profit margin.
B) Financial leverage.
C) Current ratio.
D) Working capital.
E) Quick assets.
115) Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its
most recent balance sheet. The working capital is:
A) 141%.
B) 71%.
C) ($56,000).
D) $56,000.
E) 41%.
116) Jones Corp. reported current assets of $193,000, current liabilities of $137,000, and total
liabilities of $275, 714 on its most recent balance sheet. The current ratio is:
A) 1.4 : 1.
B) 0.7 : 1.
C) 0.3 : 1.
D) 1 : 1.
E) 0.4 : 1.
117) Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its
most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts
Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is:
A) 1.4 : 1.
B) 0.77 : 1.
C) 0.54 : 1.
D) 1 : 1.
E) 0.64 : 1.
118) Current assets divided by current liabilities is the:
A) Current ratio.
B) Quick ratio.
C) Debt ratio.
D) Liquidity ratio.
E) Solvency ratio.
119) Quick assets (cash, short-term investments, and current receivables) divided by current
liabilities is the:
A) Acid-test ratio.
B) Current ratio.
C) Working capital ratio.
D) Current liability turnover ratio.
E) Quick asset turnover ratio.
120) Net sales divided by average accounts receivable, net is the:
A) Days’ sales uncollected.
B) Average accounts receivable ratio.
C) Current ratio.
D) Profit margin.
E) Accounts receivable turnover ratio.
121) Powers Company reported net sales of $1,200,000, average Accounts Receivable, net of
$78,500, and net income of $51,025. The accounts receivable turnover ratio is:
A) 0.65 times.
B) 14.3 times.
C) 28.6 times.
D) 15.3 times.
E) 16.3 times.
122) Powers Company reported net sales of $1,200,000, average Accounts Receivable, net of
$78,500, and net income of $51,025. The Day’s sales uncollected (rounded to whole days) is:
A) 24 days.
B) 15 days.
C) 4 days.
D) 562 days.
E) 48 days
123) Dividing Accounts receivable, net by Net sales and multiplying the result by 365 is the:
A) Profit margin.
B) Days’ sales uncollected.
C) Accounts receivable turnover ratio.
D) Average accounts receivable ratio.
E) Current ratio.
124) Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:
A) Inventory turnover ratio.
B) Profit margin.
C) Days’ sales in inventory.
D) Current ratio.
E) Total asset turnover.
125) Zhang Company reported Cost of goods sold of $835,000, beginning Inventory of $37,200
and ending Inventory of $46,300. The average Inventory amount is:
A) $37,200.
B) $46,300.
C) $83,500.
D) $41,750.
E) $9,100.
126) Zhang Company reported Cost of goods sold of $835,000, average Inventory of $41,750,
and Net sales of $2,338,000. The Inventory turnover ratio is:
A) 0.5 times.
B) 418 times.
C) 20 times.
D) 56 times.
E) 19 times.
127) Zhang Company reported Cost of goods sold of $835,000, ending Inventory of $41,750,
and Net sales of $2,338,000. The Days’ sales in inventory (rounded to whole days) is:
A) 18 days.
B) 418 days.
C) 7 days.
D) 56 days.
E) 20 days.