Question 1

Which of the following ratios is an indicator of liquidity?
A)The Debt-to-Total Assets Ratio.
B)The Inventory Turnover Ratio
C)The Current Ratio.
D)The Age of Receivables Ratio.

Accepted Answer

The Current Ratio, calculated as current assets divided by current liabilities, is a key liquidity ratio indicating a company's ability to meet short-term obligations with its short-term assets.

Question 2

You are given the following information about JMR Corp.:  What is JMR's quick ratio? (Round final answer to 2 decimal places)
A)1)67:1
B)0)23:1
C)0)46:1
D)1)23:1

Accepted Answer

The answer of You are given the following information about...

Question 3

ABC's net accounts receivable were $1,000 at December 31, 2013 and $1,200 at December 31, 2014.Net cash sales for 2014 were $400.The accounts receivable turnover for 2014 was 5.0.What were ABC's total net sales for 2014?
A)$5,900
B)$6,400
C)$6,000
D)$11,000
E)None of these choices are correct

Accepted Answer

The accounts receivable turnover ratio is calculated by dividing net sales by average accounts receivable. The average accounts receivable for 2014 is ($1,000 + $1,200) / 2 = $1,100. The accounts receivable turnover ratio is given as 5.0, so net sales for 2014 are $1,100 * 5.0 = $5,500. Adding net cash sales of $400 gives total net sales of $5,900.

Question 4

Return on total assets is generally considered to be a better measure of the overall profit performance of a business than is profit margin on sales.

Accepted Answer

The answer of Return on total assets is generally considered...

Question 5

All of the following are examples of lending decisions except:
A)accepting employment.
B)buy corporate bonds on the open market.
C)finance the takeover of another corporation.
D)extend normal credit terms.

Accepted Answer

Accepting employment is not a lending decision; it involves choosing to work for an employer rather than lending money or extending credit. Choices B, C, and D involve financial transactions where credit or loans are extended.

Question 6

The quick ratio will always be less than or equal to the current ratio.

Accepted Answer

The answer of The quick ratio will always be less...

Question 7

The negotiating of a collective agreement is a contractual decision that may necessitate the use of financial analysis.

Accepted Answer

The answer of The negotiating of a collective agreement is...

Question 8

Quick assets, as usually defined, include:
A)cash and accounts receivable only.
B)cash only.
C)cash, accounts receivable, short-term investments in marketable securities, only.
D)cash, accounts receivable, short-term investments in marketable securities, and inventories.
E)None of these choices are correct.

Accepted Answer

Quick assets typically include cash, accounts receivable, and short-term investments in marketable securities, but not inventories, as they are not as easily converted into cash without potentially losing value.

Question 9

The section on significant accounting policies describes where deviations from GAAP have occurred.

Accepted Answer

The section on significant accounting policies in financial statements describes the specific accounting principles and methods of application adopted by a company in preparing and presenting its financial statements, not where deviations from GAAP have occurred. Deviations from GAAP, if any, would need to be separately disclosed and justified.

Question 10

A company which offers "n/15" credit terms assuming 360 days in year would be expected to have a receivable turnover of about 24 times a year.

Accepted Answer

With "n/15" credit terms, the company expects payment within 15 days, which would lead to a receivable turnover of about 360/15 = 24 times a year. However, the correct calculation for turnover is 360 divided by the credit terms in days. The mistake in the statement is assuming "n/15" directly translates to a 15-day payment expectation without further context, but the correct interpretation should be based on actual payment terms provided, which in this case, seems to be misinterpreted. The correct turnover calculation depends on the actual payment terms, not just the formula provided.

Question 11

In horizontal analysis of financial statements, the base amounts used for purposes of comparison are the financial results of a previous time period.

Accepted Answer

The answer of In horizontal analysis of financial statements, the...

Question 12

HIJ reported the following data for 2014 in 000's:  Assuming vertical analysis, what is the relationship between current assets, operational assets, and other assets, respectively? (Rounded to the nearest percent) 
A)Choice 1
B)Choice 2
C)Choice 3
D)Choice 4
E)Choice 5

Accepted Answer

The answer of HIJ reported the following data for 2014...

Question 13

Vertical analysis of financial statements refers to the development of percentages indicating the proportionate changes in selected financial statements for two or more reporting periods.

Accepted Answer

Vertical analysis is a method where each entry for each of the three major categories of accounts (assets, liabilities, and equity) in a balance sheet is represented as a proportion of the total account. It's not about comparing changes over different periods but analyzing the structure of a single financial statement at a point in time.

Question 14

A clean opinion is another term to describe a company that has received an unqualified audit report.

Accepted Answer

The answer of A clean opinion is another term to...

Question 15

Vertical analysis of financial statements refers to a comparison of amounts which are expressed in terms of a base amount that is from a:
A)previous time period.
B)financial summary.
C)specific amount that is on the same financial statement.
D)either previous time period or common size statement.
E)common size statement.

Accepted Answer

Vertical analysis involves comparing line items within the same financial statement to a base figure on that statement, such as total assets on the balance sheet or sales on the income statement.

Question 16

Recording the payment (as distinguished from the declaration)of a cash dividend whose declaration was already recorded will:
A)decrease both the current ratio and working capital.
B)have no effect on the current ratio or earnings per share.
C)increase the current ratio but have no effect on working capital.
D)increase both the current ratio and working capital.
E)None of these choices are correct.

Accepted Answer

The answer of Recording the payment (as distinguished from the...

Question 17

If current assets exceed current liabilities, payments to creditors made on the last day of the month will:
A)increase current ratio.
B)decrease net working capital.
C)increase net working capital.
D)decrease current ratio.
E)have no effect on either the current ratio or net working capital.

Accepted Answer

Paying off current liabilities with current assets will reduce both by the same amount, increasing the current ratio since the ratio of current assets to current liabilities will be higher.

Question 18

Trend analysis is part of a(n):
A)Industrial ratio.
B)Longitudinal comparison.
C)Historical ratio.
D)Cross-sectional comparison.

Accepted Answer

Trend analysis involves comparing data over time to identify patterns or trends, which is a form of longitudinal comparison. This contrasts with cross-sectional comparisons, which analyze data from different groups at a single point in time.

Question 19

Assume the following facts for XYZ in 000's:  XYZ's return on owners' equity, return on total assets, and leverage percentages (rounded to the nearest percent)are: (Round percentage answers to nearest whole percent: Do not round intermediate calculations.) 
A)Choice 1
B)Choice 2
C)Choice 3
D)Choice 4
E)Choice 5

Accepted Answer

The answer of Assume the following facts for XYZ in...

Question 20

A trade creditor will be primarily interested in the long-run profitability of the company.

Accepted Answer

A trade creditor is primarily interested in the company's short-term liquidity and ability to pay its debts as they come due, rather than long-run profitability.

Quiz 22: Financial Statement Analysis

Which of the following ratios is an indicator of liquidity?

You are given the following information about JMR Corp.: What is JMR's quick ratio? (Round final answer to 2 decimal places)

ABC's net accounts receivable were $1,000 at December 31, 2013 and $1,200 at December 31, 2014.Net cash sales for 2014 were $400.The accounts receivable turnover for 2014 was 5.0.What were ABC's total net sales for 2014?

Return on total assets is generally considered to be a better measure of the overall profit performance of a business than is profit margin on sales.

All of the following are examples of lending decisions except:

The quick ratio will always be less than or equal to the current ratio.

The negotiating of a collective agreement is a contractual decision that may necessitate the use of financial analysis.

Quick assets, as usually defined, include:

The section on significant accounting policies describes where deviations from GAAP have occurred.

A company which offers "n/15" credit terms assuming 360 days in year would be expected to have a receivable turnover of about 24 times a year.

In horizontal analysis of financial statements, the base amounts used for purposes of comparison are the financial results of a previous time period.

HIJ reported the following data for 2014 in 000's: Assuming vertical analysis, what is the relationship between current assets, operational assets, and other assets, respectively? (Rounded to the nearest percent)

Vertical analysis of financial statements refers to the development of percentages indicating the proportionate changes in selected financial statements for two or more reporting periods.

A clean opinion is another term to describe a company that has received an unqualified audit report.

Vertical analysis of financial statements refers to a comparison of amounts which are expressed in terms of a base amount that is from a:

Recording the payment (as distinguished from the declaration) of a cash dividend whose declaration was already recorded will:

If current assets exceed current liabilities, payments to creditors made on the last day of the month will:

Trend analysis is part of a(n) :

Assume the following facts for XYZ in 000's: XYZ's return on owners' equity, return on total assets, and leverage percentages (rounded to the nearest percent) are: (Round percentage answers to nearest whole percent: Do not round intermediate calculations.)

A trade creditor will be primarily interested in the long-run profitability of the company.