Question 1

Paul Pierce Enterprises reports net income of $800,000,average total assets of $2,400,000,and average total liabilities of $400,000.Calculate the return on assets and return on equity ratios.

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Question 2

If a company's sales are $648,000 in 2015,and this represents an 8% increase over sales in 2014,what were sales in 2014?

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Question 3

Assume a company's sales are $1.6 million in 2014,$1.8 million in 2015,and $1.7 million in 2016.What is the percentage change from 2014 to 2015? What is the percentage change from 2015 to 2016? Be sure to indicate whether the percentage change is an increase or a decrease.

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Question 4

Perform a horizontal analysis on the following information providing both the dollar amount and percentage change:

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Question 5

Perform a vertical analysis on the following information:

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Question 6

Explain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

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Question 7

Explain the difference between conservative and aggressive accounting practices.Provide an example of a conservative accounting practice and explain why this practice is conservative.Provide an example of an aggressive accounting practice and explain why this practice is aggressive.

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Question 8

The following income statement and balance sheets for Laser World are provided:
   Assuming that all sales were on account,calculate the following risk ratios for 2015:

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Question 9

BC Training reports sales revenue of $2,200,000.Average inventory during the year was $200,000.The inventory turnover ratio for the year is 8.0.What amount of gross profit would the company report in its income statement?

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Question 10

Which of the following is a conservative accounting practice?

Accepted Answer

Conservative accounting practices involve recognizing potential losses or expenses earlier and delaying the recognition of revenues or gains. Adjusting the allowance for uncollectible accounts to a larger amount is conservative because it anticipates potential future losses from uncollectible accounts.

Question 11

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?

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Question 12

United Products began the year with an Inventory balance of $180,000,and had a year-end balance of $200,000.Sales of $800,000 generated a gross profit of $150,000.Calculate the inventory turnover ratio for the year.

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Question 13

Explain the difference between vertical and horizontal analysis.

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Question 14

Which of the following is an aggressive accounting practice?

Accepted Answer

Recording sales revenue before it is actually earned is an aggressive accounting practice known as premature revenue recognition. This practice can artificially increase a company's reported profits and overstate their financial health.

Question 15

Sideline Sports Products reports a return on assets of 6%,and a return on equity of 10%.Why do these two ratios differ?

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Question 16

United Products began the year with an Accounts Receivable balance of $250,000,and had a year-end balance of $280,000.Credit sales of $800,000 generated a gross profit of $150,000.Calculate the receivables turnover ratio for the year.

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Question 17

Define earnings persistence.How does earnings persistence relate to the reporting of discontinued operations and extraordinary items?

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Question 18

The following income statement and balance sheets for Laser World are provided:
   Earnings per share for the year-ended December 31,2015,is $1.90.The closing stock price on December 31,2015,is $30.40.
Calculate the following profitability ratios for 2015:

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