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| 1 | |
Which of the following would be considered an external user of accounting information? |
| | A) | Shareholder (or stockholder) |
| | B) | Budget manager |
| | C) | Internal auditor |
| | D) | All of the above |
| | E) | None of the above |
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| 2 | |
Financial statement analysis focuses on one or more elements of a company's financial condition or performance. Our textbook emphasizes four areas of inquiry with varying degrees of importance. Which area of inquiry relates to the company's ability to provide financial rewards sufficient to attract and retain financing? |
| | A) | Solvency |
| | B) | Liquidity |
| | C) | Profitability |
| | D) | Market prospects |
| | E) | All of the above |
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| 3 | |
Which of the following is the measurement of key relationships between financial statements? |
| | A) | Horizontal analysis |
| | B) | Vertical analysis |
| | C) | Ratio analysis |
| | D) | Upward analysis |
| | E) | Downward analysis |
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| 4 | |
Which type of analysis is a comparison of a company's financial condition and performance across time? |
| | A) | Horizontal analysis |
| | B) | Vertical analysis |
| | C) | Ratio analysis |
| | D) | Upward analysis |
| | E) | Downward analysis |
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| 5 | |
Which of the following are goals of the Sarbanes-Oxley Act? |
| | A) | Ensure adequate accounting disclosure |
| | B) | Strengthen corporate governance |
| | C) | Guarantee corporate profits |
| | D) | All of the above are goals |
| | E) | A and B |
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| 6 | |
A change in an account balance from $100 in year one to $250 in year five can be expressed in which way? |
| | A) | 150% |
| | B) | 25 times |
| | C) | 2.5:1 |
| | D) | 25% |
| | E) | None of the above |
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| 7 | |
Which is not true of common-size comparative statements? |
| | A) | Each item is shown as a percentage of some total of which it is a part. |
| | B) | Dollar amounts are generally not shown. |
| | C) | The net change in each item, on a year-to-year basis, is not shown. |
| | D) | Total assets are used as a total against which all balance sheet accounts are measured. |
| | E) | Retained earnings are shown as a percentage of total assets. |
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| 8 | |
A company has the following data: sales $500,000, cost of goods sold $200,000, operating expenses $100,000, average inventory $8,000, and accounts receivable $10,000. What is its number of days' sales uncollected? |
| | A) | 18.25 days |
| | B) | 7.3 days |
| | C) | 25 days |
| | D) | 30 days |
| | E) | None of the above |
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| 9 | |
If a company has sales of $500,000, cost of goods sold of $100,000, operating expenses of $100,000, average inventory of $8,000, average accounts receivable of $10,000, and average total assets of $35,000, what is its total asset turnover: |
| | A) | 50 |
| | B) | 20 |
| | C) | 14.29 |
| | D) | 8.57 |
| | E) | None of the above |
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| 10 | |
Which of the following ratios would be of the most interest to the long-term creditor of the business? |
| | A) | Current ratio |
| | B) | Times interest earned |
| | C) | Acid-test ratio |
| | D) | Working capital ratio |
| | E) | Accounts receivable turnover |
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| 11 | |
Which of the following is not correct? |
| | A) | Total asset turnover = net sales/average total assets |
| | B) | Profit margin ratio = net income/net sales |
| | C) | Return on total assets = net income/average total assets |
| | D) | Equity ratio = total liabilities/total assets |
| | E) | Current ratio = current assets/current liabilities |
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| 12 | |
What is the denominator in the formula to calculate the return on common stockholders' equity? |
| | A) | Net sales |
| | B) | Average total assets |
| | C) | Total equity |
| | D) | Total contributed capital |
| | E) | None of the above |
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| 13 | |
The balance of the Common Stock ($10 par) account was $400,000 for the entire fiscal year. The company had no preferred stock outstanding during the year. Net income for the year was $40,000; 25% of that amount was distributed to stockholders as a cash dividend. The market price of the stock on the last day of the year was $12 per share. The par value of the stock is $10 per share. What was the price-earnings ratio? |
| | A) | 40.0 |
| | B) | 4.0 |
| | C) | 12.0 |
| | D) | 2.5 |
| | E) | None of the above |
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| 14 | |
Which ratio is viewed as an indicator of future growth and risk for a stock? |
| | A) | Dividend yield |
| | B) | Earnings per share |
| | C) | Price-earnings ratio |
| | D) | Return on equity |
| | E) | Return on assets |
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| 15 | |
Which of the following matches is not correct? |
| | A) | Current ratio - Liquidity and efficiency |
| | B) | Return on total assets - Profitability |
| | C) | Profit margin ratio - Profitability |
| | D) | Equity ratio - Solvency |
| | E) | Dividend yield - Solvency |
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