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Exam 12: Financial Statement Analysis

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Question 41

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Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the purchase of inventory with cash affect each ratio?

A) Increase the current ratio and increase the acid-test ratio.
B) No change to the current ratio and decrease the acid-test ratio.
C) Decrease the current ratio and decrease the acid-test ratio.
D) Increase the current ratio and decrease the acid-test ratio.

E) A) and D)
F) A) and C)

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Question 42

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The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

A) Higher profitability.
B) Higher dividends.
C) Higher liabilities.
D) Fewer total assets.

E) A) and C)
F) A) and B)

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Question 43

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Which of the following is a negative sign that a company is not selling its inventory quickly?

A discontinued operation refers to:

Which of the following is an example of vertical analysis?

The following is an example of: $\begin{array} { | l r r | } \hline & \text { Amount } & { \% } \\\text { Cash } & \$ 300,000 & \mathbf { 6 . 0 } \\\text { Accounts receivable } & 500,000 & \mathbf { 1 0 . 0 } \\\text { Inventory } & 800,000 & \mathbf { 1 6 . 0 } \\\text { Long-term assets } & 3,400,000 & \mathbf { 6 8 . 0 } \\\text { Total assets } & \$ 5,000,000 & \mathbf { 1 0 0 . 0 } \\\hline\end{array}$

Stealth Company's 2013 receivables turnover ratio is:

Listed below are eight terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided. -     A tool to analyze trends in financial statement data for a single company over time. 

Classify each of the following accounting practices as conservative or aggressive. 1. Choosing a shorter life for calculating depreciation. 2. The write-down of inventory. 3. Decrease the allowance for uncollectible accounts. 4. Recording revenues sooner.

Nerf Mania reports net income of $500,000, net sales of $4,000,000, and average assets of $2,000,000. The return on assets is:

HHF's times interest earned ratio is:

TPX Company's 2013 return on equity is:

The average collection period converts the receivables turnover ratio into days.

Listed below are eight terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided. -     The sale or disposal of a significant component of a company's operations. 

Which of the following is a sign that a company can quickly turn its receivables into cash?

A discontinued operation is the sale or disposal of any long-term asset.

Vertical analysis calculates the amount and percentage change of an account over time.

Listed below are eight terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided. -     Accounting choices that result in reporting higher income, higher assets, and lower liabilities. 

Listed below are eight terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided.

A larger estimation of the allowance for uncollectible accounts, the write-down of overvalued inventory and the use of a shorter useful life for depreciation are all examples of conservative accounting.