Question 1

The following information is available for Meyer Company:  Which of the following statements is correct?

Accepted Answer

A)   The dividend yield is 6.0%, which is of interest to investors seeking an increase in market price of their stocks.
B)   The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments.
C)   The dividend yield is 16.7%, which is of interest to bondholders.
D)   The dividend yield is 16.7% which is an important measure of solvency.E) B) and C)
F) A) and B)

Question 2

The relationship of $325,000 to $125,000, expressed as a ratio, is

Accepted Answer

A)   2.0
B)   2.6
C)   2.5
D)   0.45E) A) and B)
F) A) and C)

Question 3

In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.

Accepted Answer

A) True 
 B)False

Question 4

The following items are reported on Denver Company's balance sheet:  
Determine: 
(a) the current ratio 
(b) the quick ratio. 
Round to one decimal place.

Accepted Answer

(a) Current ratio = Current assets ÷ Cur...

Question 5

Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.

Accepted Answer

A) True 
 B)False

Question 6

The balance sheets at the end of each of the first two years of operations indicate the following: 
If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate earned on total assets for the year?

Accepted Answer

A)   10.4%
B)   11.9%
C)   10.5%
D)   8.4%E) C) and D)
F) A) and D)

Question 7

Which of the following items appear on the corporate income statement before income from continuing operations?

Accepted Answer

A)   cumulative effect of a change in accounting principle
B)   income tax expense
C)   extraordinary gain
D)   loss on discontinued operationsE) A) and C)
F) B) and D)

Question 8

Horizontal analysis is a technique for evaluating financial statement data

Accepted Answer

A)   for one period of time
B)   over a period of time
C)   on a certain date
D)   as it may appear in the futureE) A) and C)
F) B) and D)

Question 9

On a common-sized balance sheet, 100% is

Accepted Answer

A)   total property, plant, and equipment
B)   total current assets
C)   total liabilities
D)   total assetsE) None of the above
F) C) and D)

Question 10

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

Accepted Answer

A)   judge the relative potential of two companies of similar size in different industries
B)   determine which companies in a single industry are of the same value
C)   determine which companies in a single industry are of the same size
D)   make a better comparison of two companies of different sizes in the same industryE) B) and D)
F) None of the above

Question 11

Based on the above data, what is the quick ratio, rounded to one decimal point?

Accepted Answer

A)   2.7
B)   2.6
C)   1.7
D)   0.9E) None of the above
F) C) and D)

Question 12

The following items are reported on a company's balance sheet:  
Determine:
(a) current ratio 
(b) quick ratio.  
Round your answer to one decimal place.

Accepted Answer

(a) Current ratio = Current assets (cash...

Question 13

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

Accepted Answer

A) True 
 B)False

Question 14

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

Accepted Answer

A) True 
 B)False

Question 15

The current ratio is

Accepted Answer

A)   used to evaluate a company's liquidity and short-term debt paying ability
B)   a solvency measure that indicates the margin of safety of a bondholder
C)   calculated by dividing current liabilities by current assets
D)   calculated by subtracting current liabilities from current assetsE) B) and C)
F) A) and D)

Question 16

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.    
What is the rate earned on common stockholders' equity for Diane Company?

Accepted Answer

A)   6.75%
B)   14.8%
C)   7.4%
D)   13.5%E) None of the above
F) All of the above

Question 17

Zeus Company reports the following for the current year:  
(a) Prepare a partial income statement for Zeus Company beginning with income from continuing operations before income tax. 
(b) Calculate the earnings per common share for Zeus, including per-share amount for unusual items.

Accepted Answer

The answer of Zeus Company reports the following for the...

Question 18

A company reports the following: 
The company's earnings per share on common stock is

Accepted Answer

A)   $13.33
B)   $8.50
C)   $7.50
D)   $35.00E) B) and C)
F) All of the above

Question 19

A 15% change in sales will result in a 15% change in net income.

Accepted Answer

A) True 
 B)False

Question 20

A company reports the following income statement and balance sheet information for the current year:  
Determine the rate earned on total assets.  Round your answer to one decimal place.

Accepted Answer

Rate earned on assets = (Net income + In...

Exam 14: Financial Statement Analysis

Which of the following items appear on the corporate income statement before income from continuing operations?

Correct AnswerverifiedShow Answer

Zeus Company reports the following for the current year: (a) Prepare a partial income statement for Zeus Company beginning with income from continuing operations before income tax. (b) Calculate the earnings per common share for Zeus, including per-share amount for unusual items.

Correct AnswerverifiedShow Answer

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate earned on total assets for the year?

Correct AnswerverifiedShow Answer

A 15% change in sales will result in a 15% change in net income.

Correct AnswerverifiedShow Answer

The current ratio is

Correct AnswerverifiedShow Answer

Based on the above data, what is the quick ratio, rounded to one decimal point?

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The following items are reported on Denver Company's balance sheet: Determine: (a) the current ratio (b) the quick ratio. Round to one decimal place.

Correct Answerverified(a) Current ratio = Current assets ÷ Cur...View AnswerShow Answer

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

Correct AnswerverifiedShow Answer

A company reports the following income statement and balance sheet information for the current year: Determine the rate earned on total assets. Round your answer to one decimal place.

Correct AnswerverifiedRate earned on assets = (Net income + In...View AnswerShow Answer

On a common-sized balance sheet, 100% is

Correct AnswerverifiedShow Answer

A company reports the following: The company's earnings per share on common stock is

Correct AnswerverifiedShow Answer

The following information is available for Meyer Company: Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Horizontal analysis is a technique for evaluating financial statement data

Correct AnswerverifiedShow Answer

The following items are reported on a company's balance sheet: Determine: (a) current ratio (b) quick ratio. Round your answer to one decimal place.

Correct Answerverified(a) Current ratio = Current assets (cash...View AnswerShow Answer

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

Correct AnswerverifiedShow Answer

Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.

Correct AnswerverifiedShow Answer

The relationship of $325,000 to $125,000, expressed as a ratio, is

Correct AnswerverifiedShow Answer

In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.

Correct AnswerverifiedShow Answer

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

Correct AnswerverifiedShow Answer

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the rate earned on common stockholders' equity for Diane Company?

Correct AnswerverifiedShow Answer

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(a) Current ratio = Current assets ÷ Cur...
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Rate earned on assets = (Net income + In...
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(a) Current ratio = Current assets (cash...
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