Both a low receivables turnover ratio and a high average collection period.. Both a high inventory turnover ratio and a low average days in inventory.. Both a high inventory turnover rat
Trang 1change is just as useful as if the base year and the following year were both positive
Trang 212 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
Trang 324 We use the times interest earned ratio to compare interest payments with a company's income available to pay those charges
Trang 436 To be an extraordinary item, an event that produces a gain or loss must be either unusual in nature or infrequent in occurrence
46 Which of the following is not a common type of comparison in accounting?
A Comparisons of sales growth between companies
B Comparisons of earnings per share between companies
C Comparisons over time
D Comparisons to industry
Trang 547 When using vertical analysis,we express income statement accounts as a percentage of
D Total stockholders' equity
49 Which of the following is an example of verticalanalysis?
A Comparing gross profit across companies
B Comparing income statement items as a percentage of sales
C Comparing debt with industry averages
D Comparing the change in sales over time
50 Comparing operating expenses as a percentage of sales is an example of:
A Vertical analysis
B Horizontal analysis
C Diagonal analysis
D Both vertical and horizontal analysis
51 The following is an example of:
Trang 652 The following is an example of:
A Vertical analysis
B Horizontal analysis
C Diagonal analysis
D Both vertical and horizontal analysis
53 Horizontal analysis examines trends in a company
A Over time
B Between income statement accounts in the same year
C Between balance sheet accounts in the same year
D Between income statement and balance sheet accounts in the same year
54 Which of the following is an example of horizontal analysis?
A Comparing COGS with sales
B Comparing net income across companies
C Comparing debt with equity
D Comparing the growth in sales over time
55 Which of the following is an example of horizontal analysis?
A Comparing gross profit across companies
B Comparing gross profit with operating expenses
C Comparing assets with equity
D Comparing the change in sales over time
56 Comparing changes in net income for one company over time is an example of:
A Vertical analysis
B Horizontal analysis
C Diagonal analysis
D Both vertical and horizontal analysis
57 Which of the following is correct?
Trang 758 Which of the following ratios is most useful in evaluating liquidity?
A Return on assets
B Return on equity
C Debt to equity ratio
D Current ratio
59 Which of the following ratios is most useful in evaluating solvency?
A Debt to equity ratio
B Current ratio
C Receivables turnover ratio
D Inventory turnover ratio
60 Which of the following is a sign that a company can quickly turn its receivables into cash?
A A low receivables turnover ratio
B A high receivables turnover ratio
C A high average collection period
D Both a low receivables turnover ratio and a high average collection period
61 Which of the following is a sign that a company cannot quickly turn its receivables into cash?
A A high receivables turnover ratio
B A low receivables turnover ratio
C A low average collection period
D Both a high receivables turnover ratio and a low average collection period
62 Which of the following is a negative sign that a company is not selling its inventory quickly?
A A low inventory turnover ratio
B A high inventory turnover ratio
C A low average days in inventory
D Both a high inventory turnover ratio and a low average days in inventory
63 Which of the following is a positive sign that a company is selling its inventory quickly?
A A low inventory turnover ratio
B A high inventory turnover ratio
C A low average days in inventory
D Both a high inventory turnover ratio and a low average days in inventory
64 The current ratio is calculated as:
A Current assets divided by noncurrent assets
B Current assets divided by current liabilities
C Current liabilities divided by noncurrent liabilities
D Current liabilities divided by current assets
Trang 865 The acid-test ratio is most similar to the:
A Current ratio
B Debt to equity ratio
C Times interest earned ratio
D Inventory turnover ratio
66 The acid-test ratio is:
A The liquidity ratio divided by the equity ratio
B Current assets minus inventory divided by current liabilities minus accounts payable
C Cash, net receivables, and current investments divided by current liabilities
D Cash divided by accounts payable
67 Which of the following is not a solvency ratio?
A Time interest earned ratio
B The debt to equity ratio
C The current ratio
D All of the other options are solvency ratios
68 When a company pays a bill from a plumber for previous services on account:
A Its debt to equity ratio decreases
B Its acid-test ratio always remains unchanged
C Its current ratio always remains unchanged
D All of the other options are correct
69 Assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio?
A Increase the current ratio
B No change to the current ratio
C Decrease the current ratio
D Could either increase or decrease the current ratio
70 Assuming an acid-test ratio of 1.0, how will the purchase of inventory with cash affect the ratio?
A Increase the acid-test ratio
B No change to the acid-test ratio
C Decrease the acid-test ratio
D Could either increase or decrease the acid-test ratio
71 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
Trang 972 When a company sells land for cash and makes a $25,000 gain:
A Its acid-test ratio decreases
B Its current ratio decreases
C Its debt to equity ratio decreases
D Cannot determine from the given information
73 Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory on credit When it makes the purchase
A Its current ratio decreases
B Its acid-test ratio decreases
C Its current ratio remains unchanged
D Its acid-test ratio remains unchanged
A partial balance sheet ($s in thousands) for Captain D's Seafood Inc is shown below
74 The current ratio is:
Trang 10Recent financial statement data for Harmony Health Foods (HHF) Inc is shown below.
77 HHF's debt to equity ratio is:
Excerpts from Stealth Company's December 31, 2013 and 2012, financial statements are presented below:
79 Stealth Company's 2013 receivables turnover ratio is:
Trang 1182 Stealth Company's 2013 average days in inventory is:
Trang 12Excerpts from TPX Company's December 31, 2013 and 2012, financial statements are presented below:
89 TPX Company's 2013 receivables turnover ratio is:
Trang 1395 TPX Company's 2013 return on assets is:
100.Return on assets equals:
A Gross profit ratio x Inventory turnover
B Profit margin x Inventory turnover
C Gross profit ratio x Asset turnover
D Profit margin x Asset turnover
101.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:
A 200%
B 25%
C 50%
D 12.5%
Trang 14102.Nerf Mania reports net income of $500,000, net sales of $4,000,000, and average assets of $2,000,000 The profit margin is:
104.Richard's Sporting Goods reports net income of $100,000, net sales of $500,000, and average assets of
$1,000,000 The return on assets is:
A 10%
B 20%
C 50%
D 5 times
105.Richard's Sporting Goods reports net income of $100,000, net sales of $500,000, and average assets of
$1,000,000 The profit margin is:
A 10%
B 20%
C 50%
D 5 times
106.Richard's Sporting Goods reports net income of $100,000, net sales of $500,000, and average assets of
$1,000,000 The asset turnover is:
C Other revenues and expenses
D Gain or loss on sale of assets
108.A discontinued operation refers to:
A The sale or disposal of a significant component of a company's operations
B Discontinued inventory items
C Inventory items that have been completed and sold
D The sale of most long-term assets
Trang 15109.An extraordinary item must meet which of the following criteria?
A Unusual in nature
B Infrequent in occurrence
C Unusual in nature and infrequent in occurrence
D Unusual in nature or infrequent in occurrence
B A loss from discontinued operations
C Other revenues and expenses
D A separate line item in retained earnings
Trang 16114.The financial statements of a firm that uses more aggressive accounting practices would be likely to report:
116.Which of the following is a conservative accounting practice?
A The use of a longer service life for depreciation
B Waiting to record a litigation loss
C Adjust the allowance for uncollectible accounts to a smaller amount
D The write-down of overvalued inventory
117.Which of the following is an aggressive accounting practice?
A The use of a shorter service life for depreciation
B Waiting to record a litigation loss
C Adjust the allowance for uncollectible accounts to a larger amount
D The write-down of overvalued inventory
118.Which of the following is a conservative accounting practice?
A Change from double-declining balance to straight-line depreciation
B Record sales revenue before it is actually earned
C Adjust the allowance for uncollectible accounts to a larger amount
D Record inventory at market rather than lower of cost or market
119.Which of the following is an aggressive accounting practice?
A Change from straight-line to double-declining balance depreciation
B Record sales revenue before it is actually earned
C Adjust the allowance for uncollectible accounts to a larger amount
D Record inventory at lower of cost or market rather than at cost
Trang 17120.Perform a vertical analysis on the following information:
121.Perform a horizontal analysis on the following information providing both the dollar amount and
percentage change:
122.Assume a company's sales are $1.6 million in 2011, $1.8 million in 2012, and $1.7 million in 2013 What
is the percentage change from 2011 to 2012? What is the percentage change from 2012 to 2013? Be sure to indicate whether the percentage change is an increase or a decrease
Trang 18123.If a company's sales are $648,000 in 2012, and this represents an 8% increase over sales in 2011, what were sales in 2011?
124.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
125.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
126.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?
Trang 19127.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?
Trang 20128.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 2012:
Trang 21
129.The following income statement and balance sheets for Laser World are provided:
Earnings per share for the year-ended December 31, 2012, is $1.90 The closing stock price on December
31, 2012, is $30.40
Calculate the following profitability ratios for 2012:
Trang 22
130.Barry's BBQ had sales revenue for the year of $200 million and net income of $20 million Total assets were $70 million at the beginning of the year, and $80 million at the end of the year Calculate Barry's return on assets, profit margin, and asset turnover ratios
131.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 asset and return on equity ratios
132.Phillip's Fun Center has go-karts, miniature golf, bumper boats, paintball, and laser tag Determine whether the company should report each of the following items as discontinued operations, extraordinary items, or other expenses:
1 Uninsured losses of $200,000 were incurred due to a hurricane that swept through the area for the first time in 50 years
2 The company sold its old go-karts at a loss of $25,000 and replaced them with all new go-karts
3 The company sold its laser tag center at a loss of $10,000 to focus on the other more profitable segments Laser tag is considered to be a separate business segment
4 The company restructured its business at a cost of $75,000, replacing some employee positions with automated equipment
Trang 23133.Classify each of the following accounting practices as conservative or aggressive:
1 Increase the allowance for uncollectible accounts
2 When costs are rising, change from FIFO to LIFO
3 Increase the estimated useful life of equipment
134.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
135.Explain the difference between vertical and horizontal analysis
136.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
Trang 24137.Sideline Sports Products reports a return on assets of 6%, and a return on equity of 10% Why do these two ratios differ?
138.Define earnings persistence How does earnings persistence relate to the reporting of discontinued
operations and extraordinary items?
139.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
Trang 25140.Listed below are eight risk ratios followed by a list of phrases that describe or characterize the ratios Match each phrase with the correct ratio placing the letter designating the ratio in the space provided
1 Average
collection
period
Cost of goods sold divided by average inventory; the number
of times the firm sells its average inventory balance during a
reporting period
2 Times
interest
earned ratio
Total liabilities divided by total stockholders' equity; measure
a company's solvency risk
3 Current
4
Acid-test ratio
Ratio that compares interest expense with income available to
pay those charges
5
Receivables
turnover
ratio
Net sales divided by average accounts receivable; the number
of times during a year that the average accounts receivable
balance is collected
6 Inventory
turnover
ratio
Cash, short-term investments, and accounts receivable divided
by current liabilities; measures the availability of liquid current
assets to pay current liabilities