1. Which of the following below generally is the most useful in analyzing compan
ID: 2385526 • Letter: 1
Question
1. Which of the following below generally is the most useful in analyzing companies of different sizes
a.
comparative statements
b.
common-sized financial statements
c.
price-level accounting
d.
audit report
2. What type of analysis is indicated by the following?
Increase (Decrease*)
2010
2009
Amount
Percent
Current assets
$ 380,000
$ 500,000
$120,000*
24%*
Fixed assets
1,680,000
1,500,000
180,000
12%
a.
vertical analysis
b.
horizontal analysis
c.
liquidity analysis
d.
common-size analysis
3. Assume the following sales data for a company:
2010
750,000
2009
500,000
What is the percentage increase in sales from 2009 to 2010?
a.
25%
b.
66.7%
c.
50% 250,000/500,000 = .5 or 50%
d.
150%
4. In performing a vertical analysis, the base for cost of goods sold is
a.
Total selling expenses.
b.
Net sales.
c.
Total expenses.
d.
Total revenues.
5. The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as
a.
solvency and leverage
b.
solvency and profitability
c.
solvency and liquidity
d.
solvency and equity
6. Which of the following is not an analysis used in assessing solvency?
a.
number of times interest charges are earned
b.
current position analysis
c.
ratio of net sales to assets
d.
inventory analysis
7. A company with working capital of $500,000 and a current ratio of 2.5 pays a $85,000 short-term liability. The amount of working capital immediately after payment is
a.
$585,000
b.
$415,000
c.
$500,000
d.
$85,000
8. Based on the following data for the current year, what is the accounts receivable turnover?
Net sales on account during year
$500,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
12.5 =$500,000/ 40000 = 12.5 (45,000+35,000)/2 = 40,000
b.
11.1
c.
10.0
d.
14.3
9. Based on the following data for the current year, what is the inventory turnover?
Net sales on account during year
$500,000
Cost of merchandise sold during year
330,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
3.3 $330,000 /100,000 =3.3
b.
8.3
c.
3.7
d.
3.0
10. The primary advantages of the average rate of return method are its ease of computation and the fact that:
a.
it is especially useful to managers whose primary concern is liquidity
b.
there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term
c.
it emphasizes the amount of income earned over the life of the proposal
d.
rankings of proposals are necessary
11. The expected average rate of return for a proposed investment of $800,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is:
a.
30%
b.
15%
c.
60%
d.
7.5%
a.
comparative statements
b.
common-sized financial statements
c.
price-level accounting
d.
audit report
Explanation / Answer
1. Which of the following below generally is the most useful in analyzing companies of different sizes
a.comparative statements
b.common-sized financial statements
c.price-level accounting
d.audit report
2. What type of analysis is indicated by the following?
Increase (Decrease*)
2010
2009
Amount
Percent
Current assets
$ 380,000
$ 500,000
$120,000*
24%*
Fixed assets
1,680,000
1,500,000
180,000
12%
a.vertical analysis
b.horizontal analysis
c.liquidity analysis
d.common-size analysis
3. Assume the following sales data for a company:
2010
750,000
2009
500,000
What is the percentage increase in sales from 2009 to 2010?
a.
25%
b.
66.7%
c. 50% 250,000/500,000 = .5 or 50%
d.
150%
4. In performing a vertical analysis, the base for cost of goods sold is
a.Total selling expenses.
b.Net sales.
c.Total expenses.
d.Total revenues.
5. The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as
a.
solvency and leverage
b.
solvency and profitability
c.solvency and liquidity
d.
solvency and equity
6. Which of the following is not an analysis used in assessing solvency?
a.
number of times interest charges are earned
b.
current position analysis
c.ratio of net sales to assets
d.
inventory analysis
7. A company with working capital of $500,000 and a current ratio of 2.5 pays a $85,000 short-term liability. The amount of working capital immediately after payment is
a.
$585,000
b.$415,000
c.
$500,000
d.
$85,000
8. Based on the following data for the current year, what is the accounts receivable turnover?
Net sales on account during year
$500,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.12.5 =$500,000/ 40000 = 12.5 (45,000+35,000)/2 = 40,000
b.
11.1
c.
10.0
d.
14.3
9. Based on the following data for the current year, what is the inventory turnover?
Net sales on account during year
$500,000
Cost of merchandise sold during year
330,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.3.3 $330,000 /100,000 =3.3
b.8.3
c.3.7
d.3.0
10. The primary advantages of the average rate of return method are its ease of computation and the fact that:
a.it is especially useful to managers whose primary concern is liquidity
b.there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term
c.it emphasizes the amount of income earned over the life of the proposal
d.rankings of proposals are necessary
11. The expected average rate of return for a proposed investment of $800,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is:
a.30%
b.15%
c.60%
d.7.5%
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