1) The working capital of a company is equal to 2) A company that uses leverage

Question

1) The working capital of a company is equal to

2) A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds received from

3) When a financial analyst determines the percentage change in operating income for the five-year period from 2011 to 2015, she is performing a:

4) Horizontal analysis is analysis in which

5) Most companies

6) In a common size income statement to be used in vertical analysis, the 100% amount is:

7) Which of the following is a measure of liquidity?

d. Earnings per share

8) A financial analyst is comparing two companies using a top-down approach. Which of the following would cause problems in the evaluation process?

9) Turnover ratios differ from the current and quick ratios in that they

10) All of the following are examples of questions that a financial analyst would ask about a company's use of estimates in the recording of expenses except:

d. What expected lives and residual values are used for depreciation computations?

11) Which of the following is considered a measure of short-term liquidity?

12) The gross profit percentage decreased from 36.5% in 2014 to 24.8% in 2015. What is the trend in this change?

13) A company issued additional shares of stock. Which of the following is true with regard to the effect of the stock issuance transaction on the company's ratio computations?

14) A company reported the following amounts in its financial statements:

From 2014 to 2015, the company's efficiency in managing inventory was:

15) A company purchased inventory on credit. The effect of this transaction is that the:

16) Annual reports are filed with the SEC on

17) Which of the following would report the market price of the company's stock?

18) Time series (or trend) analysis is analysis in which

a. Long-term assets less current assets b. Current assets less current liabilities c. Stockholders' equity d. Total assets less current assets

2) A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds received from

a. Common stockholders only. b. Preferred and common stockholders. c. Borrowing. d. Customers.

3) When a financial analyst determines the percentage change in operating income for the five-year period from 2011 to 2015, she is performing a:

a. Time series analysis. b. Vertical analysis. c. Profitability analysis. d. Cross-sectional analysis.

4) Horizontal analysis is analysis in which

a. Ratio increases and decreases are presented for the past two accounting periods. b. A statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements. c. Financial statement lines are expressed as a percent of the base (earliest) year. d. All items are presented as a percentage of one selected item on the financial statement.

5) Most companies

a. Try to maintain protection from creditors by keeping only a small amount of cash available. b. Strive for an appropriate balance between debt and equity financing. c. Agree that a current ratio of 0.75 is sufficient for business operations. d. Are not concerned with the debt management ratios when cash flows are good.

6) In a common size income statement to be used in vertical analysis, the 100% amount is:

a. Operating income b. Net income c. Gross profit d. Net sales

7) Which of the following is a measure of liquidity?

a. Accounts receivable turnover ratio b. Operating cash flows ratio c. Return on common equity

d. Earnings per share

8) A financial analyst is comparing two companies using a top-down approach. Which of the following would cause problems in the evaluation process?

a. One company has been in business significantly longer than the other company. b. The companies operate in different industries. c. One company's fiscal year-end is October 31, while the other company's fiscal year-end is December 31. d. Inflation has been low for several years.

9) Turnover ratios differ from the current and quick ratios in that they

a. Measure the profitability of a company instead of its liquidity. b. Measure the efficiency with which a company uses its assets. c. Are based on a point in time rather than a period of time. d. Are based on net sales instead of cash.

10) All of the following are examples of questions that a financial analyst would ask about a company's use of estimates in the recording of expenses except:

a. Are sales taxes included in revenues? b. Do warranty provisions cover actual expenditures? c. Is the allowance for uncollectible accounts sufficient to cover bad debts?

d. What expected lives and residual values are used for depreciation computations?

11) Which of the following is considered a measure of short-term liquidity?

a. Return on assets ratio b. Gross profit percentage c. Quick ratio d. Dividend yield ratio

12) The gross profit percentage decreased from 36.5% in 2014 to 24.8% in 2015. What is the trend in this change?

a. This increase represents an upward, or favorable, trend. b. The answer depends upon whether net sales increased or decreased during the period. c. The trend cannot be determined unless the dollar amount of the change is also know. d. This increase represents a downward, or negative, trend.

13) A company issued additional shares of stock. Which of the following is true with regard to the effect of the stock issuance transaction on the company's ratio computations?

a. Earnings per share decreased. b. Return on equity remained unchanged. c. The debt-to-equity ratio increased. d. The asset turnover ratio decreased

14) A company reported the following amounts in its financial statements:

2015 2014 Average inventory $100,000 $60,000 Cost of goods sold 2,000,000 1,500,000

From 2014 to 2015, the company's efficiency in managing inventory was:

a. Improving, because the inventory turnover ratio is increasing. b. Improving, because the inventory turnover ratio is decreasing. c. Declining, because the inventory turnover ratio is decreasing. d. Declining, because the inventory turnover ratio is increasing.

15) A company purchased inventory on credit. The effect of this transaction is that the:

a. Working capital increased. b. Debt-to-equity ratio increased. c. Earnings per share increased. d. Earnings per share decreased.

16) Annual reports are filed with the SEC on

a. Form 10-K b. Form 10-Q. c. The MD&A section. d. Form 8-K.

17) Which of the following would report the market price of the company's stock?

a. Balance sheet. b. Statement of cash flows. c. Income statement. d. Item 5 in Form 10-K.

18) Time series (or trend) analysis is analysis in which

a. Dollar changes and percentage changes in a company's financial statement lines are compared over several years. b. A statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements. c. All items are presented as a percentage of one selected item on a financial statement. d. Ratio increases and decreases are presented for the past two accounting periods

Explanation / Answer

1) The working capital of a company is equal to

b. Current assets less current liabilities

2) A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds received from

c. Borrowing.

3) When a financial analyst determines the percentage change in operating income for the five-year period from 2011 to 2015, she is performing a:

a. Time series analysis.

4) Horizontal analysis is analysis in which

a. Ratio increases and decreases are presented for the past two accounting periods.

5) Most companies

b. Strive for an appropriate balance between debt and equity financing.

6) In a common size income statement to be used in vertical analysis, the 100% amount is:

b. Net income

7) Which of the following is a measure of liquidity?

a. Accounts receivable turnover ratio

8) A financial analyst is comparing two companies using a top-down approach. Which of the following would cause problems in the evaluation process?

c. One company's fiscal year-end is October 31, while the other company's fiscal year-end is December 31.

9) Turnover ratios differ from the current and quick ratios in that they

d. Are based on net sales instead of cash.

10) All of the following are examples of questions that a financial analyst would ask about a company's use of estimates in the recording of expenses except:

b. Do warranty provisions cover actual expenditures?

11) Which of the following is considered a measure of short-term liquidity?

c. Quick ratio

12) The gross profit percentage decreased from 36.5% in 2014 to 24.8% in 2015. What is the trend in this change?

d. This increase represents a downward, or negative, trend.

13) A company issued additional shares of stock. Which of the following is true with regard to the effect of the stock issuance transaction on the company's ratio computations?

a. Earnings per share decreased.

14) A company reported the following amounts in its financial statements:

2015 2014

Average inventory $100,000 $60,000

Cost of goods sold 2,000,000 1,500,000

From 2014 to 2015, the company's efficiency in managing inventory was:

a. Improving, because the inventory turnover ratio is increasing.

15) A company purchased inventory on credit. The effect of this transaction is that the:

c. Earnings per share increased.

16) Annual reports are filed with the SEC on

a. Form 10-K

17) Which of the following would report the market price of the company's stock?

. Item 5 in Form 10-K.

18) Time series (or trend) analysis is analysis in which

a. Dollar changes and percentage changes in a company's financial statement lines are compared over several years.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.