Question 1 Cost of goods sold appears explicitly in the numerator of which ratio
ID: 2652176 • Letter: Q
Question
Question 1
Cost of goods sold appears explicitly in the numerator of which ratio?
Gross margin.
Inventory turnover.
Asset turnover.
Current ratio.
3 points
Question 2
The quick ratio is frequently used as a more sensitive substitute for which ratio?
Accounts receivable turnover.
Debt ratio.
Current ratio.
Inventory turnover.
3 points
Question 3
Which of the following is the LEAST significant limitation on the use of industry data in financial statement analysis?
Industries may be defined differently by different sources.
There are few sources of industry data available.
Sources may differ in the formulas used for computation of ratios.
Differences in accounting methods across firms may skew industry ratios.
3 points
Question 4
The DuPont formula expresses ROA as the product of:
Inventory turnover and gross margin.
Net margin (return on sales) and asset turnover.
Return on sales and return on equity.
Net margin (return on sales) and leverage.
3 points
Question 5
According to lecture, what are the two main components of financial analysis?
Horizontal and vertical.
Framing and justification.
Calculation and comparison.
Benchmarking and trend analysis.
3 points
Question 6
In an environment of rising costs, ABC Company changes from FIFO to LIFO as their inventory cost flow assumption. What effect will this change have on ABC's current ratio?
Increase.
Decrease.
No effect.
3 points
Question 7
If, just prior to a period of rising prices, a company changed its inventory cost flow assumption from FIFO to LIFO, the effect in the next period would be to:
Decrease both the current ratio and the inventory turnover.
Increase both the current ratio and the inventory turnover.
Increase the current ratio and decrease the inventory turnover.
Decrease the current ratio and increase the inventory turnover.
3 points
Question 8
A capital lease is treated as:
Property rental.
A restructuring.
A purchase of the property by the lessee.
Other comprehensive income.
3 points
Question 9
Which of the following is NOT a common objection to current GAAP regarding accounting for stock options?
Footnote disclosure regarding stock options is inadequate.
Stock option valuation techniques are seriously flawed.
Current standards appear to be motivated by political rather than accounting considerations.
It is questionable whether stock options represent an expense to the issuing firm.
3 points
Question 10
Under current GAAP, material understatement of a firm's liabilities is MOST likely to occur in which context?
Product warranties.
Employee pensions.
Deferred income taxes.
Lease obligations.
3 points
Question 11
Which of the following would one not expect to recur on a firm's income statement from year to year?
Loss from discontinued operations.
Equity in earning of nonconsolidated subsidiaries.
Investment income.
Net income - non-controlling interest.
Question 1
Cost of goods sold appears explicitly in the numerator of which ratio?
a.Gross margin.
b.Inventory turnover.
c.Asset turnover.
d.Current ratio.
3 points
Question 2
The quick ratio is frequently used as a more sensitive substitute for which ratio?
a.Accounts receivable turnover.
b.Debt ratio.
c.Current ratio.
d.Inventory turnover.
3 points
Question 3
Which of the following is the LEAST significant limitation on the use of industry data in financial statement analysis?
a.Industries may be defined differently by different sources.
b.There are few sources of industry data available.
c.Sources may differ in the formulas used for computation of ratios.
d.Differences in accounting methods across firms may skew industry ratios.
3 points
Question 4
The DuPont formula expresses ROA as the product of:
a.Inventory turnover and gross margin.
b.Net margin (return on sales) and asset turnover.
c.Return on sales and return on equity.
d.Net margin (return on sales) and leverage.
3 points
Question 5
According to lecture, what are the two main components of financial analysis?
a.Horizontal and vertical.
b.Framing and justification.
c.Calculation and comparison.
d.Benchmarking and trend analysis.
3 points
Question 6
In an environment of rising costs, ABC Company changes from FIFO to LIFO as their inventory cost flow assumption. What effect will this change have on ABC's current ratio?
a.Increase.
b.Decrease.
c.No effect.
3 points
Question 7
If, just prior to a period of rising prices, a company changed its inventory cost flow assumption from FIFO to LIFO, the effect in the next period would be to:
a.Decrease both the current ratio and the inventory turnover.
b.Increase both the current ratio and the inventory turnover.
c.Increase the current ratio and decrease the inventory turnover.
d.Decrease the current ratio and increase the inventory turnover.
3 points
Question 8
A capital lease is treated as:
1.Property rental.
2.A restructuring.
3.A purchase of the property by the lessee.
4.Other comprehensive income.
3 points
Question 9
Which of the following is NOT a common objection to current GAAP regarding accounting for stock options?
1.Footnote disclosure regarding stock options is inadequate.
2.Stock option valuation techniques are seriously flawed.
3.Current standards appear to be motivated by political rather than accounting considerations.
4.It is questionable whether stock options represent an expense to the issuing firm.
3 points
Question 10
Under current GAAP, material understatement of a firm's liabilities is MOST likely to occur in which context?
a.Product warranties.
b.Employee pensions.
c.Deferred income taxes.
d.Lease obligations.
3 points
Question 11
Which of the following would one not expect to recur on a firm's income statement from year to year?
1.Loss from discontinued operations.
2.Equity in earning of nonconsolidated subsidiaries.
3.Investment income.
4.Net income - non-controlling interest.
Explanation / Answer
1. Inventory turnover.
2. Current ratio
3.Industries may be defined differently by different sources.
4.Net margin (return on sales) and asset turnover
5.Horizontal and vertical
6.Increase. - Inventory will be valued at the latest purchase prices.
7.Increase the current ratio and decrease the inventory turnover.
8.A purchase of the property by the lessee.
9.-
10.Product warranties
11.
10.Loss from discontinued operations
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