Question 1

Assuming the balance in Retained Earnings at the end of year is $100,000, and that it decreased by 15% during the year. The balance in Retained Earnings at the beginning of the year was closest to:

Accepted Answer

To find the beginning balance, divide the ending balance by (1 - decrease percentage). $100,000 / (1 - 0.15) = $117,647.

Question 2

Given the following data:  In a vertical analysis, noncurrent liabilities would be expressed as:

Accepted Answer

The answer of Given the following data:  In a...

Question 3

Guliana Company reported net sales of $150,000 for the current year. Accounts Receivable at the beginning of the year was $17,000 and $15,000 at the end of year. The days' sales in average receivables was closest to:

Accepted Answer

Days' sales in average receivables is calculated as (Average Accounts Receivable / Net Sales) * 365. The average accounts receivable is ($17,000 + $15,000) / 2 = $16,000. Thus, ($16,000 / $150,000) * 365 = 38.9 days.

Question 4

A very low accounts receivable turnover would most likely indicate that:

Accepted Answer

A low accounts receivable turnover indicates that the company is taking longer to collect cash from its customers, suggesting inefficiency in collection efforts.

Question 5

Compute working capital using the following data:

Accepted Answer

The answer of Compute working capital using the following data:...

Question 6

The following data represent selected information from the comparative income statement and balance sheet for Duenke Company for the years ended December 31, 2009 and 2008: * 10,000 shares of common stock have been issued and outstanding since the company was established. They had a market value of $90 per share on December 31, 2008, and they were selling for $91.50 on December 31, 2009.
 The inventory turnover for Duenke Company for the year ended December 31, 2009, was:

Accepted Answer

The answer of The following data represent selected information from...

Question 7

The dividend yield is calculated as:

Accepted Answer

The dividend yield is calculated by dividing the dividends per share by the market price per share of common stock, which shows the return on investment from dividends.

Question 8

Which of the following is the best measure of a firm's ability to pay its long- term debt?

Accepted Answer

The debt ratio measures the proportion of a firm's assets that are financed by debt, indicating its ability to meet long-term obligations.

Question 9

On a common- size income statement each item is expressed as a percentage of:

Accepted Answer

On a common-size income statement, each item is expressed as a percentage of total revenues (or sales), which allows for easy comparison across different periods or companies.

Question 10

Assume a company has a current ratio of 1.8 and working capital equal to $48,000. If the company's current liabilities are equal to $60,000, its total current assets are:

Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Given the current ratio of 1.8 and current liabilities of $60,000, the current assets can be calculated as 1.8 * $60,000 = $108,000.

Question 11

Stocks with a high price/earnings ratio:

Accepted Answer

Stocks with a high price/earnings ratio are often considered more risky because they are priced high relative to their earnings, indicating high growth expectations which may not materialize.

Question 12

Inventory turnover is calculated as:

Accepted Answer

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory for the period, which measures how many times inventory is sold and replaced over a period.

Question 13

Given the following data:  If net sales decreases by 10%, and cost of goods sold increases by 15%, gross profit would:

Accepted Answer

The answer of Given the following data:  If net...

Question 14

Which of the following is NOT included in the calculation of the numerator in the acid- test ratio?

Accepted Answer

The acid-test ratio, also known as the quick ratio, includes cash, short-term investments, and net current receivables in the numerator. Prepaid expenses and inventory are not included.

Question 15

Expressing current operating income as a percentage of current net sales is an example of:

Accepted Answer

Vertical analysis involves expressing each item in a financial statement as a percentage of a base item, such as net sales.

Question 16

The following data represent selected information from the comparative income statement and balance sheet for Duenke Company for the years ended December 31, 2009 and 2008: * 10,000 shares of common stock have been issued and outstanding since the company was established. They had a market value of $90 per share on December 31, 2008, and they were selling for $91.50 on December 31, 2009.
 For the year ending on December 31, 2008, Duenke Company's rate of return on net sales was:

Accepted Answer

The answer of The following data represent selected information from...

Question 17

Which of the following statements about inventory turnover is most appropriate?

Accepted Answer

The most profitable inventory turnover ratio balances having enough inventory to meet demand without overstocking, which can tie up capital and increase holding costs.

Question 18

On a statement of cash flows of a financially healthy company, net income should ordinarily be:

Accepted Answer

In a financially healthy company, cash provided by operating activities is typically greater than net income because it includes non-cash expenses like depreciation and changes in working capital.

Question 19

An "efficient capital market" is one where:

Accepted Answer

An efficient capital market is defined by the Efficient Market Hypothesis, which states that stock prices fully reflect all available information.

Question 20

Compute the current ratio using the following data:

Accepted Answer

The answer of Compute the current ratio using the following...

Quiz 13: Financial Statement Analysis