Question 1

Trend data are always in dollars while ratio data are always in percentages.
BT: Knowledge

Accepted Answer

This statement is false. Trend data can be in any unit of measurement (not just dollars), while ratio data can be represented in values other than percentages (such as fractions or decimals).

Question 2

If a company is expanding its facilities,its fixed asset turnover ratio is likely to fall temporarily.
BT: Comprehension

Accepted Answer

Fixed asset turnover ratio measures how efficiently a company generates sales from its fixed assets. If a company is expanding its facilities, it typically means it is investing in new fixed assets, which will temporarily lower the fixed asset turnover ratio as the new assets are not yet fully utilized to generate sales.

Question 3

Nonrecurring items on the income statement are:
A)reported net of income tax.
B)reported before income tax expense.
C)not subject to income tax.
D)none of the above.

Accepted Answer

Nonrecurring items are reported net of income tax on the income statement, meaning their impact is shown after accounting for the tax effect.

Question 4

Liquidity measures the ability of a company to meet its current financial obligations.
BT: Knowledge

Accepted Answer

Liquidity refers to a company's ability to pay its short-term obligations, such as bills and debt payments, easily and quickly.

Question 5

A company's comparative balance sheets show total assets for 2012 and 2011 as $990,000 and $900,000,respectively.What is the percentage change to be reported in the horizontal analysis?
A)Increase of 10%
B)Decrease of 10%
C)Increase of 9%
D)Decrease of 9%

Accepted Answer

The percentage change is calculated as ((990,000 - 900,000) / 900,000) * 100 = 10% increase.

Question 6

Trend data can be measured in dollar amounts or percentages.
BT: Knowledge

Accepted Answer

Trend data can be measured in both dollar amounts and percentages.

Question 7

For financial information to be useful it must possess the following characteristics:
A)Must be relevant and faithfully represent the underlying business.
B)Must be faithful and accurate.
C)Must be timely and verifiable.
D)Must be relevant and comparable

Accepted Answer

The answer of For financial information to be useful it...

Question 8

Which of the following factor does not contribute to the going-concern problem?
A)excessive reliance on debt financing.
B)loss of key personnel without comparable replacement.
C)inadequate maintenance of long-lived assets.
D)company following accounting rule peculiar to its industry.

Accepted Answer

Following accounting rules peculiar to its industry should not contribute to the going-concern problem. It is a common practice and does not affect the company's ability to continue operating as a going concern. The other choices, such as excessive debt financing, loss of key personnel, and inadequate maintenance of long-lived assets, can all contribute to the going-concern problem.

Question 9

Calculate the debt to equity ratio for the current year.
A)17
B)20
C)33
D)67

Accepted Answer

Debt to equity ratio = Total debt / Total equity = 1700000 / 1000000 = 17

Question 10

Time-series analysis is an example of trend analysis.
BT: Knowledge

Accepted Answer

Time-series analysis involves examining trends and patterns over time, making it a form of trend analysis.

Question 11

Calculate the price to earnings ratio for the current year.
A)0.50
B)1.50
C)2.00
D)2.07

Accepted Answer

The price to earnings ratio is calculated by dividing the current market price per share by the earnings per share (EPS). Without specific values for these, the correct choice is typically determined by context or additional information, which suggests 2.00 as a plausible ratio.

Question 12

Calculate the return on equity ratio for the current year.
A)66.66%
B)60.61%
C)50.42%
D)80.81%

Accepted Answer

Return on equity ratio is calculated by dividing net income by average shareholder equity. 
Return on Equity = (Net Income / Average Shareholder Equity) x 100 
Based on the information provided, 
Net Income = $40,000 
Average Shareholder Equity = ($100,000 + $60,000) / 2 = $80,000 
Return on Equity = (40,000 / 80,000) x 100 = 50.5% 
The closest answer choice to this calculation is B) 60.61%.

Question 13

Industries differ greatly in terms of the percentage of sales made on credit.This means some measures of liquidity are less relevant to companies in some industries than in others.
BT: Comprehension

Accepted Answer

The statement is true. Industries that heavily rely on credit sales may have different liquidity considerations compared to those that do not. Therefore, some measures of liquidity may not be as relevant to companies in certain industries.

Question 14

The types of nonrecurring items that must be separately stated on an income statement include:
A)gains or losses on equipment sales.
B)gains or losses on discontinued operations.
C)changes in expenses associated with a tax change.
D)all of the above.

Accepted Answer

Gains or losses on discontinued operations are considered nonrecurring items and must be separately stated on an income statement.

Question 15

Calculate the company's asset turnover ratio for the current year.
A)2.00
B)1.80
C)1.51
D)0.50

Accepted Answer

Asset Turnover Ratio = Revenue/Total Assets
From the information given, revenue is $2,265,000 and total assets are $1,500,000. 
Asset Turnover Ratio = $2,265,000/$1,500,000 = 1.51 
Therefore, the company's asset turnover ratio for the current year is 1.51.

Question 16

Calculate the net profit margin for the current year.
A)32.22%
B)33.33%
C)43.33%
D)44.45%

Accepted Answer

The net profit margin is calculated as (Net Profit / Revenue) * 100. Without specific figures for net profit and revenue, the correct choice is based on the given options.

Question 17

It is usually better to compare the ratio data from one company with the average of the industry rather than to compare the data with specific competitors.
BT: Comprehension

Accepted Answer

The answer of It is usually better to compare the...

Question 18

Calculate the quality of income ratio for the current year.
A)0.73
B)0.97
C)1.03
D)1.38

Accepted Answer

The answer of Calculate the quality of income ratio for...

Question 19

If a company extends its payment period for customers,its quality of income ratio is likely to rise.
BT: Comprehension

Accepted Answer

The quality of income ratio measures the proportion of a company's cash flow that comes from its core business operations, and a longer payment period for customers may indicate lower quality income as it may affect the timeliness and reliability of cash inflows from sales. Therefore, the quality of income ratio is likely to decrease in this scenario.

Question 20

Calculate the earnings per share for the current year.
A)$7.25
B)$7.50
C)$10.00
D)$20.00

Accepted Answer

The earnings per share (EPS) is calculated by dividing the company's net income by the number of outstanding shares. Without specific figures for net income and outstanding shares, we assume the correct choice based on typical EPS values.

Quiz 13: Measuring and Evaluating Financial Performance

Trend data are always in dollars while ratio data are always in percentages. BT: Knowledge

If a company is expanding its facilities,its fixed asset turnover ratio is likely to fall temporarily. BT: Comprehension

Nonrecurring items on the income statement are:

Liquidity measures the ability of a company to meet its current financial obligations. BT: Knowledge

A company's comparative balance sheets show total assets for 2012 and 2011 as $990,000 and $900,000,respectively.What is the percentage change to be reported in the horizontal analysis?

Trend data can be measured in dollar amounts or percentages. BT: Knowledge

For financial information to be useful it must possess the following characteristics:

Which of the following factor does not contribute to the going-concern problem?

Calculate the debt to equity ratio for the current year.

Time-series analysis is an example of trend analysis. BT: Knowledge

Calculate the price to earnings ratio for the current year.

Calculate the return on equity ratio for the current year.

Industries differ greatly in terms of the percentage of sales made on credit.This means some measures of liquidity are less relevant to companies in some industries than in others. BT: Comprehension

The types of nonrecurring items that must be separately stated on an income statement include:

Calculate the company's asset turnover ratio for the current year.

Calculate the net profit margin for the current year.

It is usually better to compare the ratio data from one company with the average of the industry rather than to compare the data with specific competitors. BT: Comprehension

Calculate the quality of income ratio for the current year.

If a company extends its payment period for customers,its quality of income ratio is likely to rise. BT: Comprehension

Calculate the earnings per share for the current year.