Question 1

The Stockholders' Equity section of the balance sheet for Brompton Construction Company at the end of 2014 is as follows:

Accepted Answer

The answer of The Stockholders' Equity section of the balance...

Question 2

The following information is available from the balance sheets at the end of 2012 and 2011 for Kitchen Equipment Company.

Accepted Answer

The answer of The following information is available from the...

Question 3

What is the minimum number of years for which publicly traded companies must include the following statements in their annual report filed with the SEC? Balance Sheet Income Statements and Statements of Cash Flows
A)3 Years 3 Years
B)2 Years 2 Years
C)2 Years 3 Years
D)3 Years 2 Years

Accepted Answer

Publicly traded companies must include balance sheets for the last two years and income statements and statements of cash flows for the last three years in their annual report filed with the SEC.

Question 4

Which of the following statements is true regarding horizontal analysis?
A)Horizontal analysis can only be used with balance sheet accounts.
B)Horizontal analysis can only be used with income statement accounts.
C)Horizontal analysis can only be used with retained earnings accounts.
D)Time series analysis is an advanced statistical technique for horizontal analysis.

Accepted Answer

Horizontal analysis, also known as trend analysis, is applicable to both balance sheet and income statement accounts, making statements A, B, and C incorrect. It involves comparing financial data over multiple periods to identify trends and growth patterns. Time series analysis is indeed a more advanced statistical technique that can be used within the context of horizontal analysis to analyze data points collected or recorded at specific intervals over a period of time.

Question 5

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply:
 Refer to the data for Sunshine Farm Supply.
Which of the following would result from a horizontal analysis of its income statement?
A)Cost of goods sold is 42.1% of net sales for 2012.
B)Gross profit is 42.1% of net sales for 2012.
C)Cost of goods sold decreased $50,000 or 23.8% during 2012.
D)Accounts receivable total 13.3% of total assets for 2012.

Accepted Answer

Horizontal analysis compares financial statement line items over multiple periods to identify changes in their relative sizes. A decrease of $50,000 or 23.8% in cost of goods sold during 2012 would be the result of a horizontal analysis of the income statement. Option A and B provide information about the relationship between cost of goods sold and net sales, but do not provide a comparison with a prior period. Option D is unrelated to the income statement and pertains to the balance sheet.

Question 6

To review the current market price of the stock,one should review the
A)balance sheet.
B)income statement.
C)statement of cash flows.
D)none of these;it is not on the financial statements.

Accepted Answer

The current market price of a stock is not found on the financial statements. It is determined by market demand and supply factors, including investor sentiment and economic conditions. One can check the stock price on a financial news website or through a brokerage account.

Question 7

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply:
 Refer to the data for Sunshine Farm Supply.
Which of the following would not result from a vertical analysis of its balance sheet?
A)Accounts receivable increased $22,000 or 36.7% during 2012.
B)Accounts receivable is five times larger than Merchandise inventory in 2012.
C)Accounts receivable is 13.3% of total assets for 2012.
D)Merchandise inventory is 2.7% of total assets for 2012.

Accepted Answer

The answer of Sunshine Farm Supply Following are selected data...

Question 8

St.Petersburg Corporation
Use the information obtained from the comparative financial statements included in the St.Petersburg Corporation's 2012 annual report that is presented below to answer the questions that follow.All amounts are in thousands of dollars.

Accepted Answer

The answer of St.Petersburg Corporation
Use the information obtained from the...

Question 9

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company?
A)Will earnings per share be distributed to stockholders?
B)Will the company earn a fair return on the amount invested by the stockholders?
C)Will the key ratios be reported on the balance sheet?
D)Will cash flows from operations exceed the amount of net income for the period?

Accepted Answer

The most important consideration for a stockholder when evaluating whether to purchase stock in a company is whether the company will earn a fair return on the amount invested by the stockholders. This is because the ultimate goal of owning stock is to receive a return on investment. While the other considerations listed may also be important, they do not necessarily guarantee a fair return on investment.

Question 10

The dollar change and percentage change in the accounts receivable account from 2013 to 2014 is calculated for Allison Corporation.This is an example of
A)horizontal analysis
B)vertical analysis
C)profitability analysis
D)solvency assessment

Accepted Answer

Horizontal analysis compares financial data from different time periods to identify trends or changes. In this case, the dollar change and percentage change in the accounts receivable account from 2013 to 2014 is being analyzed to identify any changes in the company's financial position over time, which is a component of horizontal analysis. Vertical analysis, on the other hand, typically compares different items on a company's financial statements within the same time period to identify the proportional representation of each item within the overall financial picture. Profitability analysis and solvency assessment are both separate types of financial analysis that do not apply directly to the comparison of accounts receivable from 2013 to 2014.

Question 11

A financial analyst is comparing two companies.Which of the following would cause major problems in the evaluation process?
A)One company has a fiscal year that ends on October 31,while the other company has a fiscal year that ends on August 31.
B)One company reported nonoperating activities,while the other company did not.
C)The companies operate in different industries.
D)Inflation has been low for the past several years.

Accepted Answer

Comparing companies from different industries can cause major problems in the evaluation process because industries have different growth prospects, risks, and financial characteristics. This makes it difficult to make direct comparisons between the financial health and performance of the companies.

Question 12

A banker is analyzing a company which operates in the petroleum industry.Which of the following might be a major consideration in determining whether the company should receive a loan?
A)The petroleum industry suffers from political pressures concerning the selling price of its products.
B)Inflation has been high for several years in a row.
C)All companies in the petroleum industry use the same accounting principles.
D)The company has a large amount of interest payments related to many outstanding loans.

Accepted Answer

The answer of A banker is analyzing a company which...

Question 13

The Stockholders' Equity section of the balance sheet for Calhoun Industries at the end of 2014 is as follows:

Accepted Answer

The answer of The Stockholders' Equity section of the balance...

Question 14

Trend analysis is analysis
A)of dollar changes and percentage changes over several years.
B)in which all items are presented as a percentage of one selected item on a financial statement.
C)in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements.
D)of all ratios that increased or decreased over past accounting periods.

Accepted Answer

Trend analysis involves tracking changes in figures over multiple years or periods, specifically in terms of dollar values and percentage changes. Option B describes common-size analysis, option C describes ratio analysis, and option D is too broad and not specific to trend analysis.

Question 15

Which of the following is least useful in evaluating a company's financial statements?
A)Comparison with government economic data for the economy as a whole
B)Comparison with other companies in the same industry
C)Comparison of the company's current period data with accounting data from 5 years ago
D)Comparison of the company's current period data with that of the last year

Accepted Answer

The answer of Which of the following is least useful...

Question 16

Which of the following is the most serious limitation to financial statement analysis of publicly traded companies?
A)Some companies don't use GAAP.
B)Inflation can distort comparisons between years.
C)Some companies report nonoperating items such as extraordinary gains and losses,while others do not.
D)Different industries use different account names.

Accepted Answer

Inflation can significantly impact the comparability of financial statements over time and make it difficult to understand the true financial performance of a company. This limitation is considered to be the most serious as it affects all industries and companies, regardless of their accounting policies or management practices. Other limitations such as non-operating items or industry-specific accounting differences can be overcome with adjustments and adjustments, but inflation is a pervasive challenge.

Question 17

Horizontal analysis is analysis
A)of dollar changes and percentage changes over two or more years.
B)in which all items are presented as a percentage of one selected item on a financial statement.
C)in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements
D)of all ratios that increased or decreased over past accounting periods.

Accepted Answer

Horizontal analysis compares dollar changes and percentage changes over two or more years on a financial statement. It is also known as trend analysis. Option B is referring to vertical analysis, Option C is referring to ratio analysis, and Option D is not a correct definition of any type of analysis.

Question 18

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply:
 Refer to the data for Sunshine Farm Supply.
Which of the following would result from a horizontal analysis of its balance sheet?
A)Accounts receivable increased $22,000 or 57.9% during 2012.
B)Accounts receivable is five times larger than Merchandise inventory in 2012.
C)Accounts receivable is 13.3% of total assets for 2012.
D)Merchandise inventory is 2.7% of total assets for 2012.

Accepted Answer

A horizontal analysis compares financial statement data for two or more years to identify changes over time. Therefore, the only option that provides information on the change in a specific account over time is option A, which states that accounts receivable increased by $22,000 or 57.9% during 2012. Options B, C, and D provide static information on the balance sheet accounts but do not provide any information on changes over time.

Question 19

Which of the following statements is true regarding valuation amounts on the balance sheet?
A)Stockholders' equity reflects the amount the stockholders would receive upon liquidation.
B)Assets are recorded at current cost.
C)Stockholders' equity reflects the current market value of the stock
D)There are a variety of assumptions used in determining amounts reported on the balance sheet.

Accepted Answer

Valuation amounts on the balance sheet are determined through a variety of assumptions which can lead to different amounts being reported, making option D the correct option. Option A is not always true as stockholders' equity reflects the residual value of assets, which is not always the amount the stockholders would receive upon liquidation. Option B is not always true as assets can be recorded at historical cost, fair market value, or other methods. Option C is not always true as stockholders' equity reflects the shareholders' ownership of the company, not just the current market value of the stock.

Question 20

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply:
 Refer to the data for Sunshine Farm Supply.
Which of the following would result from a vertical analysis of its income statement?
A)Accounts receivable increased $22,000 or 57.9% during 2012.
B)Gross profit is 57.9% of net sales for 2012.
C)Cost of goods sold increased $50,000 or 23.8% during 2012.
D)Net sales increased $110,000 or 28.9% during 2012.

Accepted Answer

Vertical analysis expresses each item on the income statement as a percentage of net sales. Therefore, the only option that relates to the calculation of percentages is option B, which states that gross profit is 57.9% of net sales for 2012. The other options relate to dollar amounts or percentage changes in dollar amounts, which are not relevant to a vertical analysis of the income statement.

Quiz 13: Financial Statement Analysis

The Stockholders' Equity section of the balance sheet for Brompton Construction Company at the end of 2014 is as follows:

The following information is available from the balance sheets at the end of 2012 and 2011 for Kitchen Equipment Company.

What is the minimum number of years for which publicly traded companies must include the following statements in their annual report filed with the SEC? Balance Sheet Income Statements and Statements of Cash Flows

Which of the following statements is true regarding horizontal analysis?

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply: Refer to the data for Sunshine Farm Supply. Which of the following would result from a horizontal analysis of its income statement?

To review the current market price of the stock,one should review the

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply: Refer to the data for Sunshine Farm Supply. Which of the following would not result from a vertical analysis of its balance sheet?

St.Petersburg Corporation Use the information obtained from the comparative financial statements included in the St.Petersburg Corporation's 2012 annual report that is presented below to answer the questions that follow.All amounts are in thousands of dollars.

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company?

The dollar change and percentage change in the accounts receivable account from 2013 to 2014 is calculated for Allison Corporation.This is an example of

A financial analyst is comparing two companies.Which of the following would cause major problems in the evaluation process?

A banker is analyzing a company which operates in the petroleum industry.Which of the following might be a major consideration in determining whether the company should receive a loan?

The Stockholders' Equity section of the balance sheet for Calhoun Industries at the end of 2014 is as follows:

Trend analysis is analysis

Which of the following is least useful in evaluating a company's financial statements?

Which of the following is the most serious limitation to financial statement analysis of publicly traded companies?

Horizontal analysis is analysis

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply: Refer to the data for Sunshine Farm Supply. Which of the following would result from a horizontal analysis of its balance sheet?

Which of the following statements is true regarding valuation amounts on the balance sheet?

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply: Refer to the data for Sunshine Farm Supply. Which of the following would result from a vertical analysis of its income statement?