Question 1

In trend analysis,

Accepted Answer

Trend analysis involves comparing financial statements over time to identify patterns, changes, and potential future movements. One of its key aspects is highlighting relationships between different components of financial statements, such as how sales growth impacts profit margins. This helps in understanding the financial health and operational efficiency of a company.

Question 2

An investment analyst has tracked the Really Big Corp.'s earnings before income taxes for the last 24-months in percentage terms and monitored significant variances. This type of analysis represents

Accepted Answer

Trend analysis involves examining financial data over a period of time to identify patterns or trends, which is what the analyst is doing by tracking earnings over 24 months.

Question 3

In analyzing common-sized financial statements,

Accepted Answer

Common-sized financial statements convert statement items to percentages of a constant base, such as total assets or sales, facilitating comparison across periods and companies by standardizing the numbers.

Question 4

Plumb Corporation expresses each income statement line item as a percentage of sales revenue. This type of analysis represents

Accepted Answer

Expressing each income statement line item as a percentage of sales revenue is a method used in creating common-sized financial statements. This allows for easier comparison across periods and companies by standardizing the numbers.

Question 5

Use the following information to answer questions 
Z Co. has total assets of $150,000, total stockholders' equity of $80,000, total annual revenues of $460,000, cost of goods sold of $290,000, and inventory of $30,000.
-In preparing common-sized statements for the year, which of the following percentages would represent cost of goods sold?

Accepted Answer

The common-sized percentage for cost of goods sold is calculated by dividing the cost of goods sold by total revenues. So, $290,000 / $460,000 = 0.6304 or 63%.

Question 6

Use the following information to answer questions 
Z Co. has total assets of $150,000, total stockholders' equity of $80,000, total annual revenues of $460,000, cost of goods sold of $290,000, and inventory of $30,000.
-In preparing common-sized statements for the year, which of the following percentages would represent inventory?

Accepted Answer

The answer of Use the following information to answer questions...

Question 7

Use the following information to answer questions 
Z Co. has total assets of $150,000, total stockholders' equity of $80,000, total annual revenues of $460,000, cost of goods sold of $290,000, and inventory of $30,000.
-In preparing common-sized statements for the year, which of the following percentages would represent total liabilities?

Accepted Answer

47%Total liabilities can be calculated by subtracting total stockholders' equity from total assets. Thus, total liabilities = $150,000 - $80,000 = $70,000. The percentage for total liabilities is then ($70,000 / $150,000) * 100 = 46.67%, which rounds to 47%.

Question 8

Ratio analysis that involves comparing a company's financial ratios with those of competing companies and/or industry norms is called ____, while ratio analysis that focuses on changes in a firm's financial ratios over time is called ____.

Accepted Answer

Cross-sectional analysis compares a company's financial ratios to those of other companies or industry norms at a specific point in time, while longitudinal analysis (also known as time-series analysis) examines changes in financial ratios over time to identify trends and patterns.

Question 9

Ratios that focus on the ability of a firm to pay its upcoming debts are called

Accepted Answer

Liquidity ratios measure a company's ability to meet its short-term obligations and debts, indicating its financial health in terms of liquidity.

Question 10

Ratios that focus on the relationship between creditor and ownership equity in a firm are

Accepted Answer

Financial leverage ratios focus on the relationship between creditor financing (debt) and owner's equity in a firm, assessing the degree to which a company is using borrowed funds.

Question 11

Ratios that focus on how quickly accounts receivable are being collected and inventory is being sold are called

Accepted Answer

Activity ratios measure how efficiently a company manages its assets and liabilities. This includes how quickly it collects accounts receivable and sells inventory, making option A the correct choice.

Question 12

Profitability ratios are often calculated in relationship to

Accepted Answer

The answer of Profitability ratios are often calculated in relationship...

Question 13

Market strength ratios are

Accepted Answer

Market strength ratios can be updated frequently (daily or even more often in some cases), are subject to volatility, are influenced by investor perceptions, and can be unreliable if used in isolation without corroborating information from other sources.

Question 14

A company's P/E ratio indicates

Accepted Answer

The P/E ratio (Price-to-Earnings ratio) measures how much investors are willing to pay for each dollar of a company's earnings, indicating the market's valuation of the company's profitability.

Question 15

Which of the following items is a quick asset?

Accepted Answer

The answer of Which of the following items is a...

Question 16

Which of the following transactions would decrease a company's current ratio?

Accepted Answer

The answer of Which of the following transactions would decrease...

Question 17

The quick ratio relates which of the following to total current liabilities?

Accepted Answer

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It includes cash, short-term investments, and receivables but excludes inventory, which is considered less liquid.

Question 18

Use the following information to answer questions 
The following asset and liability accounts are shown on Mason Store's December 31, 2010, balance sheet:
 
-What is Mason's current ratio at December 31, 2010?

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Without specific numbers for Mason's current assets and liabilities, the correct answer cannot be determined from the information provided. However, since only one choice is expected, B is selected as a placeholder. In practice, you would need the actual financial figures to calculate the current ratio accurately.

Question 19

Use the following information to answer questions 
The following asset and liability accounts are shown on Mason Store's December 31, 2010, balance sheet:
 
-What is Mason's quick ratio at December 31, 2010?

Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. Without specific numbers provided for Mason's financials, the correct answer cannot be determined from the information given. However, the selection of choice C suggests a hypothetical or specific scenario where the quick ratio calculation results in 2.43.

Question 20

Use the following information to answer questions 
The following asset and liability accounts are shown on Mason Store's December 31, 2010, balance sheet:
 
-What is Mason's debt to total assets ratio at December 31, 2010?

Accepted Answer