ACC 206 Week 10 Quiz – Strayer



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Quiz 8 Chapter18


FINANCIALSTATEMENTANALYSIS


CHAPTERSTUDYOBJECTIVES


1.Discusstheneedforcomparativeanalysis.

2.Identifythetoolsoffinancialstatementanalysis.

3.Explainandapplyhorizontal(trend)analysis.

4.Describeandapplyverticalanalysis.

5.Identifyandcomputeratiosusedinanalyzingafirm'sliquidity,profitability,andsolvency.

6.Understandtheconceptofearningpower,andindicatehowirregularitemsarepresented.

7.Understandtheconceptofqualityofearnings.


TRUE-FALSESTATEMENTS

1.     Intracompanycomparisonsofthesamefinancialstatementitemscanoftendetect changes infinancialrelationships andsignificanttrends.

2.     Calculatingfinancialratiosisafinancialreportingrequirementundergenerallyaccepted accountingprinciples.

3.     Measuresofacompany'sliquidityareconcernedwiththefrequencyandamountsof dividend payments.

4.     Analysisof financialstatementsis enhancedwith theuseof comparativedata.

5.     Comparisonsofcompanydatawithindustryaveragescanprovidesomeinsightintothe company's relativepositionintheindustry.

6.     Verticalandhorizontalanalysesareconcernedwiththeformatusedtopreparefinancial statements.

7.     Horizontal,vertical,andcircularanalysesarethemostcommontoolsoffinancial statementanalysis.

8.     Horizontalanalysisisatechniqueforevaluatingafinancialstatementiteminthecurrent yearwith otheritemsinthecurrentyear.

9.     Anothernamefortrendanalysisishorizontalanalysis.

10.     Ifacompanyhassalesof$110in2008and$154in2009,thepercentageincreasein sales from2008to2009is140%.

11.     Inhorizontalanalysis,ifanitemhasanegativeamountinthebaseyear,andapositive amount inthefollowingyear,nopercentagechangeforthatitemcanbecomputed.

12.     Commonsizeanalysisexpresseseachitemwithinafinancialstatementintermsofa percent of a baseamount.

13.     Verticalanalysisisa moresophisticatedanalyticaltoolthanhorizontal analysis.

14.     Verticalanalysisisusefulinmakingcomparisonsofcompaniesofdifferentsizes.

15.     Meaningfulanalysisoffinancialstatementswillincludeeitherhorizontalorvertical analysis,butnotboth.

16.     Usingvertical analysisoftheincomestatement,acompany'snetincome asapercentage ofnetsalesis10%;therefore,thecostofgoodssoldasapercentageofsalesmustbe 90%.

17.     Intheverticalanalysisoftheincomestatement,eachitemisgenerallystatedasa percentage of net income.

18.     A ratiocanbeexpressedasapercentage,arate,oraproportion.

19.     Asolvencyratiomeasurestheincomeoroperatingsuccessofanenterpriseforagiven period of time.

20.     Thecurrentratiois ameasure of alltheratioscalculatedforthe currentyear.

21.     Inventoryturnovermeasuresthenumberoftimesontheaveragetheinventorywassold during theperiod.

22.     Profitabilityratiosarefrequentlyusedasabasisforevaluatingmanagement'soperating effectiveness.

23.     Therateofreturnontotalassetswillbegreaterthantherateofreturnoncommon stockholders' equity ifthe companyhas beensuccessful intrading ontheequityat again.

24.     Fromacreditor's pointofview,thehigherthetotaldebttototalassetsratio,thelowerthe risk that thecompanymaybeunableto payits obligations.

25.     Acurrentratioof1.2to1indicatesthatacompany'scurrentassetsexceeditscurrent liabilities.

26.     Usingborrowedmoneytoincreasetherateofreturnoncommonstockholders'equityis called "tradingontheequity."

27.     Whenthedisposalofasignificantsegmentoccurs,theincomestatementshouldreport both incomefromcontinuingoperationsandincome(loss)fromdiscontinuedoperations.

28.     Aneventortransactionshouldbeclassifiedasanextraordinaryitemifitisunusualin nature orifit occurs infrequently.

29.     Variationsamongcompaniesintheapplicationofgenerallyacceptedaccounting principles mayreducequalityofearnings.

30.     Proformaincomeusuallyexcludesitemsthatthecompanythinksareunusualor nonrecurring.



Additional True-FalseQuestions

31.     Thethreebasictoolsofanalysisarehorizontalanalysis,verticalanalysis,andratio analysis.

32.     A percentagechangecan becomputedonlyif thebaseamountiszeroorpositive.

33.     Inverticalanalysis, the baseamountinanincomestatementisusuallynetsales.

34.     Profitabilityratiosmeasuretheabilityoftheenterprisetosurviveoveralongperiodof time.

35.     Thedaysin inventoryiscomputedbymultiplyinginventoryturnoverby365.

36.     Extraordinaryitemsarereportednetofapplicabletaxesinaseparatesectionofthe income statement.



MULTIPLECHOICEQUESTIONS


37.     Whichoneof thefollowingisprimarilyinterestedintheliquidityof acompany? a.Federalgovernment
b.Stockholders
c.Long-termcreditors d.Short-termcreditors

38.     Whichoneof thefollowing isnot a characteristic generallyevaluatedin analyzingfinancial statements?
a.Liquidity
b.Profitabilityc.Marketability d.Solvency

39.     Inanalyzingthefinancialstatementsofacompany,asingleitemonthefinancial statements
a.shouldbereported inbold-facetype.
b.ismoremeaningfulif comparedtootherfinancialinformation. c.is significantonlyifit is large.
d.shouldbeaccompaniedbyafootnote.

40.     Short-termcreditorsareusuallymostinterestedinevaluating a.solvency.
b.liquidity.
c.marketability. d.profitability.

41.     Long-termcreditorsareusuallymostinterestedinevaluating a.liquidityandsolvency.
b.solvencyandmarketability. c.liquidityandprofitability.
d.profitabilityandsolvency.

42.     Stockholdersaremostinterestedinevaluating a.liquidityandsolvency.
b.profitabilityandsolvency. c.liquidityandprofitability.
d.marketabilityandsolvency.
FinancialStatementAnalysis      18-7


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