Question 1

Which of the following ratios is not considered to be a test of profitability?

Accepted Answer

A)  Current ratio.
B)  Net profit margin.
C)  Return on assets.
D)  Earnings per share.E) A) and D)
F) All of the above

Question 2

The debt-to-equity ratio measures which of the following?

Accepted Answer

A)  Liquidity.
B)  Solvency.
C)  Profitability.
D)  Market strength.E) A) and B)
F) A) and C)

Question 3

Which of the following statements is incorrect?

Accepted Answer

A)  If selling and administrative expenses as a percentage of sales increases,then gross profit percentage will decrease.
B)  If the cost of goods sold percentage decreases and other expenses do not change,then net profit margin will increase as a percentage of sales.
C)  If sales dollars decrease,a company might still report a higher gross profit percentage if cost of goods sold decreases at a faster rate than the decrease in sales.
D)  It is possible that when selling and administrative expense in dollars decrease,selling and administrative expenses as a percentage of sales will increase.E) All of the above
F) A) and B)

Question 4

A higher current ratio is preferable for companies that do not have predictable cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Liquidity ratios concentrate on:

Accepted Answer

A)  The operating cycle.
B)  Profitability.
C)  Short-term financial strength.
D)  Ability to pay interest on loans.E) B) and C)
F) A) and C)

Question 6

Which of the following transactions does not affect earnings per share?

Accepted Answer

A)  A 2-for-1 common stock split.
B)  A 10% common stock dividend distribution.
C)  Accruing revenue at year-end.
D)  Issuing additional shares of preferred stock.E) B) and C)
F) C) and D)

Question 7

Which of the accounting ratios considers the importance of cash flows relating to required interest payments?

Accepted Answer

A)  Times interest earned.
B)  Debt-to-equity.
C)  Cash coverage.
D)  Quick.E) A) and D)
F) B) and D)

Question 8

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Accepted Answer

A)  Mogul's current ratio decreased.
B)  Mogul's return on equity ratio decreased.
C)  Mogul's debt-to-equity ratio remained the same.
D)  Mogul's return on assets decreased.E) A) and B)
F) A) and C)

Question 9

Time-series analysis is a comparison of information for a specific company over a period of time to determine changes in operations.

Accepted Answer

A) True 
 B)False

Question 10

Component percentages are used to express items on financial statements as a percentage of a single base amount.

Accepted Answer

A) True 
 B)False

Question 11

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

Accepted Answer

A) True 
 B)False

Question 12

The records of Washington Company showed the following:
  *10,000 shares outstanding at 1/1 and at 12/31;current market price,$30
**Including income tax;income tax rate is 30%
Calculate each of the following ratios:
A.Return on assets
B.Return on equity
C.Net profit margin
D.Earnings per share

Accepted Answer

A.Return on assets = $17,000 ÷...

Question 13

Complete the following income statement for the dollar amounts and the component percentages:

Accepted Answer

The answer of Complete the following income statement for the...

Question 14

At the end of 2019,Doran Corporation reported net income of $70,000,gross sales revenue of $1,525,000,and sales returns of $125,000.
Calculate the net profit margin ratio.

Accepted Answer

Net profit margin = ...

Question 15

The following financial data are available for Murphy Company:
  Calculate each of the following ratios.Round your answers to two decimal places.
A.Return on equity
B.Price/earnings ratio
C.Dividend yield

Accepted Answer

A.Return on equity = 19.93% = ...

Question 16

The price/earnings ratio is affected by the amount of risk that investors are willing to take.

Accepted Answer

A) True 
 B)False

Question 17

Trenton Company has provided the following information: • Net income,$240,000
• Preferred shares issued,6,000
• Weighted average number of shares of common stock issued,24,000
• Cash dividends declared and paid on common stock,$30,000
• Market price per share,$36
• Weighted average number of treasury shares of common stock,4,000
-
What is Trenton's price/earnings ratio?

Accepted Answer

A)  3.0
B)  5.1
C)  3.4
D)  4.5E) A) and B)
F) None of the above

Question 18

Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?

Accepted Answer

A)  Mylan's current ratio remained the same.
B)  Mylan's return on equity ratio remained the same.
C)  Mylan's debt-to-equity ratio remained the same.
D)  Mylan's earnings per share remained the same.E) A) and C)
F) A) and B)

Question 19

Which of the following transactions increase both the quick ratio and the current ratio assuming that both ratios are greater than 1?

Accepted Answer

A)  Collecting an account receivable.
B)  Purchasing inventory on account.
C)  Accruing revenue earned at year-end.
D)  Selling inventory on account at the cost of the inventory.E) B) and C)
F) None of the above

Question 20

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount.What was the current ratio?

Accepted Answer

A)  1.00
B)  1.25
C)  3.00
D)  5.00E) A) and B)
F) A) and C)

Exam 13: Analyzing Financial Statements

Correct Answer
verified

Complete the following income statement for the dollar amounts and the component percentages:

Correct Answer
verified

Which of the following ratios is not considered to be a test of profitability?

Correct Answer
verified

At the end of 2019,Doran Corporation reported net income of $70,000,gross sales revenue of $1,525,000,and sales returns of $125,000. Calculate the net profit margin ratio.

Correct Answer
verified
Net profit margin = ...
View Answer

Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?

Correct Answer
verified

The following financial data are available for Murphy Company: Calculate each of the following ratios.Round your answers to two decimal places. A.Return on equity B.Price/earnings ratio C.Dividend yield

Correct Answer
verified
A.Return on equity = 19.93% = ...
View Answer

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

Correct Answer
verified

Which of the following transactions does not affect earnings per share?

Correct Answer
verified

Component percentages are used to express items on financial statements as a percentage of a single base amount.

Correct Answer
verified

Liquidity ratios concentrate on:

Correct Answer
verified

A higher current ratio is preferable for companies that do not have predictable cash flows.

Correct Answer
verified

Which of the following transactions increase both the quick ratio and the current ratio assuming that both ratios are greater than 1?

Correct Answer
verified

The price/earnings ratio is affected by the amount of risk that investors are willing to take.

Correct Answer
verified

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Correct Answer
verified

The debt-to-equity ratio measures which of the following?

Correct Answer
verified

Which of the accounting ratios considers the importance of cash flows relating to required interest payments?

Correct Answer
verified

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount.What was the current ratio?

Correct Answer
verified

Time-series analysis is a comparison of information for a specific company over a period of time to determine changes in operations.

Correct Answer
verified

The records of Washington Company showed the following: *10,000 shares outstanding at 1/1 and at 12/31;current market price,$30 **Including income tax;income tax rate is 30% Calculate each of the following ratios: A.Return on assets B.Return on equity C.Net profit margin D.Earnings per share

Correct Answer
verified
A.Return on assets = $17,000 ÷...
View Answer

Which of the following statements is incorrect?

Correct Answer
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Exam 13: Analyzing Financial Statements

Correct AnswerverifiedShow Answer

Complete the following income statement for the dollar amounts and the component percentages:

Correct AnswerverifiedShow Answer

Which of the following ratios is not considered to be a test of profitability?

Correct AnswerverifiedShow Answer

At the end of 2019,Doran Corporation reported net income of $70,000,gross sales revenue of $1,525,000,and sales returns of $125,000. Calculate the net profit margin ratio.

Correct AnswerverifiedNet profit margin = ...View AnswerShow Answer

Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?

Correct AnswerverifiedShow Answer

The following financial data are available for Murphy Company: Calculate each of the following ratios.Round your answers to two decimal places. A.Return on equity B.Price/earnings ratio C.Dividend yield

Correct AnswerverifiedA.Return on equity = 19.93% = ...View AnswerShow Answer

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

Correct AnswerverifiedShow Answer

Which of the following transactions does not affect earnings per share?

Correct AnswerverifiedShow Answer

Component percentages are used to express items on financial statements as a percentage of a single base amount.

Correct AnswerverifiedShow Answer

Liquidity ratios concentrate on:

Correct AnswerverifiedShow Answer

A higher current ratio is preferable for companies that do not have predictable cash flows.

Correct AnswerverifiedShow Answer

Which of the following transactions increase both the quick ratio and the current ratio assuming that both ratios are greater than 1?

Correct AnswerverifiedShow Answer

The price/earnings ratio is affected by the amount of risk that investors are willing to take.

Correct AnswerverifiedShow Answer

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Correct AnswerverifiedShow Answer

The debt-to-equity ratio measures which of the following?

Correct AnswerverifiedShow Answer

Which of the accounting ratios considers the importance of cash flows relating to required interest payments?

Correct AnswerverifiedShow Answer

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount.What was the current ratio?

Correct AnswerverifiedShow Answer

Time-series analysis is a comparison of information for a specific company over a period of time to determine changes in operations.

Correct AnswerverifiedShow Answer

The records of Washington Company showed the following: *10,000 shares outstanding at 1/1 and at 12/31;current market price,$30 **Including income tax;income tax rate is 30% Calculate each of the following ratios: A.Return on assets B.Return on equity C.Net profit margin D.Earnings per share

Correct AnswerverifiedA.Return on assets = $17,000 ÷...View AnswerShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

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Net profit margin = ...
View Answer

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A.Return on equity = 19.93% = ...
View Answer

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A.Return on assets = $17,000 ÷...
View Answer

Correct Answer
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