Question 1

TPX Company's 2013 profit margin is:

Accepted Answer

A)  18.8%.
B)  9.0%.
C)  19.4%.
D)  15.1%.E) None of the above
F) B) and C)

Question 2

Which of the following ratios is most useful in evaluating liquidity?

Accepted Answer

A)  Return on assets.
B)  Return on equity.
C)  Debt to equity ratio.
D)  Current ratio.E) B) and C)
F) B) and D)

Question 3

Growth stocks have high expectations of future earnings growth,and therefore,usually trade at higher PE ratios.

Accepted Answer

A) True 
 B)False

Question 4

Define earnings persistence.How does earnings persistence relate to the reporting of discontinued operations and extraordinary items?

Accepted Answer

Earnings persistence is the ability of c...

Question 5

Explain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

Accepted Answer

We measure income statement accounts ove...

Question 6

An extremely high inventory turnover ratio may be a signal that the company is losing sales due to inventory shortages.

Accepted Answer

A) True 
 B)False

Question 7

Asset turnover measures sales volume in relation to the investment in assets,and is calculated as net sales divided by average total assets.

Accepted Answer

A) True 
 B)False

Question 8

The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

Accepted Answer

A)  Higher profitability.
B)  Higher dividends.
C)  Higher liabilities.
D)  Fewer total assets.E) A) and B)
F) B) and C)

Question 9

The sale or disposal of a significant component of a company's operations is referred to as:

Accepted Answer

A)  A discontinued operation.
B)  An extraordinary item.
C)  Other revenues and expenses.
D)  Gain or loss on sale of assets.E) B) and D)
F) None of the above

Question 10

Ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

Accepted Answer

A) True 
 B)False

Question 11

Comparing changes in net income for one company over time is an example of:

Accepted Answer

A)  Vertical analysis.
B)  Horizontal analysis.
C)  Diagonal analysis.
D)  Both vertical and horizontal analysis.E) All of the above
F) A) and D)

Question 12

TPX Company's 2013 gross profit ratio is:

Accepted Answer

A)  57.5%.
B)  36.5%.
C)  63.5%.
D)  60.0%.E) A) and D)
F) C) and D)

Question 13

Return on assets equals:

Accepted Answer

A)  Gross profit ratio x Inventory turnover.
B)  Profit margin x Inventory turnover.
C)  Gross profit ratio x Asset turnover.
D)  Profit margin x Asset turnover.E) C) and D)
F) A) and B)

Question 14

Which of the following is a sign that a company can quickly turn its receivables into cash?

Accepted Answer

A)  A low receivables turnover ratio.
B)  A high receivables turnover ratio.
C)  A high average collection period.
D)  Both a low receivables turnover ratio and a high average collection period.E) B) and D)
F) A) and C)

Question 15

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Accepted Answer

A) True 
 B)False

Question 16

Return on assets is calculated as net income divided by ending total assets.

Accepted Answer

A) True 
 B)False

Exam 12: Financial Statement Analysis

Return on assets is calculated as net income divided by ending total assets.

Correct Answer
verified

TPX Company's 2013 profit margin is:

Correct Answer
verified

Explain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

Correct Answer
verified
We measure income statement accounts ove...
View Answer

Which of the following ratios is most useful in evaluating liquidity?

Correct Answer
verified

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Correct Answer
verified

Which of the following is a sign that a company can quickly turn its receivables into cash?

Correct Answer
verified

TPX Company's 2013 gross profit ratio is:

Correct Answer
verified

The sale or disposal of a significant component of a company's operations is referred to as:

Correct Answer
verified

Asset turnover measures sales volume in relation to the investment in assets,and is calculated as net sales divided by average total assets.

Correct Answer
verified

Define earnings persistence.How does earnings persistence relate to the reporting of discontinued operations and extraordinary items?

Correct Answer
verified
Earnings persistence is the ability of c...
View Answer

Comparing changes in net income for one company over time is an example of:

Correct Answer
verified

Ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

Correct Answer
verified

Return on assets equals:

Correct Answer
verified

Growth stocks have high expectations of future earnings growth,and therefore,usually trade at higher PE ratios.

Correct Answer
verified

An extremely high inventory turnover ratio may be a signal that the company is losing sales due to inventory shortages.

Correct Answer
verified

The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

Correct Answer
verified

Exam 12: Financial Statement Analysis

Return on assets is calculated as net income divided by ending total assets.

Correct AnswerverifiedShow Answer

TPX Company's 2013 profit margin is:

Correct AnswerverifiedShow Answer

Explain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

Correct AnswerverifiedWe measure income statement accounts ove...View AnswerShow Answer

Which of the following ratios is most useful in evaluating liquidity?

Correct AnswerverifiedShow Answer

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Correct AnswerverifiedShow Answer

Which of the following is a sign that a company can quickly turn its receivables into cash?

Correct AnswerverifiedShow Answer

TPX Company's 2013 gross profit ratio is:

Correct AnswerverifiedShow Answer

The sale or disposal of a significant component of a company's operations is referred to as:

Correct AnswerverifiedShow Answer

Asset turnover measures sales volume in relation to the investment in assets,and is calculated as net sales divided by average total assets.

Correct AnswerverifiedShow Answer

Define earnings persistence.How does earnings persistence relate to the reporting of discontinued operations and extraordinary items?

Correct AnswerverifiedEarnings persistence is the ability of c...View AnswerShow Answer

Comparing changes in net income for one company over time is an example of:

Correct AnswerverifiedShow Answer

Ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

Correct AnswerverifiedShow Answer

Return on assets equals:

Correct AnswerverifiedShow Answer

Growth stocks have high expectations of future earnings growth,and therefore,usually trade at higher PE ratios.

Correct AnswerverifiedShow Answer

An extremely high inventory turnover ratio may be a signal that the company is losing sales due to inventory shortages.

Correct AnswerverifiedShow Answer

The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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We measure income statement accounts ove...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Earnings persistence is the ability of c...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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