FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Financial Statement Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is a conservative accounting practice?

A) The use of a longer service life for depreciation.
B) Waiting to record a litigation loss.
C) Recording a lower amount for bad debt expense.
D) Taking an asset write-down early.

E) None of the above
F) A) and B)

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is a conservative accounting practice?

A) Change from double-declining balance to straight-line depreciation.
B) Record sales revenue before it is actually earned.
C) Adjust the allowance for uncollectible accounts to a larger amount.

D) A) and B)
E) None of the above

Correct Answer

verified

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory on credit.When it makes the purchase:

Horizontal analysis analyzes trends in financial statement data for a single company over time.

Compared to growth stocks,value stocks' price-earnings ratio is typically:

When a company sells land for cash and makes a $25,000 gain:

A discontinued operation is the sale or disposal of any long-term asset.A discontinued operation is the sale or disposal of a significant component of a business.

We can use ratios to help evaluate a firm's performance and financial position.

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

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

Trend analysis and time-series analysis refer to ____ analysis.

The following is an example of:

We use the times interest earned ratio to compare interest payments with a company's income available to pay those charges.

Excerpts from TPX Company's December 31,2018 and 2017,financial statements are presented below: TPX Company's 2018 receivables turnover ratio is (rounded to one decimal place) : $\begin{array} { | l | r | r | } \hline & \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 7 } \\\hline \text { Accounts receivable } & \$ 80,000 & \$ 72,000 \\\hline \text { Inventory } & 84,000 & 70,000 \\\hline \text { Net sales } & 400,000 & 372,000 \\\hline \text { Cost of goods sold } & 254,000 & 216,000 \\\hline \text { Total assets } & 850,000 & 810,000 \\\hline \text { Total stockholders' equity } & 500,000 & 450,000 \\\hline \text { Net income } & 75,000 & 56,000 \\\hline\end{array}$

We use vertical analysis to express each income statement item as a percentage of sales.

Assuming a current ratio of 1.0,how will the purchase of inventory with cash affect the ratio?

Excerpts from Stealth Company's December 31,2018 and 2017,financial statements are presented below: Stealth Company's 2018 average days in inventory is (round intermediate calculations to two decimal places and final answer to one decimal place) : $\begin{array} { | l | r | r | } \hline & \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 7 } \\\hline \text { Accounts receivable } & \$ 40,000 & \$ 36,000 \\\hline \text { Inventory } & 28,000 & 36,000 \\\hline \text { Net sales } & 190,000 & 186,000 \\\hline \text { Cost of goods sold } & 114,000 & 108,000 \\\hline \text { Total assets } & 425,000 & 405,000 \\\hline \text { Total stockholders' equity } & 240,000 & 225,000 \\\hline \text { Net income } & 32,500 & 28,000 \\\hline\end{array}$

Excerpts from Stealth Company's December 31,2018 and 2017,financial statements are presented below: Stealth Company's 2018 inventory turnover is (rounded to two decimal places) : $\begin{array} { | l | r | r | } \hline & \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 7 } \\\hline \text { Accounts receivable } & \$ 40,000 & \$ 36,000 \\\hline \text { Inventory } & 28,000 & 36,000 \\\hline \text { Net sales } & 190,000 & 186,000 \\\hline \text { Cost of goods sold } & 114,000 & 108,000 \\\hline \text { Total assets } & 425,000 & 405,000 \\\hline \text { Total stockholders' equity } & 240,000 & 225,000 \\\hline \text { Net income } & 32,500 & 28,000 \\\hline\end{array}$

If the base-year amount is zero,we can't calculate a percentage change under horizontal analysis.

When a company with a current ratio of 1.2 pays a current liability: