Professional Documents
Culture Documents
1. A long-term creditor looks to profitability and solvency measures that indicate the
company's ability to survive over a long period of time.
A. True
B. False
2. Vertical analysis is a technique for evaluating a series of financial statement data over a
period of time.
A. True
B. False
3. The purpose of horizontal analysis is to determine the increase or decrease that has taken
place, expressed as an amount or a percentage.
A. True
B. False
B. False
5. Solvency ratios measure the short-term ability of the company to pay its maturing
obligations and to meet unexpected needs for cash.
A. True
B. False
B. False
B. False
8. Asset turnover measures how efficiently a company uses its assets to generate sales.
A. True
B. False
9. Extraordinary items are events and transactions that are unusual in nature or infrequent in
occurrence.
A. True
B. False
10. Pro forma income usually excludes items that the company thinks are unusual or
nonrecurring.
A. True
B. False
B. profitability.
C. solvency.
D. growth potential.
B. intercompany basis.
C. intracompany basis.
13. A technique for evaluating a series of financial statement data over a period of time is:
A. horizontal analysis.
B. ratio analysis.
C. vertical analysis.
D. common-size analysis.
14. A technique for evaluating financial statements that expresses the relationship among
selected items of financial statement data is:
A. horizontal analysis.
B. ratio analysis.
C. vertical analysis.
D. common-size analysis.
B. ratio analysis.
C. trend analysis.
D. vertical analysis.
16. In vertical analysis, the base amount for each income statement item is:
A. gross profit.
B. net income.
C. net sales.
D. sales.
B. rate.
C. simple proportion.
18. Ratios that measure the short-term ability of the company to pay its maturing obligations
are:
A. liquidity ratios.
B. profitability ratios.
C. solvency ratios.
D. trend ratios.
B. current ratio.
D. receivables turnover.
B. profit margin.
C. return on assets.
21. When a company has preferred stock, the return on common stockholders' equity is
computed by dividing:
A. net income by ending common stockholders' equity.
C. Profit margin.
D. Price-earnings ratio.
24. Which of the following includes all changes in stockholders' equity during a period
except those resulting from investments by stockholders and distributions to
stockholders?
A. Net income.
B. Gross income.
D. Comprehensive income.
This is the end of the test. When you have completed all the questions and reviewed your
answers, press the button below to grade the test.
0% (0 out of 25 correct)
1. A long-term creditor looks to profitability and solvency measures that indicate the
company's ability to survive over a long period of time.
A. True
B. False
3. The purpose of horizontal analysis is to determine the increase or decrease that has
taken place, expressed as an amount or a percentage.
A. True
B. False
5. Solvency ratios measure the short-term ability of the company to pay its maturing
obligations and to meet unexpected needs for cash.
A. True
8. Asset turnover measures how efficiently a company uses its assets to generate
sales.
A. True
B. False
9. Extraordinary items are events and transactions that are unusual in nature or
infrequent in occurrence.
A. True
B. False
10. Pro forma income usually excludes items that the company thinks are unusual or
nonrecurring.
A. True
B. False
13. A technique for evaluating a series of financial statement data over a period of
time is:
A. horizontal analysis.
B. ratio analysis.
C. vertical analysis.
D. common-size analysis.
14. A technique for evaluating financial statements that expresses the relationship
among selected items of financial statement data is:
A. horizontal analysis.
B. ratio analysis.
C. vertical analysis.
D. common-size analysis.
16. In vertical analysis, the base amount for each income statement item is:
A. gross profit.
B. net income.
C. net sales.
D. sales.
18. Ratios that measure the short-term ability of the company to pay its maturing
obligations are:
A. liquidity ratios.
B. profitability ratios.
C. solvency ratios.
D. trend ratios.
21. When a company has preferred stock, the return on common stockholders' equity
is computed by dividing:
A. net income by ending common stockholders' equity.
B. net income by average common stockholders' equity.
C. net income less preferred dividends by ending common stockholders'
equity.
D. net income less preferred dividends by average common stockholders'
equity.
24. Which of the following includes all changes in stockholders' equity during a
period except those resulting from investments by stockholders and distributions
to stockholders?
A. Net income.
B. Gross income.
C. Continuing operations income.
D. Comprehensive income.
Retake Test
Self Study
1. Comparisons of data within a company are an example of the following comparative
basis:
A. Industry averages.
B. Intracompany.
C. Intercompany.
C. gross profit.
D. fixed assets.
B. Differential analysis.
C. Vertical analysis
D. Ratio analysis.
5. Sammy Corporation reported net sales of $300,000, $330,000, and $360,000 in the years,
2006, 2007, and 2008, respectively. If 2006 is the base year, what is the trend percentage
for 2008?
A. 77%.
B. 108%.
C. 120%.
D. 130%.
B. Current ratio.
9. Scout Corporation has income before taxes of $400,000 and an extraordinary loss of
$100,000. If the income tax rate is 25% on all items, the income statement should show
income before extraordinary items and extraordinary items, respectively, of:
A. $325,000 and $100,000.
10. Which situation below might indicate a company has a low quality of earnings?
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answers, press the button below to grade the test.
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5. Sammy Corporation reported net sales of $300,000, $330,000, and $360,000 in the
years, 2006, 2007, and 2008, respectively. If 2006 is the base year, what is the
trend percentage for 2008?
A. 77%.
B. 108%.
C. 120%.
D. 130%.
9. Scout Corporation has income before taxes of $400,000 and an extraordinary loss
of $100,000. If the income tax rate is 25% on all items, the income statement
should show income before extraordinary items and extraordinary items,
respectively, of:
A. $325,000 and $100,000.
B. $325,000 and $75,000.
C. $300,000 and $100,000.
D. $300,000 and $75,000.
10. Which situation below might indicate a company has a low quality of earnings?
A. The same accounting principles are used each year.
B. Revenue is recognized when earned.
C. Maintenance costs are expensed as incurred.
D. The company is continually reporting pro forma income numbers.
Retake Test