ACC 206 Week 10 Quiz – Strayer

ACC 206 Week 10 Quiz – Strayer

Click on the Link Below to Purchase A+ Graded Course Material

http://budapp.net/ACC-206-Accounting-Principles-II-Week-10-Quiz-Strayer-268.htm

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

43. A stockholderis interestedintheabilityof afirmto a.payconsistentdividends.
b.appreciateinshareprice.c.surviveovera longperiod. d.all of these.

44. Comparisonsoffinancialdatamadewithina companyarecalled a.intracompanycomparisons.
b.interiorcomparisons.
c.intercompanycomparisons. d.intramuralcomparisons.

45. Atechniqueforevaluatingfinancialstatementsthatexpressestherelationshipamong selected items offinancialstatementdatais
a.commonsizeanalysis. b.horizontalanalysis.
c.ratioanalysis.
d.verticalanalysis.

46. Whichoneof thefollowingisnotatool infinancialstatementanalysis? a.Horizontalanalysis
b.Circularanalysis c.Verticalanalysis d.Ratioanalysis

47. Inanalyzingfinancialstatements,horizontalanalysis is a a.requirement.
b.tool.
c.principle. d.theory.

48. Horizontalanalysisis also called a.linearanalysis.
b.verticalanalysis. c.trendanalysis.
d.commonsizeanalysis.

49.    Verticalanalysisisalsoknownas a.perpendicularanalysis.
b.commonsizeanalysis. c.trendanalysis.
d.straight-lineanalysis.

50. Inratioanalysis,theratiosareneverexpressedasa a.rate.
b.negativefigure. c.percentage.
d.simpleproportion.
18-8

51. Theformulaforhorizontalanalysisofchangessincethebaseperiodisthecurrentyear amount
a.dividedbythebaseyearamount.
b.minusthebaseyearamountdividedbythe base yearamount.c.minusthebase yearamountdividedbythe currentyearamount. d.plusthebaseyearamountdividedbythebase yearamount.

52. Horizontalanalysisevaluatesaseriesoffinancialstatementdataovera periodof time a.that hasbeenarrangedfromthehighestnumbertothelowestnumber.
b.that hasbeenarrangedfromthelowestnumbertothehighestnumber. c.todeterminewhichitemsareinerror.
d.todeterminetheamountand/orpercentageincreaseordecreasethathastaken place.

53. Horizontalanalysisevaluatesfinancialstatementdata a.withina periodof time.
b.overa periodof time. c.onacertaindate.
d.as it mayappearinthefuture.

54. Assumethefollowingsalesdatafor a company:

2010 $1,000,000 2009                          900,000 2008                          750,000 2007                          600,000

If2007isthebaseyear, whatis thepercentageincreaseinsalesfrom2007to 2009? a.100%
b.150% c.50%d.66.7%

55. Comparativebalancesheetsareusuallypreparedfor a.oneyear.
b.twoyears.c.threeyears. d.four years.

56. Horizontalanalysisisappropriatelyperformed a.onlyonthe incomestatement.
b.onlyonthebalancesheet.
c.onlyonthestatementof retainedearnings. d.onallthreeofthesestatements.

57. Ahorizontalanalysisperformedonastatementofretainedearningswouldnotshowa percentagechangein
a.dividendspaid. b.netincome.
c.expenses.
d.beginningretained earnings.
FinancialStatementAnalysis 18-9

58. Under whichofthefollowingcasesmaya percentagechangebecomputed? a.Thetrendofthe balancesisdecreasingbutallbalancesarepositive.
b.Thereis nobalanceinthebaseyear.
c.There is apositivebalancein thebaseyear andanegativebalancein thesubsequent year.
d.There is anegativebalancein thebaseyearandapositivebalanceinthe subsequent year.

59. Assumethefollowingsalesdatafor a company:

2009 $945,000 2008                 780,000 2007                 650,000

If2007isthebaseyear,whatis thepercentageincreaseinsalesfrom2007to 2008? a.25%
b.20%c.125% d.143%

60. Assumethefollowingcost ofgoodssolddatafora company:

2009 $1,500,000 2008              1,200,000 2007                 900,000

If2007isthebaseyear,whatisthepercentage increase incostofgoodssoldfrom2007 to2009?
a.167% b.67%c.60% d.40%

Usethefollowing informationforquestions61–62:

MoonBeam,Inc.hasthefollowingincomestatement(inmillions):

MOON BEAM, INC. IncomeStatement
FortheYearEndedDecember31,2008

NetSales $180 CostofGoodsSold                                                120 GrossProfit                                                                 60 OperatingExpenses 33NetIncome $27

61. Usingverticalanalysis,whatpercentageisassignedto Costof GoodsSold? a. 67%
b.     33% c.100%
d.Noneof theabove
18-10

62. Usingverticalanalysis,whatpercentageis assignedto NetIncome? a.100%
b.85% c.15%
d.Noneof theabove

63. Verticalanalysisisalsocalled a.commonsizeanalysis.
b.horizontalanalysis. c.ratioanalysis.
d.trendanalysis.

64. Verticalanalysisisa techniquewhichexpresseseachitemwithinafinancialstatement a.in dollarsandcents.
b.intermsof apercentageoftheiteminthepreviousyear. c.in terms of apercentofa baseamount.
d.starting withthe highestvaluedowntothe lowestvalue.

65. Incommonsizeanalysis,
a.a baseamountisrequired. b.abase amountisoptional.
c.thesamebaseisusedacross allfinancialstatementsanalyzed.
d.theresultsof thehorizontalanalysisarenecessaryinputsforperformingtheanalysis.