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The primary objective of external financial reporting is to:


A) enhance the ability of the company to acquire financial capital from external sources.
B) accurately provide financial results for tax purposes.
C) comply with external regulations and requirements of government and professional associations.
D) provide useful information to decision makers,especially investors and creditors.

E) B) and C)
F) All of the above

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Which balance sheet line item has the highest percentage increase from the prior year to the current year?  Current Year  Prior Year  Cash $54,00C$36,000 Accounts Receivable 18,00C72,000 Inventory 108,00C54,000 Prepaid Insurance 18,00C27,000\begin{array}{lrr}&\text { Current Year } & \text { Prior Year }\\\text { Cash } & \$ 54,00 C & \$ 36,000 \\\text { Accounts Receivable } & 18,00 \mathrm{C} & 72,000 \\\text { Inventory } & 108,00 \mathrm{C} & 54,000 \\\text { Prepaid Insurance } & 18,00 C & 27,000\end{array}


A) Inventory
B) Cash
C) Accounts receivable
D) Prepaid insurance

E) C) and D)
F) A) and B)

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The ratio that measures how many times a company replenishes its inventory in a year is the:


A) days to sell ratio.
B) receivables turnover ratio.
C) inventory turnover ratio.
D) days to collect ratio.

E) None of the above
F) C) and D)

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Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?


A) Puffin generated more sales per dollar of fixed assets.
B) Puffin has greater depreciation expense.
C) Puffin has more fixed assets.
D) Puffin has greater sales.

E) None of the above
F) All of the above

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Match each term with the appropriate definition.Not all definitions will be used. -Trend Analysis


A) Also known as time-series analysis.
B) The ability of a company to meet its short-run financial obligations.
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance.
D) A measure of current earnings performance.
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F) A type of analysis that focuses on relationships within a single financial statement.
G) A result from comparing a company's results to other companies in the industry.
H) The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I) A measure of long-run survivability.
J) The standard that expenses should be recognized when incurred.
K) The characteristic that financial information needs to be valuable to decision makers.
L) The standard that takes for granted a company's near term financial survival.

M) B) and C)
N) I) and K)

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Which of the following measures would assist in assessing the profitability of a company?


A) Earnings per share
B) Times interest earned ratio
C) Inventory turnover ratio
D) Debt-to-assets ratio

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

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Which events may indicate going-concern problems?


A) An increase in research and development costs.
B) A decrease in barriers to expansion.
C) Additions of patents.
D) Loss of a key supplier or customer.

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

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Which of the following ratios is calculated by dividing current assets by current liabilities?


A) Return on equity ratio
B) Current ratio
C) Net profit margin ratio
D) Fixed asset turnover ratio

E) All of the above
F) A) and B)

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Sheffield Company has $145,000 of inventory at the beginning of the year and $131,000 at the end of the year.Sales revenue is $1,972,800,cost of goods sold is $1,145,400,and net income is $248,400 for the year.On average,the number of days to sell inventory is approximately:


A) 203 days.
B) 44 days.
C) 61 days.
D) 26 days.

E) A) and B)
F) C) and D)

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The comparative financial statements of Seward,Inc.include the following data:  Curyent Year Prior Year  Income Statement  Net Sales Revenue 234,000180,000 Cost of Goods Sold 99,00084,600 Operating Expenses 70,20057,600 Interest Expense 6,3006,300 Income Tax Expense 9,0007,200 Net Income 49,50024,300Balance Sheet  Current Assets 207,000171,000 Plant, Property and Equipment, Net 176,400189,000 Current Liabilities 81,00068,400 Long-Term Liabilities 77,40077,400 Stockholders’ Equity 225,000214,200 Total Liabilities & Stockholders’ Equity 383,400360,000\begin{array}{lrr}&\text { Curyent Year}&\text { Prior Year }\\\text { Income Statement }\\\text { Net Sales Revenue } & \mathbf{2 3 4 , 0 0 0} & \mathbf{1 8 0 , 0 0 0} \\\text { Cost of Goods Sold } & 99,000 & 84,600 \\\text { Operating Expenses } & 70,200 & 57,600 \\\text { Interest Expense } & 6,300 & 6,300 \\\text { Income Tax Expense } & 9,000 & 7,200 \\\text { Net Income } & 49,500 & 24,300\\ \text {Balance Sheet }\\\text { Current Assets } & \mathbf{2 0 7 , 0 0 0} & \mathbf{1 7 1 , 0 0 0} \\\text { Plant, Property and Equipment, Net } & 176,400 & 189,000 \\\text { Current Liabilities } & 81,000 & 68,400 \\\text { Long-Term Liabilities } & 77,400 & 77,400 \\\text { Stockholders' Equity } & 225,000 & 214,200 \\\text { Total Liabilities \& Stockholders' Equity } & 383,400 & 360,000\end{array} The fixed asset turnover ratio for the current year is closest to:


A) 1.28.
B) 1.24.
C) 0.75.
D) 1.64.

E) B) and D)
F) B) and C)

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Webster,Inc.has the following information: Net income 30.000 Stock price (per share) $20 Average number of shares outstanding10,000Average amount of stockholders’ equity $90,000\begin{array} { ll } \text {Net income }&30.000\\ \text { Stock price (per share) }&\$20\\ \text { Average number of shares outstanding}&10,000\\ \text {Average amount of stockholders' equity }&\$90,000\\\end{array} What is the Price/Earnings ratio?


A) 2.2
B) 4.0
C) 6.7
D) 20.0

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

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The primary objective of financial accounting and reporting is to provide:


A) useful information.
B) going concern information.
C) ratio analysis.
D) solvency.

E) A) and B)
F) A) and C)

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Nonrecurring items such as a loss from discontinued operations is reported on the income statement:


A) net of income tax.
B) before income tax expense.
C) below the net income line.
D) Nonrecurring items are not subject to income taxes;therefore,they are not reported on the income statement.

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

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The following information is available for a company for the current year:  Net Sales Revenue $345,000 Cost of Goods Sold 205,000 Average Accounts Receivable 32,500 Average Inventory 9,450 Average Net Fixed Assets 81,250 Average Total Assets 130,000\begin{array} { l r } \text { Net Sales Revenue } & \$ 345,000 \\\text { Cost of Goods Sold } & 205,000 \\\text { Average Accounts Receivable } & 32,500 \\\text { Average Inventory } & 9,450 \\\text { Average Net Fixed Assets } & 81,250 \\\text { Average Total Assets } & 130,000\end{array} Required: Part a.Calculate the receivables turnover ratio for the current year. Part b.Calculate the days to collect for the current year. Part c.Calculate the inventory turnover ratio for the current year. Part d.Calculate the days to sell for the current year. Round all ratios to two decimal points.

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Part a
Receivables turnover ratio = Net ...

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Match each term with the appropriate definition.Not all definitions will be used. -Liquidity


A) Also known as time-series analysis.
B) The ability of a company to meet its short-run financial obligations.
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance.
D) A measure of current earnings performance.
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F) A type of analysis that focuses on relationships within a single financial statement.
G) A result from comparing a company's results to other companies in the industry.
H) The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I) A measure of long-run survivability.
J) The standard that expenses should be recognized when incurred.
K) The characteristic that financial information needs to be valuable to decision makers.
L) The standard that takes for granted a company's near term financial survival.

M) A) and B)
N) B) and L)

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Willow Manufacturing had net Accounts Receivable of $600,000 at the beginning of the year and $740,000 at the end of the year.Net Sales Revenue for 2019 was $5,200,000.What is the days to collect from customers?


A) 60.00
B) 42.12
C) 51.94
D) 47.03

E) A) and B)
F) A) and C)

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Which of the following is a profitability ratio?


A) Return on equity
B) Times interest earned
C) Inventory turnover
D) Receivables turnover

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

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Benchmarks are useful when evaluating a company's performance.

A) True
B) False

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Which of the following types of items would you be most likely to see below the income tax expense line on an income statement?


A) Gain on Sale of Discontinued Operations,Net of Tax
B) Gross Profit
C) Selling,General,and Administrative Expense
D) Salaries Expense

E) C) and D)
F) A) and B)

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Which of the following is calculated by dividing cost of goods sold by average inventory and then dividing this result into 365 days?


A) Inventory turnover
B) Current ratio
C) Days to collect ratio
D) Days to sell ratio

E) C) and D)
F) All of the above

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