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ACC 557 (Strayer) WK 11 chapter 14 Quiz

TRUE-FALSE STATEMENTS

1. Intra-company comparisons of the very same financial statement items can regularly detect transforms in financial relationship and far-ranging trends.

2. Calculating financial ratios is a financial reporting need under usually accepted accountancy principles.

3. Steps of a company"s liquidity are involved with the frequency and quantities of dividend payments.


4. Evaluation of gaue won statements is intensified with the usage of comparative data.

5. To compare of firm data with industry averages can carry out some insight into the company"s relative place in the industry.

6. Vertical and horizontal analyses are concerned with the style used to prepare gaue won statements.

7. Horizontal, vertical, and also circular analyses room the most common tools of financial declare analysis.

8. Horizontal evaluation is a technique for evaluating a jae won statement items in the present year with other items in the existing year.

9. One more name because that trend evaluation is horizontal analysis.

10. If a firm has sales that $110 in 2012 and $154 in 2013, the percentage increase in sales from 2012 come 2013 is 140%.

11. In horizontal analysis, if an item has a an unfavorable amount in the base year, and a hopeful amount in the following year, no percentage change for the item deserve to be computed.

12. Usual size evaluation expresses each item in ~ a financial statement in regards to a percent of a basic amount.

13. Vertical analysis is a much more sophisticated analytical device than horizontal analysis.

14. Vertical evaluation is helpful in making comparisons of companies of various sizes.


15. Meaningful evaluation of financial statements will incorporate either horizontal or upright analysis, yet not both.

16. Utilizing vertical analysis of the revenue statement, a company"s net revenue as a portion of net sales is 10%; therefore, the expense of products sold together a percentage of sales must be 90%.

17. In the vertical analysis of the income statement, each item is generally stated as a portion of net income.

18. A ratio have the right to be expressed as a percentage, a rate, or a proportion.

19. A solvency ratio procedures the income or operation success of an enterprise for a given period of time.

20. The current ratio is a measure of every the ratios calculated because that the present year.

21. Inventory turnover actions the variety of times top top the median the inventory to be sold throughout the period.

22. Profitability ratios are commonly used as a communication for assessing management"s operation effectiveness.

23. The rate of return on complete assets will be better than the price of return on usual stockholders" same if the company has done well in trading on the equity at a gain.

24. Indigenous a creditor"s allude of view, the higher the total debt to full assets ratio, the reduced the risk that the firm may be can not to pay its obligations.

25. A present ratio of 1.2 come 1 indicates that a company"s current assets exceed its present liabilities.

26. Using obtained money to boost the rate of return on typical stockholders" equity is called "trading ~ above the equity."

27. As soon as the disposal of a far-reaching segment occurs, the income statement should report both earnings from continuing operations and income (loss) from stop operations.

28. An occasion or transaction have to be classified together an extraordinary item if it is unusual in nature or if it wake up infrequently.

29. Variations amongst companies in the application of normally accepted audit principles may reduce top quality of earnings.

30. Agree forma earnings usually excludes items the the company thinks space unusual or nonrecurring.

34. The three simple tools of analysis are horizontal analysis, upright analysis, and ratio analysis.

35. A percentage readjust can it is in computed just if the base amount is zero or positive.

36. In vertical analysis, the base amount in an revenue statement is commonly net sales.

37. Benefit ratios measure the capability of the companies to endure over a long duration of time.

38. The days in perform is computed by multiplying inventory turnover by 365.

39. Particularly items room reported net of applicable counting in a separate section of the earnings statement.

MULTIPLE selection QUESTIONS

40. Which among the complying with is generally interested in the liquidity the a company?

a. Federal government

b. Stockholders

c. Permanent creditors

d. Temporary creditors

41. Which one of the complying with is no a characteristic typically evaluated in analyzing financial statements?

a. Liquidity

b. Profitability

c. Marketability

d. Solvency

42. In evaluating the gaue won statements that a company, a solitary item ~ above the gaue won statements

a. Need to be reported in bold-face type.

b. Is an ext meaningful if compared to various other financial information.

c. Is far-reaching only if that is large.

d. Have to be add by a footnote.

43. Temporary creditors space usually most interested in evaluating

a. Solvency.

b. Liquidity.

c. Marketability.

d. Profitability.

44. Irreversible creditors are usually most interested in evaluating

a. Liquidity and solvency.

b. Solvency and also marketability.

c. Liquidity and also profitability.

d. Profitability and also solvency.

45. Stockholders are most interested in evaluating

a. Liquidity and also solvency.

b. Profitability and solvency.

c. Liquidity and profitability.

d. Marketability and also solvency.

46. A stockholder is interested in the ability of a certain to

a. Pay consistent dividends.

b. Appreciate in re-superstructure price.

c. Endure over a lengthy period.

d. All of these.

47. To compare of jae won data made within a agency are called

a. Intracompany comparisons.

b. Internal comparisons.

c. Intercompany comparisons.

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d. Intramural comparisons.

48. A an approach for analyzing financial statements the expresses the relationship amongst selected item of financial statement data is