Question

Trend or time-series analysis is another term used for ____ analysis

Multiple Choice

• Ratio

• Horizontal

• Vertical

• Diagonal

Vertical analysis refers to:

Multiple Choice

• Expressing each item in a financial statement as a percentage of the same base amount.

• Expressing each item in a financial statement in order of highest amount to lowest amount.

• Expressing each item in a financial statement as its trend over time.

• Expressing each item in a financial statement in order of highest importance to lowest importance.

The times interest earned ratio is classified as an indicator of a company's:

Multiple Choice

• Profitability.

• Long-term survival.

• Liquidity.

• Solvency.

Which of the following is an example of horizontal analysis?

Multiple Choice

• Comparing a balance sheet account with another balance sheet account at the same point in time.

• Comparing a balance sheet account with an income statement account.

• Comparing an income statement account with another income statement account at the same point in time.

• Comparing a balance sheet account over time.

Which of the following is an example of horizontal analysis?

Multiple Choice

• Comparing assets with equity.

• Comparing gross profit across companies.

• Comparing gross profit with operating expenses.

• Comparing the change in sales over time.

Jamble Co. reports cash of $40,000, accounts receivable of $60,000, inventory of $150,000, equipment of $350,000, and current liabilities of $100,000. What is Jamble's current ratio?

Multiple Choice

• 6.0.

• 1.0.

• 1.4.

• 2.5.

Which of the following is an example of conservative accounting?

Multiple Choice

• Adjusting the allowance for uncollectible accounts to a smaller amount.

• Recording the lowest possible warranty expense.

• Changing to a longer useful life for depreciating a long-lived asset.

• Recording inventory at lower of cost or net realizable value.

Sports Unlimited reports net income of $240,000, sales revenue of $24 million, and average total assets of $3 million. The asset turnover is:

Multiple Choice

• 12 times.

• 0.08 times.

• 8 times.

• 1.5 times.

amble Co. reports cash of $40,000, accounts receivable of $60,000, inventory of $150,000, equipment of $350,000, and current liabilities of $100,000. What is Jamble's acid-test ratio?

Multiple Choice

• 6.0.

• 1.0.

• 4.5.

• 2.5.

Which of the following is an example of an aggressive accounting practice in relation to the reporting of net income?

Multiple Choice

• Judging a contingent loss to be reasonably likely instead of probable.

• Estimating the useful life of a depreciable asset to be 10 years instead of 6 years.

• Assuming net realizable value of inventory remains above cost despite lack of sales of current inventory.

• All of the other answers are examples of aggressive accounting.

The Sports Addition reports net sales of $2 million, cost of goods sold of $1 million, operating expenses of $500,000, and other expenses of $100,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by:

Multiple Choice

• $400,000.

• $2,000,000.

• $100,000.

• $1,000,000.

Which of the following is an example of aggressive accounting?

Multiple Choice

• Recording the lowest possible warranty expense.

• The write-down of overvalued inventory.

• Adjusting the allowance for uncollectible accounts to a larger amount.

• Changing to a shorter useful life for depreciating a long-lived asset.

Which of the following ratios is more useful in evaluating solvency?

Multiple Choice

• Debt to equity ratio.

• Receivables turnover ratio.

• Inventory turnover ratio.

• Current ratio.

Conservative accounting practices refer to:

Multiple Choice

• Practices that result in reporting lower income, lower assets, and/or higher liabilities.

• Practices that reduce the amount of tax paid to federal, state, and local jurisdictions.

• Practices that result in greater employee training to avoid injuries.

• Practices that result in management taking fewer risky operating decisions that have the potential to result in losses.

The Sports Addition reports net sales of $2 million, cost of goods sold of $1 million, operating expenses of $500,000, and other expenses of $100,000. The Company's gross profit ratio is:

Multiple Choice

• 100%.

• 25%.

• 50%.

• 5%.

Answer 1

1) Trend or time-series analysis is another term used for ____ analysis - Horizontal analysis

In this model, analysis is done horizontally by computing absolute change from previous year and converting it into percentage change. Thus values are compared horizontally.

2) Vertical analysis refers to: - (a) Expressing each item in a financial statement as a percentage of the same base amount.

Such basis is total assets for balance sheet and net sales for income statement.

3)  The times interest earned ratio is classified as an indicator of a company's: - Solvency

4)  Which of the following is an example of horizontal analysis - Comparing a balance sheet account over time.

Horizontal analysis purpose is to measure trend by considering the change over a time period.

5)  Which of the following is an example of horizontal analysis - Comparing the change in sales over time.

Horizontal analysis purpose is to measure trend by considering the change over a time period.

6) Jamble Co. reports cash of $40,000, accounts receivable of $60,000, inventory of $150,000, equipment of $350,000, and current liabilities of $100,000. What is Jamble's current ratio? .......... 2.50

Current ratio = Current assets / Current liabilities = ( 40,000 + 60000 + 150000) / 100,000 = 2.50

7) Conservative account - Recording inventory at lower of cost or net realizable value.

In the case of conservative system, accountant want to use pessimistic approach of valuation.

8) Sports Unlimited reports net income of $240,000, sales revenue of $24 million, and average total assets of $3 million. The asset turnover is: = 8 times

Assets turnover = Sales revenue / Average total assets = 24 / 3 = 8 times.

9) amble Co. reports cash of $40,000, accounts receivable of $60,000, inventory of $150,000, equipment of $350,000, and current liabilities of $100,000. What is Jamble's acid-test ratio? ........ 1 time

Acid - test ratio = Quick assets / current liabilities = ( 40,000 + 60000) / 100,000 = 1 time

10) Which of the following is an example of an aggressive accounting practice in relation to the reporting of net income?

- All of the other answers are examples of aggressive accounting.

11) The Sports Addition reports - 2000,000

12)  Which of the following is an example of aggressive accounting? - Recording the lowest possible warranty expense.

Aggressive style is characterized by under estimation of possible losses and expenses.

13) Which of the following ratios is more useful in evaluating solvency? - Debt equity ratio

14)  Conservative accounting practices refer to: - Practices that result in reporting lower income, lower assets, and/or higher liabilities.

In the case of conservative system, accountant want to be pessimistic approach of valuation.

15) GP Ratio = 50 %

Gross profit ratio = ( sales - cost of goods sold ) / sales * 100