Chapter 13 Questions Flashcards
Financial statement analysis applies _____ tools to financial statements for decision-making.
analytical
Financial statement analysis provides information to internal users to improve:
efficiency and effectiveness
This building block reveals a company’s ability to generate future revenues and meet long-term obligations.
solvency
General-purpose financial statements do NOT include general ledger accounts. True or False?
True
Apple Company compares its first quarter sales revenue for the current year with its previous year’s first quarter sales revenue. This is an example of what type of comparison?
Intracompany
Comparison of a company’s financial condition and performance to a base amount is an example of what type of analysis?
Vertical analysis
Horizontal analysis is the review of financial statement data across time and the term horizontal comes from the _____ movement of our eyes as we review comparative financial statements:
left-to-right
A tool used to evaluate individual financial statement items or a group of items is called:
Vertical analysis
Comparative financial statements show:
changes in relative importance of each financial statement item
A pie chart graphic of a common-size income statement will show:
each cost as a component of net sales.
All of the following are one of the building blocks of financial statement analysis except:
solvency
profitability
marketing prospects
liquidity
efficiency
marketing prospects
Liquidity is the availability of resources to pay _____________ term cash requirements.
short
Current liabilities are greater than the quick assets of the company.
Current liabilities are greater than the quick assets of the company.
Which of the following is not a solvency ratio?
Price earnings ratio
Equity ratio
Debt ratio
Debt-to-equity ratio
Price earnings ratio
Profitability measures a company’s ability to:
earn an adequate return
Current ratio
Liquidity and efficiency
Return on equity
Profitability
Days’ sales uncollected
Liquidity and efficiency
Total asset turnover
Liquidity and efficiency
Acid-test ratio
Liquidity and efficiency
Dividend yield
Market prospects
Return on total assets
Profitability
Equity ratio
Solvency
Accounts receivable turnover
Liquidity and efficiency
Which ratio summarizes the components of Profit Margin and Total Asset Turnover?
Return on total assets Correct
What measure reflects the difference between current assets and current liabilities?
Working capital
Which of the following short-term liquidity ratios measure how frequently a company collects its accounts?
Day’s sales uncollected
Account receivable turnover
