There are those that believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation of financial statement analysis?

There are those that believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation...

Which of the following is not a method of "benchmarking"?

Which of the following is not a method of "benchmarking"? A) Conduct an industry group analysis. B) Utilize the DuPont system to analyze a firm's...

Why is the quick ratio considered by some to be a better measure of liquidity than the current ratio?

Why is the quick ratio considered by some to be a better measure of liquidity than the current ratio? A) The quick ratio more accurately reflects...

Which of the following is a benefit of a common-size income statement?

Which of the following is a benefit of a common-size income statement? A) It is very useful to assess how effectively a firm collected its accounts...

Limitations of ratio analysis include all but

Limitations of ratio analysis include all but A) Ratios depend on accounting data based on historical costs. B) Differences in accounting practices...

Peer group analysis can be performed by

Peer group analysis can be performed by A) management choosing a set of firms that are similar in size or sales, or who compete in the same market. B)...

Which one of the following statements about trend analysis is NOT correct?

Which one of the following statements about trend analysis is NOT correct? A) This benchmark is based on a firm's historical performance. B) It allows...

Which one of the following is NOT an advantage of using ROE as a goal?

Which one of the following is NOT an advantage of using ROE as a goal? A) ROE is highly correlated with shareholder wealth maximization. B) ROE and...

Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth?

Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth? A)...

The DuPont equation shows that a firm's ROE is determined by three factors:

The DuPont equation shows that a firm's ROE is determined by three factors: A) net profit margin, total asset turnover, and the equity multiplier B)...

Which one of the following statements is NOT correct?

Which one of the following statements is NOT correct? A) The DuPont system is based on two equations that relate a firm's ROA and ROE. B) The DuPont...

For a firm that has both debt and equity,

For a firm that has both debt and equity, A) ROE > ROA. B) ROE < ROA. C) ROE = ROA D) None of the above. Answer: ...

For a firm that has no debt in its capital structure,

For a firm that has no debt in its capital structure, A) ROE > ROA. B) ROE < ROA. C) ROE = ROA. D) None of the above. Answer: ...

Coverage ratios, like times interest earned and cash coverage ratio, allow

Coverage ratios, like times interest earned and cash coverage ratio, allow A) a firm's management to assess how well they meet short-term liabilities. B)...

Which one of the following statements is NOT correct?

Which one of the following statements is NOT correct? A) A leveraged firm is more risky than a firm that is not leveraged. B) A leveraged firm is less...

If firm A has a higher debt-to-equity ratio than firm B, then

If firm A has a higher debt-to-equity ratio than firm B, then A) firm A has a lower equity multiplier than firm B. B) firm B has a lower equity multiplier...

Which one of the following statements is correct?

Which one of the following statements is correct? A) The lower the level of a firm's debt, the higher the firm's leverage. B) The lower the level...

One of the following statements is NOT true of asset turnover ratios.

One of the following statements is NOT true of asset turnover ratios. A) Asset turnover ratios measure the level of sales per dollar of assets that...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) The accounts receivables turnover ratio measures how quickly the firm collects on its credit...

All but one of the following is true about the inventory turnover ratio.

All but one of the following is true about the inventory turnover ratio. A) It is calculated by dividing inventory by cost of goods sold. B) It measures...

All else being equal, which one of the following will decrease a firm's current ratio?

All else being equal, which one of the following will decrease a firm's current ratio? A) a decrease in the net fixed assets B) a decrease in depreciation C)...

Which one of the following does NOT change a firm's current ratio?

Which one of the following does NOT change a firm's current ratio? A) The firm collects on its accounts receivables. B) The firm purchases inventory...

All but one of the following is true about quick ratios.

All but one of the following is true about quick ratios. A) The quick ratio is calculated by dividing the most liquid of current assets by current...

Which of the following is NOT true of liquidity ratios?

Which of the following is NOT true of liquidity ratios? A) They measure the ability of the firm to meet short-term obligations with short-term assets...

Which of the following is true of ratio analysis?

Which of the following is true of ratio analysis? A) A ratio is computed by dividing one balance sheet or income statement by another. B) The choice...

Common-size financial statements:

Common-size financial statements: A) are a specialized application of ratio analysis. B) allow us to make meaningful comparisons between the financial...

All but one of the following is true of common-size income statements.

All but one of the following is true of common-size income statements. A) Each income statement item is standardized by dividing it by total assets. B)...

All but one of the following is true of common-size balance sheets.

All but one of the following is true of common-size balance sheets. A) Each asset and liability item on the balance sheet is standardized by dividing...

An individual analyzing a firm's financial statements should do all but one of the following:

An individual analyzing a firm's financial statements should do all but one of the following: A) Use unaudited financial statements. B) Do a trend...

Anyone analyzing a firm's financial statements should

Anyone analyzing a firm's financial statements should A) use audited financial statements only. B) do a trend analysis. C) perform a benchmark analysis. D)...

A firm's management analyzes financial statement's so that:

A firm's management analyzes financial statement's so that: A) they can get feedback on their investing, financing, and working capital decisions...

The creditors of a firm analyze financial statements so that they can focus on

The creditors of a firm analyze financial statements so that they can focus on A) the firm's amount of debt. B) the firm's ability to generate sufficient...

Shareholders analyze financial statements in order to:

Shareholders analyze financial statements in order to: A) assess the cash flows that the firm will generate from operations. B) determine the firm's...

Financial statements can be analyzed from the following three different perspectives:

Financial statements can be analyzed from the following three different perspectives: A) management, regulator, and bondholder B) management, shareholder,...

Which one of the following is NOT true for a corporation?

Which one of the following is NOT true for a corporation? A) Interest paid on bonds issued last year is tax deductible. B) Common-stock dividends...

Clarity Music Company has a marginal tax rate of 34 percent and an average tax rate of 32 percent this year. It is planning to construct a new recording studio next year. The appropriate tax rate to be applied on the income generated from the new studio is

Clarity Music Company has a marginal tax rate of 34 percent and an average tax rate of 32 percent this year. It is planning to construct a new recording...

Trident Corporation had the following cash flows in the current year. Which one of the following is a financing activity cash flow?

Trident Corporation had the following cash flows in the current year. Which one of the following is a financing activity cash flow? A) Rent on a warehouse...

Which one of the following is NOT a cash flow from investing activities?

Which one of the following is NOT a cash flow from investing activities? A) buying and selling bonds or stock of other firms B) buying or selling...

Cash flows from financing activities include all but one of the following:

Cash flows from financing activities include all but one of the following: A) cash payments on the principal of long-term debt B) issuing and paying...

Which one of the following is NOT a cash flow from operating activities?

Which one of the following is NOT a cash flow from operating activities? A) cash payments on the principal of long-term debt B) payments for utilities...

Which one of the following are NOT all noncash items?

Which one of the following are NOT all noncash items? A) depreciation, deferred taxes, and prepaid expenses B) depletion charges, taxes, and amortization C)...

The major disadvantages of market-value accounting include

The major disadvantages of market-value accounting include A) the difficulty in estimating the current value for some assets. B) the difficulty in...

Which of the following is NOT true about treasury stock?

Which of the following is NOT true about treasury stock? A) It is the firm's own shares repurchased in the market by the firm. B) It can be reissued...

Which one of the following is NOT true about goodwill?

Which one of the following is NOT true about goodwill? A) It is an intangible asset. B) It represents the value of all unrecorded assets acquired...

When prices are falling, valuing inventory using the LIFO method rather than FIFO gives

When prices are falling, valuing inventory using the LIFO method rather than FIFO gives A) inventory a higher value but lowers net income. B) inventory...

When prices are rising, valuing ending inventory using the FIFO method rather than LIFO gives

When prices are rising, valuing ending inventory using the FIFO method rather than LIFO gives A) inventory a higher value but lowers net income. B)...

Petra, Inc., has $400,000 as current assets, $1.225 million as plant and equipment, and $250,000 as goodwill. In preparing the balance sheet, these assets should be listed in which of the following orders?

Petra, Inc., has $400,000 as current assets, $1.225 million as plant and equipment, and $250,000 as goodwill. In preparing the balance sheet, these...

The conventional way of preparing a balance sheet is to list all assets in the order of their

The conventional way of preparing a balance sheet is to list all assets in the order of their A) market value. B) risk. C) liquidity. D) historical...

Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount of $230,000 for 10 years. Its market value on December 31, 2008 is $1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The asset's value should be recognized on the balance sheet at

Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount...

The cost principle states that an asset should be recognized on the balance sheet at

The cost principle states that an asset should be recognized on the balance sheet at A) the market value of the asset. B) at the market value less...

On June 23, 2008, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation, with the payment to be made in 90 days on September 20. The goods were shipped to Rynex on July 2. The firm's accountants should recognize the sale on

On June 23, 2008, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation, with the payment to be made in 90 days on September 20....

According to the realization principle, revenue from a sale of the firm's products are recognized

According to the realization principle, revenue from a sale of the firm's products are recognized A) when the products are shipped to the buyer. B)...

Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008. Products produced in the months of May were sold in July. The firm uses FIFO to value its inventory. According to the matching principle, the firm's accountant should associate

Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008. Products produced in the months of May were sold in July. The firm...

The matching principle calls for the accountant of a firm to

The matching principle calls for the accountant of a firm to A) identify an asset with each liability of the firm. B) associate the revenue generated...

Dell Computer Corporation has receivables of $2.5 million and inventory worth $1.8 million. The firm plans to borrow $2 million for working capital purposes from Austin First National Bank. In evaluating the loan request, the bank should place the most emphasis on

Dell Computer Corporation has receivables of $2.5 million and inventory worth $1.8 million. The firm plans to borrow $2 million for working capital...

The going concern assumption implies that

The going concern assumption implies that A) a firm will continue to be in business for the foreseeable future. B) a firm will be going out of business...

Your uncle, who has a second home in Bethany Beach, Delaware, is planning to sell it in the next few weeks. You are interested in buying this beachside property, so your agent negotiates a price for the house with your uncle's agent. This transaction is an example of

Your uncle, who has a second home in Bethany Beach, Delaware, is planning to sell it in the next few weeks. You are interested in buying this beachside...

The assumption of arm's-length transaction states that

The assumption of arm's-length transaction states that A) both parties to a transaction can act independently of each other and make economically...

Accounting standards prescribed by GAAP are important because

Accounting standards prescribed by GAAP are important because A) they make the financial statements of all firms standardized. B) they allow one to...

The generally accepted accounting principles (GAAP) are

The generally accepted accounting principles (GAAP) are A) rules that outline how a firm can operate ethically. B) rules on how the firm will be valued...

Annual reports are prepared by a firm's management to

Annual reports are prepared by a firm's management to A) communicate to shareholders the firm's failures in the previous year. B) provide overview...

Which of the following sections do annual reports typically contain?

Which of the following sections do annual reports typically contain? A) financial summary related to the past year's performance B) information about...