Reference no: EM131785022

Question 1

The times interest earned ratio reflects the ability of a company to make interest payments.
True
False

Question 2

Trend percentages emphasize changes that have occurred over a period of time.
True
False

Question 3

In evaluating a company, the financial analyst must be alert to the economic climate in which that company operates, the general economic conditions in the country, regional conditions, and conditions in the industry and related industries.
True
False

Question 4

Ratios are simply a way of expressing data as logical relationships within or between financial statements.
True
False

Question 5

Expressing the change in net sales from one period to the next in both absolute and percentage terms is an example of horizontal analysis.
True
False

Question 6

The gross margin amounts for Blue Co. were $40,000, $44,000, and $50,000, respectively, for the years 2010 through 2012. If 2010 is the base year for a trend analysis, the appropriate percentages for 2011 and 2012 are:

A. 220% and 250%.

B. 10% and 25%.

C. 110% and 125%.

D. 22% and 25%.

Question 7

The accounts receivable turnover ratio measures (select the best answer):

A. how rapidly a company pays its obligations.

B. how rapidly the accounts receivable are collected.

C. how rapidly uncollectible accounts are written off.

D. The other answers are all incorrect.

Question 8

The information gained from an analysis of financial statements has its greatest value in assisting the user in making predictions.
True
False

Question 9

Common-size statements show only period-to-period percentage changes in financial statement items.
True
False

Question 10 

You are given the following information:

Income before interest and taxes $600,000
Less: Interest expense (45,000)
Balance $555,000
Less: Taxes (at 40% rate) (222,000)
Income after taxes $333,000
Less: Preferred dividends (15,000)
Income available to common stockholders $318,000

The number of times interest was earned is:

A. 7.40

B. 33.33

C. 13.33

D. 12.33

Question 11

Outside parties use financial statement analysis for:

A. assessing the results of past management performance.

B. assisting in decisions on investing.

C. assisting in decisions on extending credit.

D. All of the above answers are correct.

Question 12

Whether a given common stock is said to be relatively high priced or low priced depends at least partially on its earnings per share.
True
False

Question 13

The stockholders' equity to debt ratio is a measure of the corporation's:

A. ability to stimulate the growth of business debt.

B. long-term solvency.

C. ability to generate profit.

D. ability to do all of the other answers.

Question 14

Earnings per share of common stock is a measure of the per share:

A. profit after taxes.

B. dividend distribution.

C. profit before interest and taxes.

D. earnings available to common stockholders.

Question 15

The two elements used in determining the rate of return on operating assets are:

A. net income and operating assets.

B. net operating income and operating assets.

C. net operating income and turnover of operating assets.

D. net income and turnover of operating assets.

Question 16

In evaluating a company, the financial analyst must be sure that any data and techniques being used are comparable.
True
False

Question 17

Percentages in financial analysis are useful for comparison purposes, but actual dollar amounts are often necessary to make financial judgments.
True
False

Question 18

Comparative financial statements are statements in which figures for a single company are presented for each of two or more periods.
True
False

Question 19

Assuming relatively stable business conditions, a decline in the average number of day's sales in accounts receivable outstanding from one year to the next might indicate:

A. a longer discount period and a more distant due date were extended to customers in the second year.

B. a significant decrease in sales in the second year.

C. a stiffening of the company's credit policies.

D. that the second year's sales were made at lower prices than the first year's sales.

Question 20

You are given the following information:
Income before interest expense and taxes $500,000
Less: Interest expense 40,000
Income before federal income taxes $460,000
Less: Taxes (at 40% rate) 184,000
Net income $276,000
Less: Preferred dividends 30,000
Earnings available for common stockholders $246,000

The number of times the interest is earned is:

A. 12.5

B. 25.5

C. 4.6

D. 11.5

Question 21

The following selected data are taken from the Blake Company's accounts:

Sales in 2012 $714,000
Cost of goods sold in 2012 432,000
Accounts receivable, 12/31/12 484,000
Accounts receivable, 1/1/12 440,000
Inventory, 1/1/12 260,000
Inventory, 12/31/12 140,000

The inventory turnover rate is:

A. 1.66

B. 2.16

C. 1.35

D. 3.57

Question 22

A company that has favorable financial leverage is using debt or preferred stock to magnify the earnings per share on common stock.
True
False

Question 23

According to the Grafton Furniture Profit video, how much profit margin leakage was Grafton furniture experiencing because of inefficiencies like mistakes, do-overs, and poor workflow?

20%

30%

50%

70%

Question 24 

According to the Grafton Furniture Profit video, how much additional gross profit does Marcus expect to earn from all 4 accent chairs combined that offered in the Quick-ship line in 1 year?

$500,000

$250,000

$1,000,000

$750,000

Question 25

According to the Grafton Furniture Profit video, in order to prevent future quality issues, Marcus gives Stephan what to mark furniture that meets quality standards and is ready to ship?

Green ribbons

Approval stamp

Pink slips

Yellow dots

Question 26

According to the Grafton Furniture Profit video, how much does Marcus estimate that he spent to renovate Grafton furniture including the costs of the new roof, air conditioner, design center, and employee lunch room?

$150,000

$1,000,000

$500,000

$700,000

Question 27

According to the Grafton Furniture Profit video, third generation businesses have what fail rate according to Marcus?

30%

70%

60%

90%

Question 28

What does Marcus say is the industry average gross margin for custom furniture?

90%

70%

50%

25%

Question 29

According to the Grafton Furniture Profit video, which is not one of the 4 types of accent chairs Marcus asks Stephan to design?

California

Florida

Midwest

Southwest

East Coast

Question 30

According to the Grafton Furniture Profit video, what large, national retailer does Marcus pitch to carry the new line of chairs?

Ashley Furniture

Camping World

DirectBuy

WalMart