Question 1

A firm with a gross profit margin which meets industry standard and a net profit margin which is below industry standard must have excessive ________.

Accepted Answer

A)   general and administrative expenses
B)   cost of goods sold
C)   dividend payments
D)   principal payments

Question 2

If Dana Dairy Products has credit terms which specify that accounts receivable should be paid in 25 days,the average collection period ________ since 2012.(See Table 3.2)

Accepted Answer

A)   has deteriorated
B)   has remained the same
C)   has improved
D)   cannot be determined

Question 3

Using the DuPont system of analysis,holding other factors constant,an increase in financial leverage will result in ________.

Accepted Answer

A)   an increase in the return on equity
B)   a decrease in the gross profit margin
C)   an increase in the gross profit margin
D)   an increase in retained earnings

Question 4

A firm with a low return on total assets can improve its return on equity,all else remaining the same,by ________.

Accepted Answer

A)   increasing its debt ratio
B)   increasing its total asset turnover
C)   decreasing its debt ratio
D)   decreasing its total asset turnover

Question 5

Which of the following is a limitation of ratio analysis?

Accepted Answer

A)   Financial ratios cannot reveal certain specific aspects of a firm's financial position.
B)   Ratios that reveal large deviations from the norm merely indicate the possibility of a problem.
C)   It is difficult to access audited financial statements for ratio analysis.
D)   Ratio analysis assumes that inflation has no effect on a firm's business.

Question 6

Operating profit is known as ________.

Accepted Answer

A)   earnings after interest and taxes
B)   earnings before interest and taxes
C)   earnings before depreciation and taxes
D)   earnings after tax

Question 7

Generally accepted accounting principles are authorized by the Financial Accounting Standards Board (FASB).

Accepted Answer

A) True 
 B)False

Question 8

The three basic ratios used in the DuPont system of analysis are ________.

Accepted Answer

A)   net profit margin, total asset turnover, and return on investment
B)   net profit margin, total asset turnover, and return on equity
C)   net profit margin, total asset turnover, and equity multiplier
D)   net profit margin, financial leverage multiplier, and return on equity

Question 9

Cross-sectional analysis involves the comparison of different firms' financial ratios at the same point in time.

Accepted Answer

A) True 
 B)False

Question 10

Paid-in capital in excess of par represents the amount of proceeds ________.

Accepted Answer

A)   in deficit of the par value from the original sale of common stock
B)   in excess of the par value from the original sale of common stock
C)   in excess of the par value from the current value of common stock
D)   in excess of the par value from the intrinsic value of common stock

Question 11

Which of the following is a current liability?

Accepted Answer

A)   accounts receivable
B)   cash
C)   notes payable
D)   inventory

Question 12

Table 3.1  Information (2013 values) 
1. Sales totaled $110,000
2. The gross profit margin was 25 percent.
3. Inventory turnover was 3.0.
4. There are 360 days in the year.
5. The average collection period was 65 days.
6. The current ratio was 2.40.
7. The total asset turnover was 1.13.
8. The debt ratio was 53.8 percent.
-Total assets for CEE in 2013 were ________.(See Table 3.1)

Accepted Answer

A)   $ 45,895
B)   $124,300
C)   $ 58,603
D)   $ 97,345

Question 13

Return on total assets (ROA)measures the overall effectiveness of management in generating profits with its available assets.

Accepted Answer

A) True 
 B)False

Question 14

A ________ ratio is commonly used to assess owners' appraisal of the share value.

Accepted Answer

A)   debt
B)   price/earnings
C)   return on equity
D)   return on total assets

Question 15

Time-series analysis is the evaluation of a firm's financial performance in comparison to other firm(s)at the same point in time.

Accepted Answer

A) True 
 B)False

Question 16

The stockholder's report includes ________.

Accepted Answer

A)   an estimated interest cost report
B)   an estimated dividend report
C)   a break-even sales report
D)   a statement of retained earnings

Question 17

Net fixed assets represent the difference between gross fixed assets and accumulated depreciation of fixed assets.

Accepted Answer

A) True 
 B)False

Question 18

Financial leverage multiplier is the ratio of ________.

Accepted Answer

A)   current assets to common stockholders' equity
B)   total assets to common stockholders' equity
C)   total assets to total debt
D)   current assets to current liabilities

Question 19

The 2002 Sarbanes-Oxley Act was designed to ________.

Accepted Answer

A)   limit the compensation that could be paid to corporate CEOs
B)   eliminate the many disclosure and conflict-of-interest problems of corporations
C)   provide uniform international accounting standards
D)   provide the guidelines to minimize the tax

Question 20

In an effort to analyze Clockwork Company finances,Jim realized that he was missing the company's net profits after taxes for the current year.Find the company's net profits after taxes using the following information.
Return on total assets = 2%
Total asset turnover = 0.5
Cost of goods sold = $105,000
Gross profit margin = 0.30

Accepted Answer

Sales = Cost of goods sold/(1 - Gross pr...

Exam 3: Financial Statements and Ratio Analysis

Paid-in capital in excess of par represents the amount of proceeds ________.

Correct Answer
verified

Operating profit is known as ________.

Correct Answer
verified

A ________ ratio is commonly used to assess owners' appraisal of the share value.

Correct Answer
verified

The three basic ratios used in the DuPont system of analysis are ________.

Correct Answer
verified

Correct Answer
verified

Net fixed assets represent the difference between gross fixed assets and accumulated depreciation of fixed assets.

Correct Answer
verified

The stockholder's report includes ________.

Correct Answer
verified

Correct Answer
verified
Sales = Cost of goods sold/(1 - Gross pr...
View Answer

Cross-sectional analysis involves the comparison of different firms' financial ratios at the same point in time.

Correct Answer
verified

If Dana Dairy Products has credit terms which specify that accounts receivable should be paid in 25 days,the average collection period ________ since 2012.(See Table 3.2)

Correct Answer
verified

The 2002 Sarbanes-Oxley Act was designed to ________.

Correct Answer
verified

Return on total assets (ROA)measures the overall effectiveness of management in generating profits with its available assets.

Correct Answer
verified

Financial leverage multiplier is the ratio of ________.

Correct Answer
verified

Which of the following is a limitation of ratio analysis?

Correct Answer
verified

A firm with a low return on total assets can improve its return on equity,all else remaining the same,by ________.

Correct Answer
verified

Generally accepted accounting principles are authorized by the Financial Accounting Standards Board (FASB).

Correct Answer
verified

Time-series analysis is the evaluation of a firm's financial performance in comparison to other firm(s)at the same point in time.

Correct Answer
verified

Using the DuPont system of analysis,holding other factors constant,an increase in financial leverage will result in ________.

Correct Answer
verified

Which of the following is a current liability?

Correct Answer
verified

A firm with a gross profit margin which meets industry standard and a net profit margin which is below industry standard must have excessive ________.

Correct Answer
verified

Exam 3: Financial Statements and Ratio Analysis

Paid-in capital in excess of par represents the amount of proceeds ________.

Correct AnswerverifiedShow Answer

Operating profit is known as ________.

Correct AnswerverifiedShow Answer

A ________ ratio is commonly used to assess owners' appraisal of the share value.

Correct AnswerverifiedShow Answer

The three basic ratios used in the DuPont system of analysis are ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Net fixed assets represent the difference between gross fixed assets and accumulated depreciation of fixed assets.

Correct AnswerverifiedShow Answer

The stockholder's report includes ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedSales = Cost of goods sold/(1 - Gross pr...View AnswerShow Answer

Cross-sectional analysis involves the comparison of different firms' financial ratios at the same point in time.

Correct AnswerverifiedShow Answer

If Dana Dairy Products has credit terms which specify that accounts receivable should be paid in 25 days,the average collection period ________ since 2012.(See Table 3.2)

Correct AnswerverifiedShow Answer

The 2002 Sarbanes-Oxley Act was designed to ________.

Correct AnswerverifiedShow Answer

Return on total assets (ROA)measures the overall effectiveness of management in generating profits with its available assets.

Correct AnswerverifiedShow Answer

Financial leverage multiplier is the ratio of ________.

Correct AnswerverifiedShow Answer

Which of the following is a limitation of ratio analysis?

Correct AnswerverifiedShow Answer

A firm with a low return on total assets can improve its return on equity,all else remaining the same,by ________.

Correct AnswerverifiedShow Answer

Generally accepted accounting principles are authorized by the Financial Accounting Standards Board (FASB).

Correct AnswerverifiedShow Answer

Time-series analysis is the evaluation of a firm's financial performance in comparison to other firm(s)at the same point in time.

Correct AnswerverifiedShow Answer

Using the DuPont system of analysis,holding other factors constant,an increase in financial leverage will result in ________.

Correct AnswerverifiedShow Answer

Which of the following is a current liability?

Correct AnswerverifiedShow Answer

A firm with a gross profit margin which meets industry standard and a net profit margin which is below industry standard must have excessive ________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Sales = Cost of goods sold/(1 - Gross pr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified