Question1

Your answer is correct.

The relationship between current assets and current liabilities is important in evaluating a
company's

profitability.

liquidity.

market value.

solvency.

Question 2
Your answer is correct.

Which of the following is a measure of liquidity?

Debt to equity ratio

Working capital

Earnings per share

Profit margin

Question 3

Your answer is correct.

Current assets divided by current liabilities is known as the

working capital

profit margin.

current ratio.

capital structure.

Question4
Correct.

Danner Corporation reported net sales of $600,000, $680,000, and $800,000 in the years
2011, 2012, and 2013, respectively. If 2011 is the base year, what percentage do 2013 sales
represent of the base?

33%

133%

113%

75%

Question 5
Correct.

In analyzing financial statements, horizontal analysis is a

tool.

principle.

requirement.

theory.

Question6
Correct.

Comparative balance sheets

do not show both dollar amount and percentage changes.

do not show a comparison of total stockholders' equity.

are usually prepared for at least one year.

are usually prepared for at least two years.

Question7
Correct.

Assume the following cost of goods sold data for a company:

2013

$1,500,000

2012

1,200,000

2011
1,000,000
If 2011 is the base year, what is the percentage increase in cost of goods sold from 2011 to
2013?

50%

67%

150%

20%

Question 8
Correct.

Comparisons of data within a company are an example of the following comparative basis:

Interregional.

Intracompany.

Intercompany.

Industry averages.

Question 9
Correct.

The following schedule is a display of what type of analysis?

Amount
Current assets
Property, plant, and equipment
Total assets

Horizontal analysis

Ratio analysis

Differential analysis

Vertical analysis

Question 10
Correct.

A common measure of profitability is the

current ratio.

Percent

$100,000

25%

300,000

75%

$400,000

100%

current cash debt coverage ratio.

debt to total assets.

return on common stockholders' equity ratio.

Question11
Correct.

Which one of the following would be considered a long-term solvency ratio?

Receivables turnover

Current cash debt coverage ratio

Return on total assets

Debt to total assets ratio

Question 12
Correct.

The current ratio is

calculated by subtracting current liabilities from current assets.

calculated by dividing current liabilities by current assets.

used to evaluate a company's solvency and long-term debt paying ability.

used to evaluate a company's liquidity and short-term debt paying ability.

Question 13
Correct.

Richards, Inc. has the following income statement (in millions):

RICHARDS, INC.
Income Statement
For the Year Ended December 31, 2012
Net Sales

$180

Cost of Goods Sold

Gross Profit

60
120

Operating Expenses
Net Income

75
$ 45

Using vertical analysis, what percentage is assigned to net income?

A.100%

B.75%

C.25%

D.None of the above.