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Exam 14: Financial Statement Analysis

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Question 71

Multiple Choice

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Supreme's return on assets was:

A) 9.75%.
B) 6.75%.
C) 17.75%.
D) 30.75%.

E) None of the above
F) B) and C)

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Question 72

True/False

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The quality of earnings tends to be higher for a company that uses straight-line depreciation and defers costs whenever possible than for a company which uses accelerated depreciation and defers costs only when necessary.

A) True
B) False

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Question 73

Multiple Choice

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Comparative financial statements compare the company's current statements with:

Noble's gross profit rate was:

Which of the following usually is least important as a measure of short-term liquidity?

The Piazza Company has working capital of $540,000 and current assets of $810,000. The current ratio is:

The debt ratio is computed by dividing total liabilities by current assets.

Measures of solvency and credit risk Shown below are selected items appearing in a recent balance sheet of Grant Products. (Dollar amounts are in thousands.) (a) Compute the following: (1) Total quick assets $____________ (2) Total current assets $____________ (3) Total current liabilities $____________ (4) Quick ratio ______ to 1 (5) Current ratio ______ to 1 (b) Research indicates an industry average quick ratio is 1.3 to 1, and a current ratio of 2.3 to 1. Based upon this information, does Grant Products appear more or less solvent than the average company in its industry? Explain briefly.

If a retail store has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is:

A company should carry the amount of working capital necessary to conduct operations, not necessarily maximize its working capital.

The inventory turnover rate indicates how quickly inventory sells.

Eleva Corporation's days to collect accounts receivable for 2011 is:

ROI: What and why? In general terms, what do all "ROI" ratios measure? Why are such computations useful?

The changes in financial statement items from a base year to following years are called:

Assume that net sales are increasing faster than the rate of inflation, and that the company's gross profit rate is rising. Of the following, the most logical conclusion is that:

If a retail store has a current ratio of 2.5 and working capital of $117,000. What are the total of the current assets?

A company's liquidity refers to its ability to remain profitable.

When an income statement does not show gross profit or operating income it is called a consolidated statement.

The price-earnings ratio is measured by dividing:

The current ratio: