Question

1. A common size financial statement is a useful tool in performance evaluation because it enables the user to:

A.        compare one company’s performance in different periods.

B.         evaluate the direction a business is taking over a longer period of time.

C.         evaluate relationships between key components in the financial statements.

D.        compare companies of different sizes in the same industry.

2.         Comparing one company against a competitor or against industry averages is called:

            A.        benchmarking.

B.         comparative analysis.

C.         horizontal analysis.

D.        cost benefit analysis.

3.         The following amounts were selected from ABC company’s income statements:
                       

	Year 4	Year 3	Year 2	Year 1
Net Sales	$155,000	$150,000	$130,000	$100,000

Using trend analysis and Year 1 as the base year, the trend percentage for Year 4 is:

1. 35%.                            C.         100%.
2. 55%.                            D.         155%.

4.         The accounts receivable turnover shows the:

1. proportion of assets financed with debt.
2. ability to collect receivables.
3. ability to collect cash from credit customers.
4. number of times a company sells its average level of inventory during the year.

5.         Which of the following is NOT a measure of a company’s ability to pay its current liabilities?

1. Current ratio
2. Working capital
3. Debt ratio
4. Acid-test (quick) ratio

6.         Which of the following help measure a company’s profitability?

1. Price/earnings ratio
2. Rate of return on total assets
3. Times-interest-earned ratio
4. Current ratio

7.         A company’s balance sheet reports:

Cash	$ 50,000
Accounts Receivable	75,000
Inventory	110,000
Plant & Equipment	95,000
Total Assets	$330,000
Current Liabilities	$105,000
Long-term liabilities	110,000
Stockholders' equity	115,000
Total Liabilities & Stockholders' Equity	$330,000

           

The debt ratio is:

1. 0.65.                             C.         1.19.
2. 0.95.                             D.         1.87.

8.         Shaker Corporation was organized on January 1 of the current year with 200,000 shares of $15 par value common stock authorized with 100,000 shares issued on that date. No other changes in common stock occurred during the year. The annual preferred stock dividend is $30,000. Net income for the current year was $400,000. What was the earnings per share reported on the income statement for the current year?

1. $1.85
2. $2.00
3. $3.70
4. $4.00

Answer 1