Accounting: Balance Sheet and Financial Statements

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MULTIPLE CHOICE

1. The percentage analysis of increases and decreases in individual items in comparative financial statements is called a. vertical analysis
b. solvency analysis
c. profitability analysis
d. horizontal analysis

2. Which of the following below generally is the most useful in analyzing companies of different sizes a. comparative statements
b. common-sized financial statements
c. price-level accounting
d. audit report

3. The percent of fixed assets to total assets is an example of e. vertical analysis
f. solvency analysis
g. profitability analysis
h. horizontal analysis
.
4. An analysis in which all the components of an income statement are expressed as a percentage of net sales is called i. vertical analysis
j. horizontal analysis
k. liquidity analysis
l. common-size analysis

5. A balance sheet that displays only component percentages is called m. trend balance sheet
n. comparative balance sheet
o. condensed balance sheet
p. common-sized balance sheet

6. One reason that a common-size statement is a useful tool in financial analysis is that it enables the user to q. judge the relative potential of two companies of similar size in different industries r. determine which companies in a single industry are of the same value s. determine which companies in a single industry are of the same size t. make a better comparison of two companies of different sizes in the same industry

7. Under which of the following cases may a percentage change be computed? u. There is no amount in the base year.
v. There is a negative amount in the base year and a negative amount in the subsequent year. w. The trend of the amounts is decreasing but all amounts are positive. x. There is a negative amount in the base year and a positive amount in the subsequent year.

8. In a common size balance sheet, the 100% figure is:
y. total property, plant and equipment
z. total current assets
{. total liabilities
|. total assets

9. Horizontal analysis is a technique for evaluating financial statement data }. for one period of time
~. over a period of time
. on a certain date
. as it may appear in the future

10. Horizontal analysis of comparative financial statements includes the . development of common size statements
. calculation of liquidity ratios
. calculation of dollar amount changes and percentage changes from the previous to the current year . evaluation of financial statement data

11. In horizontal analysis, each item is expressed as a percentage of the . base year figure
. retained earnings figure
. total assets figure
. net income figure

12. The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as . solvency and leverage
. solvency and profitability
. solvency and liquidity
. solvency and equity

Accounts payable$ 30,000
Accounts receivable65,000
Accrued liabilities7,000
Cash20,000
Intangible assets40,000
Inventory72,000
Long-term investments100,000
Long-term liabilities75,000
Marketable securities36,000
Notes payable (short-term)20,000
Property, plant, and equipment625,000
Prepaid expenses2,000

13. Based on the above data, what is the amount of quick assets? . $163,000
. $195,000
. $121,000
. $56,000

14. Based on the above data, what is the amount of working capital? . $238,000
. $138,000
. $178,000
. $64,000

15. Based on the above data, what is the quick ratio, rounded to one decimal point? . 2.4
. 3.4
. 2.1
. 1.5

16. Which of the following is...
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