accounting questions chapter 1- 20
Chapter 14
Financial Statement Analysis
True / False Questions 1. Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time.
True False 2. The quick ratio is especially useful in evaluating the liquidity of a company with fast moving inventories.
True False 3. Deducting the cost of goods sold from net income gives us operating income.
True False 4. The gross profit rate is gross profit expressed as a percentage of net sales.
True False 5. The gross profit rate usually is lowest on fast moving merchandise and highest on specialty and novelty products.
True False 6. When an income statement does not show gross profit or operating income it is called a consolidated statement.
True False 7. ROE - return on equity - is measured by dividing net income by average number of shares outstanding.
True False 8. The yield rate on stock is measured by dividing dividends per share by market price per share.
True False 9. The trend in ratios is usually more useful than looking at a single year's ratio.
True False 10. The acid test ratio includes marketable securities but does not include accounts receivable.
True False 11. Comparative financial statements show side-by-side financial data for two or more companies.
True False 12. 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.
True False 13. If total current assets are $140,000 at the end of Year 1, increase by $50,000 by the end of Year 2, and increase by $50,000 in Year 3, the percentage increase over the preceding year is less in Year 3 than in Year 2.
True False 14. Working capital is the excess of current assets over current liabilities.
Financial Statement Analysis
True / False Questions 1. Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time.
True False 2. The quick ratio is especially useful in evaluating the liquidity of a company with fast moving inventories.
True False 3. Deducting the cost of goods sold from net income gives us operating income.
True False 4. The gross profit rate is gross profit expressed as a percentage of net sales.
True False 5. The gross profit rate usually is lowest on fast moving merchandise and highest on specialty and novelty products.
True False 6. When an income statement does not show gross profit or operating income it is called a consolidated statement.
True False 7. ROE - return on equity - is measured by dividing net income by average number of shares outstanding.
True False 8. The yield rate on stock is measured by dividing dividends per share by market price per share.
True False 9. The trend in ratios is usually more useful than looking at a single year's ratio.
True False 10. The acid test ratio includes marketable securities but does not include accounts receivable.
True False 11. Comparative financial statements show side-by-side financial data for two or more companies.
True False 12. 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.
True False 13. If total current assets are $140,000 at the end of Year 1, increase by $50,000 by the end of Year 2, and increase by $50,000 in Year 3, the percentage increase over the preceding year is less in Year 3 than in Year 2.
True False 14. Working capital is the excess of current assets over current liabilities.