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Test Bank For Financial Accounting, 16 th
Edition By Carl Warren, Jefferson Jones, William Tayler (All Chapters 1-14, 100% Original Verified, A+ Grade) All Chapters Arranged
Reverse: 14-1
This is The Original Test Bank For 16 th Edition, All other Files in The Market are Fake/Old/Wrong Edition. 1 / 4
1. Comparative financial statements are designed to compare the financial statements of two or more corporations.a. True b. False
ANSWER: False
2. In horizontal analysis, the current year is normally used as the base year.a. True b. False
ANSWER: False
3. On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.a. True b. False
ANSWER: False
4. The analysis of increases and decreases in the amount and percentage of comparative financial statement items is referred to as horizontal analysis.a. True b. False
ANSWER: True
5. A 15% change in sales will result in a 15% change in net income.a. True b. False
ANSWER: False
6. A financial statement showing each item on the statement as a percentage of one key item on the statement is called a common-sized financial statement.a. True b. False
ANSWER: True
7. The relationship of each asset item as a percent of total assets is an example of vertical analysis.a. True b. False
ANSWER: True
8. Vertical analysis refers to comparing the financial statements of a single company over several years.a. True b. False ANSWER: False CopyrightCengageLearning.Poweredby Cognero.Page 1Name: Class: Date: Chapter 14: Financial Statement Analysis 2 / 4
9. In a common-sized income statement, each item is expressed as a percentage of net income.a. True b. False
ANSWER: False
10. In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.a. True b. False
ANSWER: False
11. Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.a. True b. False
ANSWER: False
12. In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.a. True b. False
ANSWER: False
13. Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency, profitability, and liquidity.a. True b. False
ANSWER: True
14. The excess of current assets over current liabilities is referred to as working capital.a. True b. False
ANSWER: True
15. Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.a. True b. False ANSWER: True CopyrightCengageLearning.Poweredby Cognero.Page 2Name: Class: Date: Chapter 14: Financial Statement Analysis 3 / 4
16. Using measures to assess a business's ability to pay its current liabilities is called current position analysis.a. True b. False
ANSWER: True
17. Current position analysis is used by short-term creditors to assess how quickly they will be repaid.a. True b. False
ANSWER: True
18. An advantage of the current ratio is that it considers the makeup of the current assets.a. True b. False
ANSWER: False
19. If two companies have the same current ratio, their ability to pay short-term debt is the same.a. True b. False
ANSWER: False
20. The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.a. True b. False
ANSWER: False
21. A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.a. True b. False
ANSWER: True
22. If a firm has a current ratio of 2, the subsequent collection of a 60-day note receivable on account will cause the ratio to decrease.a. True b. False ANSWER: False CopyrightCengageLearning.Poweredby Cognero.Page 3Name: Class: Date:
Chapter 14: Financial Statement Analysis
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