Financial Accounting Test Question IFS No 5 On Interpretation Of Financial Statements

Financial Accounting Test Question IFS No.5 On Interpretation Of Financial Statements:




1.      Comparisons between financial statements are most informative and useful if


a.      Any changes in circumstances of the underlying transaction are made known

b.      The presentation are in good form

c.      Accounting principles are not changed

d.      All of the above



2.      A company reported sales of $300,000 in 2005, the base year. Sales were $360,000 in 2006 and $450,000 in 2007. In the presentation of an index-number trend series, the sales index for 2007 should be reported as: 


a.      67

b.    100

c.    120

d.    150



3.      The current ratio is also known as the: 


a.  Turnover ratio  

b.  Working capital ratio

c.  Acid test ratio

d.  Liquidity ratio



4.      Sales for the year totaled $400,000; cost of goods sold $240,000;beginning inventory,$30,000;ending inventory$50,000; average trade receivables for the year,$80,000. The inventory turnover rate was: 


a. 5

b. 6

c. 8   

d. 10      



5.      A measure of the overall efficiency of asset utilization is the:


a.  Earnings per share

b.  Receivable turnover rate

c.  Asset turnover rate

d.  Acid-test ratio



6.      The ratio of income to sales determines the:


a.  Asset turnover

b.  Inventory turnover

c.  Rate earned on assets

d.  None of the above




7.      If stockholders have provided 80% and creditors have provided 20% of total assets, this can be referred to as:


a.     Trading on the equity

b.     Equity to debt ratio of 4 to 1

c.     Applying leverage

d.     All of the above are correct


8.      A company reported income after income tax of $100,000;income tax expense$40,000; interest earned on investments, $20,000;interest paid on bonds outstanding,$60,000. The number of times interest was earned would be: 


a.   3.3

b.   3.0

c.   2.3

d.   1.7



9.     If a company’s capital structure does not qualify as simple: 


a.   Both a primary and a fully diluted earnings per share amount must    be reported   

b.   Only one earnings per share amount is normally required

c.   The company cannot have stock options outstanding

d.   It is not necessary to determine weighted average number of shares outstanding




10.    A company had 80,000 shares of stock outstanding on January 1. On March 31, the company sol an additional 20,000 shares; a 3-for-1 stock split was distributed on July 15; and an additional 20,000 shares were sold on November 1. The weighted average number of shares to be used in determining earnings per share for the year would be: 


a.     95,000 

b.   320,000

c.   238,333

d.  288,333



11.    A company ha 90,000 shares of common stock outstanding at the beginning of the year, sold an additional 60,000 shares on May 1 and had income for the year of $26,000. Earnings per share for the year would be:


a. $0.14    

b. $0.17

c. $0.20

d  $0.29


12.    A company had 100,000 shares of common stock and 100,000 shares of cumulative nonconvertible preferred stock outstanding throughout the year. The dividend on the preferred stock was 70 ct per share. If the company reported income of $100,000 for the year, what amount of earnings per share should be reported?


a. $0.30

b. $0.70 

c. $1.00

d  None of the above.




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