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Financial Accounting Question Test IFS No. 6 On Interpretation Of Financial Statement
True Or False
1. Financial statements that reflect financial data for two or more periods are often referred to as comparative statements
· True · False
2. Development of data that measures changes occurring from one accounting period to another is a form of horizontal analysis
· True · False
3. One form of horizontal analysis is the development of an index-number trend series
· True · False
4. When preparing an index-number trend series, the first year presented must always be the base(100%)
· True · False
5. Index numbers can only be computed when amounts are positive
a. True b. False
6. Common-size financial statements are a widely used vertical analysis technique.
· True · False
7. A common-size income statement usually shows each revenue or expense item as a percentage of net sales
· True · False
8. Comparability between enterprises is more difficult to obtain than comparability within a single enterprise.
a. True b. False
9. Computation of ratios for an accounting period is a form of horizontal analysis
· True · False
10. Generally, the first concern of a financial analyst is a firm’s liquidity
· True · False
11. The working capital ratio is regarded as a fundamental measurement of a company’s liquidity
a. True b. False
12. Normally, an analyst would believe that a manufacturing company with a current ratio of 3 to 1 was in serious liquidity trouble.
· True · False
13. The acid-test ratio is regarded primarily as a measure of a company’s long-term liquidity situation
· True · False
14. Usually a quick ratio of 1.5 to 1 would be considered satisfactory.
a. True b. False
15. The accounts receivable turnover is both a measure of liquidity and a measure of activity
· True · False
16. Average receivables may also be expressed in terms of the number of days’ sales in receivables
· True · False
17. The receivable position and the approximate collection time may be evaluated by computing the accounts receivable turnover
c. True d. False
18. The inventory turnover is computed by dividing cost of goods sold by average inventory
· True · False
19. A natural business year relates to a fiscal year ending when operations are at their lowest point
· True · False
20. Normally a relatively low inventory turnover is desirable
a. True b. False
21. The ratio of the net sales to total sales is often called the profitability ratio
· True · False
22. The ratio called profit margin on sales is a measure of the profit percentage per dollar of sales
· True · False
23. Return on investment(ROI) is a measure of overall asset productivity
· True · False
24. The price earning ratio is a measure of the relative attractiveness of common stock as an investment
· True · False
25. The use of borrowed funds is known as trading on the equity.
· True · False |
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