Question 1

If a company has current assets totaling $56,000 and current liabilities totaling $40,500, then the company's working capital totals $15,500.

Accepted Answer

True

Question 2

The excess of current liabilities over quick assets is referred to as working capital.

Accepted Answer

False

Question 3

The percentage analysis of the relationship of each component in a financial statement to a total within the statement is referred as vertical analysis.

Accepted Answer

True

Question 4

If the current credit terms are 2/10, n/30 for Jones Inc., an accounts receivable turnover of 3 for the current year would be considered normal.

Accepted Answer

The answer of If the current credit terms are 2/10,...

Question 5

Solvency analysis focuses on the ability of a business to make a profit.

Accepted Answer

The answer of Solvency analysis focuses on the ability of...

Question 6

The ratio of current assets to current liabilities is referred to as the acid-test ratio.

Accepted Answer

The answer of The ratio of current assets to current...

Question 7

The relationship of each asset item as a percent of total assets is an example of horizontal analysis.

Accepted Answer

The answer of The relationship of each asset item as...

Question 8

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the income tax expenses as a percentage of net sales must be 90%.

Accepted Answer

The answer of Using vertical analysis of the income statement,...

Question 9

The terms acid-test ratio and quick ratio refer to the same ratio which measures the instant debt-paying ability of a company.

Accepted Answer

The answer of The terms acid-test ratio and quick ratio...

Question 10

The days' sales in inventory is one means of expressing the relationship between net sales and accounts receivable.

Accepted Answer

The answer of The days' sales in inventory is one...

Question 11

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

Accepted Answer

The answer of If a firm has a quick ratio...

Question 12

Current position analysis indicates a company's ability to liquidate current liabilities.

Accepted Answer

The answer of Current position analysis indicates a company's ability...

Question 13

Statements in which all items are expressed as percentages with no dollar amounts are called common-sized statements.

Accepted Answer

The answer of Statements in which all items are expressed...

Question 14

A balance sheet shows cash, $75,000; marketable securities, $110,000; receivables, $90,000; and $225,000 of inventories.Current liabilities are $200,000.The current ratio is 1.375 to 1.

Accepted Answer

The answer of A balance sheet shows cash, $75,000; marketable...

Question 15

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Accepted Answer

The answer of If the accounts receivable turnover for the...

Question 16

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Accepted Answer

The answer of The percentage analysis of increases and decreases...

Question 17

The relationship of 120 to 100 can be expressed as 1.2, 1.2:1, or 120%.

Accepted Answer

The answer of The relationship of 120 to 100 can...

Question 18

A company's assets are comprised of the following: Cash, $25,000; Receivables, $5,600; Marketable Securities, $7,200; and Equipment, $65,000.The total of quick assets is $37,800.

Accepted Answer

The answer of A company's assets are comprised of the...

Question 19

The comparison of the financial data of a single company for two or more years is called horizontal analysis.

Accepted Answer

The answer of The comparison of the financial data of...

Question 20

"Working capital" is another term for the current ratio.

Accepted Answer

The answer of "Working capital" is another term for the...

Quiz 9: Metric Analysis of Financial Statements