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The primary objective of external financial reporting is:


A) to enhance the ability of the company to acquire financial capital from external sources.
B) to accurately provide financial results for tax purposes.
C) to comply with external regulations and requirements of government and professional associations.
D) to provide useful information to decision makers,especially investors and creditors.

E) A) and B)
F) A) and C)

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A company's comparative balance sheet show total assets for 2015 and 2014 as $990,000 and $900,000,respectively.What is the percentage change to be reported in the horizontal analysis?


A) Increase of 10%
B) Increase of 9%
C) Increase of 5%
D) Increase of 4%

E) B) and D)
F) C) and D)

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The income statements for 2014 and 2013 for Purrfect Pets,Inc.are presented below: Purrfect Pets,Inc. Income Statements Year Ended December 31 The income statements for 2014 and 2013 for Purrfect Pets,Inc.are presented below: Purrfect Pets,Inc. Income Statements Year Ended December 31 A.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent. B.Interpret your analysis.Comment on significant changes. A.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent. B.Interpret your analysis.Comment on significant changes.

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Purrfect Pets,Inc.
Income Statements
Yea...

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Net income was $418,600 in 2014 and $364,000 in 2013.The year-to-year percentage change in net income is closest to:


A) 15%.
B) 55%.
C) 87%.
D) 13%.

E) A) and D)
F) B) and C)

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If cost of goods sold remains unchanged,an increase in the inventory turnover rate is indicative of:


A) a reduction in the cost of goods sold.
B) a decrease in inventory.
C) an increase in inventory.
D) an increase in sales revenue.

E) B) and C)
F) A) and D)

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Trend data can be measured in dollar amounts or percentages.

A) True
B) False

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A company provided the following information: A company provided the following information: There was no change in contributed capital this year and there were no dividends declared in the current year.The return on equity ratio for the current year is closest to: A) 20.7%. B) 75%. C) 3.8%. D) 1.33%. There was no change in contributed capital this year and there were no dividends declared in the current year.The return on equity ratio for the current year is closest to:


A) 20.7%.
B) 75%.
C) 3.8%.
D) 1.33%.

E) B) and D)
F) All of the above

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Which of the following measures would assist in assessing the profitability of a company?


A) Debt-to-assets ratio.
B) Fixed asset turnover ratio.
C) Receivables turnover ratio.
D) Current ratio.

E) B) and C)
F) A) and D)

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Company X has net sales revenue of $1,250,000,cost of goods sold of $760,000,and all other expenses of $290,000.The beginning balance of stockholders' equity is $400,000 and the beginning balance of fixed assets is $361,000.The ending balance of stockholders' equity is $600,000 and the ending balance of fixed assets is $389,000.The return on equity (ROE) ratio is closest to:


A) 0.53.
B) 2.50.
C) 3.33.
D) 0.40.

E) A) and B)
F) A) and C)

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Use the information above to answer the following question.Which of the following is closest to the fixed asset turnover ratio?


A) 2.65
B) 1.72
C) 4.25
D) 3.80

E) C) and D)
F) A) and D)

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When evaluating its net profit margin for 2015,Coca Cola would most likely use all of the following benchmarks except:


A) Anheuser Busch's net profit margin for 2015.
B) Coca Cola's net profit margin for 2014.
C) Pepsico's net profit margin for 2015.
D) The average net profit margin for the soft drink manufacturing industry for 2015.

E) A) and B)
F) A) and C)

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Use the information above to answer the following question.Which of the following is closest to the company's debt to assets ratio for the current year?


A) 0.20
B) 0.67
C) 0.17
D) 0.33

E) B) and D)
F) B) and C)

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Which of the following is generally the most useful in analyzing companies of different size?


A) Comparative financial statements.
B) Horizontal analysis.
C) Common size financial statements.
D) Trend analysis.

E) A) and D)
F) All of the above

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Net sales divided by average total assets is the calculation for which of the following ratios?


A) Net profit margin
B) Asset turnover
C) Current ratio
D) Return on assets

E) None of the above
F) B) and D)

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Special items such as gains or losses relating to changes in the value of certain balance sheet accounts are reported below the net income line on the income statement.

A) True
B) False

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Which of the following statements is true regarding the relationship of the debt-to-assets ratio and the debt-to-equity ratio?


A) Debt to assets is usually greater than debt to equity.
B) Debt to assets is usually less than debt to equity
C) Debt to assets is usually equal to debt to equity.
D) There is no constant relationship between these two ratios.

E) All of the above
F) None of the above

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How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:


A) large percentage of assets and inventory costs are stable.
B) large percentage of assets and inventory costs are not stable.
C) small percentage of assets and inventory costs are not stable.
D) small percentage of assets and inventory costs are stable.

E) A) and C)
F) A) and B)

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If you wish to examine how one aspect of a business is doing relative to other aspects of the business at the current time,you are most likely to use:


A) time-series analysis.
B) ratio analysis.
C) horizontal analysis.
D) cross-sectional analysis.

E) C) and D)
F) B) and D)

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A trend analysis to determine a year-to-year dollar amount change is calculated by:


A) subtracting the previous period amount from the current amount.
B) subtracting the current period amount from the previous period amount.
C) subtracting the current period amount from the previous period amount and then dividing the result by the previous period amount.
D) subtracting the previous period amount from the current period amount and then dividing the result by the current period amount.

E) A) and B)
F) A) and D)

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Which of the following is not a similarity of GAAP and IFRS?


A) They both generally require that an exchange take place before a transaction is recorded.
B) They both promote information that is relevant and that faithfully represents the underlying transactions.
C) They both include rules regarding recognition,classification,and measurement of transactions.
D) They both allow fixed assets to be reported at fair values.

E) None of the above
F) All of the above

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