AACT CHP. 10-12

The number of shares outstanding is equal to the number of shares issued by the company minus the number of the company's own shares that it has purchased.

True

Earnings per share (EPS) is:

Useful in comparing earnings performance for the same company over time.

Which of the following types of analysis allows for the comparison of financial statement items between companies of different size?

Vertical analysis

Authorized stock is the number of shares that have been sold to investors.

false - Authorized stock is the total number of shares available to sell, stated in the company's articles of incorporation. Issued stock is the number of shares that have been sold to investors.

When using vertical analysis, we express income statement accounts as a percentage of:

sales

All publicly held corporations in the United States are regulated by the Securities and Exchange Commission.

true

Horizontal analysis analyzes trends in financial statement data for a single company over time.

true

Retained earnings represent the earnings of the corporation that have not been distributed as dividends to stockholders.

true

The average days in inventory converts the inventory turnover ratio into days.

true

A corporation has limited liability and attracting outside investment is easier relative to sole proprietorships and partnerships.

TRUE

Limited liability means that even in the event of bankruptcy, stockholders in a corporation can lose no more than the amount they invested in the company.

TRUE

Owners in a sole proprietorship or a partnership can be held personally liable for debts the company has incurred, over and beyond the investment they have made.

TRUE

Authorized common stock refers to the total number of shares:

That can be issued.

To perform a vertical analysis of a balance sheet, you would divide each line item on the statement by:

Total assets.

A low current ratio indicates that a company has sufficient current assets to pay current liabilities as they become due.

false

Authorized stock is the number of shares that have been sold to investors.

false

Dividends are paid on all shares issued by the company including treasury stock.

false

The price-earnings (PE) ratio compares a company's share price with its earnings per share.

true

We use the times interest earned ratio to compare interest payments with a company's income available to pay those charges.

true