ACG3173 Chapter 5 Quiz

Plant, property, and equipment

A manufacturing firm will most likely have the heaviest investment in which type of assets?

d. Merchandise

A retailing firm has which type of inventory? a. Work in process b. Raw materials and merchandise c. Raw Materials d. Merchandise e. Raw materials, work in process, merchandise

fractions usually expressed in percent or times.

In financial statement analysis, ratios are:

to measure the firm's ability to meet its current obligations.

Liquidity ratios can be used:

B. Management is always interested in maximum profitability.

Management is a user of financial analysis. Which of the following comments does not represent a fair statement as to the management perspective? A. Management is interested in the asset structure of the entity. B. Management is always interested in maximum profitability. C. Management is interested in the view of creditors. D. Management is interested in the financial structure of the entity. E. Management is interested in the view of investors.

common-Size Statements.

Statements in which all items are expressed only in relative terms (percentages of a base) are termed:

Relative numbers would be most meaningful for both the large and small firm, especially for inter-firm comparisons.

Suppose you are comparing two firms in the steel industry. One firm is large and the other is small. Which type of numbers would be most meaningful for statement analysis?

A. All of the answers are correct.

Which of the following can offer a type of comparison in financial statement analysis? A. All of the answers are correct. B. Past ratios and figures C. Statistics of competitors D. Industry averages E. None of the answers are correct.

C. Financial analysis can be used to detect apparent liquidity problems.

Which of the following does not represent a problem with financial analysis? A. There are as many ratios for financial analysis as there are pairs of figures. B. Financial statement analysis is an art; it requires judgment decisions on the part of the analyst. C. Financial analysis can be used to detect apparent liquidity problems. D. Some industry ratio formulas vary from source to source. E. Adequate detailed disclosure of how the industry ratios are computed is often lacking.

A. All of the answers are users.

Which of the following would not be a user of financial statements? A. All of the answers are users. B. Management C. Bankers D. Employee unions E. Investment analysts

D. In vertical analysis, a figure from this year's statement is compared with a base selected from the prior statement.

Which of these statements is false? A. Financial ratios are usually expressed in percent or times. B. A ratio can be computed from any pair of numbers. C. Given the large quantity of variables included in financial statements, a very long list of meaningful ratios can be derived. D. In vertical analysis, a figure from this year's statement is compared with a base selected from the prior statement. E. Comparing ratios computed from income statement and balance sheet numbers can create difficulties due to the timing of the financial statements.