Accounting Final Multiple Choice Ch 10,11,13

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

B. Asset turnover

Which of the following could indicate bad news? A. An increase in asset turnover ratio. B. A decrease in days to sell. C. A decrease in EPS. D. A decrease in the debt to assets ratio.

C. A decrease in EPS.

Which of the following statements follows from the controllability principle? A. A profit center manager should be evaluated based on residual income, not return on investment. B. An investment center manager should be evaluated based on return on investment, not residual income. C. A profit center manager should be evaluated based on segment margin, not profit margin. D. A cost center manager should be evaluated on costs and revenues, not just costs.

C. A profit center manager should be evaluated based on segment margin, not profit margin.

Which of the following is calculated by dividing net sales by average total assets? A. Net profit margin. B. Fixed asset turnover. C. Asset turnover ratio. D. Current ratio.

C. Asset turnover ratio.

If an analyst wanted to examine a company's long-run ability to survive, which of the following would best be considered? A. Liquidity. B. Market share. C. Profitability. D. Solvency.

D. Solvency.

Which of the following methods is calculated as annual net income as a percentage of the original investment in assets? A. Accounting rate of return B. Payback period C. Net present value D. Internal rate of return

A. Accounting rate of return

Which of the following measures would assist in assessing the profitability of a company? A. Asset turnover. B. Times interest earned ratio. C. Inventory turnover ratio. D. Debt to assets ratio.

A. Asset turnover.

The responsibility center in which the manager does not have responsibility and authority over revenues is A. a cost center. B. an investment center. C. a profit center. D. a revenue center.

A. a cost center.

When comparing mutually exclusive capital investments, managers should A. choose the option with the lowest cost on a net present value basis. B. choose the option with the lowest undiscounted cost. C. not use net present value because it cannot be used to compare investments. D. not use sensitivity analysis.

A. choose the option with the lowest cost on a net present value basis.

An increase in the gross profit percentage indicates that: A. cost of goods sold as a percentage of sales has decreased. B. cost of goods sold as a percentage of sales has increased. C. operating expenses as a percentage of sales have increased. D. operating expenses as a percentage of sales have decreased.

A. cost of goods sold as a percentage of sales has decreased.

A problem in which you must calculate how much money you will have in the future as a result of investing a certain amount in the present is a A. future value of a single amount problem. B. present value of a single amount problem. C. future value of an annuity problem. D. present value of an annuity problem.

A. future value of a single amount problem.

A positive net present value indicates that a project will A. generate a return in excess of the firm's cost of capital. B. generate more cash than is initially invested. C. generate more cash than alternative projects. D. generate a return in excess of alternative projects.

A. generate a return in excess of the firm's cost of capital.

The transfer pricing method that uses the price the company would charge external customers is the A. market price method. B. cost-based method. C. negotiation. D. balanced scorecard method.

A. market price method.

If net income is rising, but sales and the gross profit percentage remain the same, then: A. operating expenses are falling. B. operating expenses are rising. C. cost of goods sold is falling. D. cost of goods sold is rising.

A. operating expenses are falling.

A decision that requires managers to choose from among a set of alternative capital investment opportunities is a(n) A. preference decision. B. capital decision. C. screening decision. D. incremental analysis.

A. preference decision.

The value now of a cash flow to be received in the future is called A. present value. B. cash value. C. future value. D. accounting value.

A. present value.

Independent projects should be prioritized according to their A. profitability index. B. net present value. C. payback period. D. total cash flows.

A. profitability index.

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.

A. subtracting the previous period amount from the current amount.

. The internal rate of return is a measure of A. the rate actually earned by the project, considering the time value of money. B. the rate actually earned by the project, based on accounting income. C. the rate used to discount the future cash flows to reflect the time value of money. D. the firm's cost of capital.

A. the rate actually earned by the project, considering the time value of money.

Which of the following capital budgeting methods focuses on net income rather than cash flows? A. Payback period B. Accounting rate of return C. Net present value D. Internal rate of return

B. Accounting rate of return

Which of the following statements regarding liquidity and solvency ratios is true? A. Unlike solvency ratios, liquidity ratios relate to the company's long-run survival. B. Both liquidity ratios and solvency ratios measure a company's ability to meet its financial obligations. C. Liquidity ratios include the return on equity ratio and the times interest earned ratio. D. Solvency ratios include the current ratio and the net profit margin ratio.

B. Both liquidity ratios and solvency ratios measure a company's ability to meet its financial obligations.

Which of the following is the primary tool used by cost centers to manage costs? A. Return on investment B. Budgetary control system C. Balanced scorecard D. Transfer pricing

B. Budgetary control system

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.

B. Debt to assets is usually less than debt to equity

In what type of organization is decision-making authority spread throughout the organization? A. Centralized organization B. Decentralized organization C. Participative organization D. Top-down organization

B. Decentralized organization

Which of the following would be included in net income but not in annual cash flows? A. Sales revenue B. Depreciation C. Initial investment D. Direct labor

B. Depreciation

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.

B. Fixed asset turnover ratio.

Which of the following statement regarding the payback method is incorrect? A. The payback period is the amount of time it takes for a capital investment to "pay for itself." B. In general, projects with longer payback periods are safer investments than those with shorter payback periods. C. When cash flows are equal each year, the payback period is calculated by dividing the initial investment in the project by its annual cash flow. D. The payback method is often used as a screening tool for potential investments.

B. In general, projects with longer payback periods are safer investments than those with shorter payback periods.

When cash flows are equal each year, the payback period is calculated as: A. Initial investment × Annual net cash flow B. Initial investment/Annual net cash flow C. Annual net cash flow/Initial investment D. Annual net cash flow - Initial investment/Project life

B. Initial investment/Annual net cash flow

Almond, Inc uses a balanced scorecard. One of the measures on the scorecard is the average education level of the firm's managers. Which balanced scorecard perspective would this measure most likely fit into? A. Customer perspective B. Learning and growth perspective C. Internal business perspective D. Financial perspective

B. Learning and growth perspective

Net income divided by Net sales is the calculation for which of the following ratios? A. Return on equity ratio. B. Net profit margin ratio. C. Current ratio. D. Asset turnover ratio

B. Net profit margin ratio.

Profit margin can be calculated as A. Sales revenue/average invested assets B. Operating income/sales revenue C. Operating income/average invested assets D. Average invested assets/sales revenue

B. Operating income/sales revenue

.Which of the following is not an advantage of decentralization? A. Allows top managers to focus on strategic issues B. Potential duplication of resources C. Allows for development of managerial expertise D. Managers can react quickly to local information

B. Potential duplication of resources

Which of the following is not an advantage of decentralization? A. Allows top managers to focus on strategic issues B. Potential duplication of resources C. Allows for development of managerial expertise D. Managers can react quickly to local information

B. Potential duplication of resources

Which of the following ratios is calculated by dividing liquid assets by current liabilities? A. Current ratio. B. Quick ratio. C. Turnover ratio. D. Working capital ratio.

B. Quick ratio.

Which of the following is calculated by dividing net income by average total stockholders' equity? A. Return on assets ratio. B. Return on equity ratio. C. Earnings per share. D. Net profit margin ratio.

B. Return on equity ratio.

Which of the following is not a perspective used by the balanced scorecard? A. Financial B. Short-term C. Customer D. Learning and growth

B. Short-term

Which of the following could explain why a company has a lower net profit margin ratio but a higher EPS than one of its competitors? A. The company sells a higher percentage of goods on credit. B. The company has fewer shares of outstanding common stock relative to its net income. C. The company earns a higher percentage of net income from non-operating activities. D. The company pays a higher dividend.

B. The company has fewer shares of outstanding common stock relative to its net income.

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.

B. a decrease in inventory.

The responsibility center in which the manager has responsibility and authority over revenues, costs and assets is A. a cost center. B. an investment center. C. a profit center. D. a revenue center.

B. an investment center.

One of the most important concepts in responsibility accounting is the A. balanced scorecard. B. controllability principle. C. related-party transactions. D. transfer price

B. controllability principle.

The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the A. market price method. B. cost-based method. C. negotiation. D. balanced scorecard method.

B. cost-based method

A current ratio of 2.5 means that for every dollar of: A. accounts payable, there is $2.50 of cash. B. current liabilities, there is $2.50 of current assets. C. current assets, there is $2.50 of current liabilities. D. total liabilities, there is $2.50 of cash.

B. current liabilities, there is $2.50 of current assets.

A debt to assets ratio of .50 indicates that the company has: A. more liabilities than stockholders' equity. B. equal amounts of liabilities and stockholders' equity. C. more stockholders' equity than liabilities. D. no liabilities.

B. equal amounts of liabilities and stockholders' equity.

If the ROI of a project is greater than the hurdle rate, the residual income will be A. equal to operating income. B. greater than zero. C. greater than operating income. D. greater than average invested assets.

B. greater than zero.

Solvency ratio data are primarily concerned with the ability of a company to: A. produce profits. B. handle its debt. C. manage its cash flow. D. provide income for stockholders.

B. handle its debt.

A problem in which you must calculate the worth to you today of receiving a certain amount at some time in the future is a A. future value of a single amount problem. B. present value of a single amount problem. C. future value of an annuity problem. D. present value of an annuity problem.

B. present value of a single amount problem.

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.

B. ratio analysis.

Although the inventory turnover ratio is an important analytical tool for many companies, it would be most crucial for a company that: A. provides legal services. B. sells cell phones and notebook computers. C. manufactures steel. D. sells paint.

B. sells cell phones and notebook computers.

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.

C. Common size financial statements.

The ratio that measures the percentage of financing from creditors is the: A. Current ratio. B. Times interest earned ratio. C. Debt to assets ratio. D. Price/earnings ratio.

C. Debt to assets ratio.

Which of the following ratios is used to evaluate solvency? A. Earnings per share. B. Fixed asset turnover. C. Debt-to-assets. D. Quick ratio.

C. Debt-to-assets.

E. Choudhury Company's price/earnings ratio is 15.3. Its closest competitor, Bhatt, Inc. has a P/E ratio of 9.4. Which of the following would not be a valid conclusion to draw from a comparison of the two companies' P/E ratios? A. E. Choudhury Company's stock is overpriced. B. Investors believe E. Choudhury Co. has a brighter future than Bhatt, Inc. C. E. Choudhury Company has been more profitable than Bhatt, Inc. D. The stock price of E. Choudhury Company has been bid up due to rumors of a merger.

C. E. Choudhury Company has been more profitable than Bhatt, Inc.

Which ratio is used to evaluate how a company is managing its property, plant and equipment? A. Accounts receivable turnover. B. Inventory turnover. C. Fixed asset turnover. D. Asset turnover.

C. Fixed asset turnover.

The minimum required rate of return for a project is the A. Annual rate of return. B. Accounting rate of return. C. Hurdle rate. D. Internal rate of return.

C. Hurdle rate.

Which of the following statements regarding the P/E ratio is not true? A.The P/E ratio indicates how much investors are willing to pay for a share of a company's stock as a multiple of current earnings. B.A high P/E ratio may mean that investors have pushed the price of the stock up in anticipation of higher future net income. C. If EPS decreases and there is no change in the market price of the stock, the P/E ratio will decrease. D. If the market price of the stock increases and there is no change in EPS, the P/E ratio will increase.

C. If EPS decreases and there is no change in the market price of the stock, the P/E ratio will decrease.

Projects that are unrelated to one another, so that investing in one project does not preclude or affect the choice about investing in the other alternatives, are A. Mutually exclusive projects. B. Screening projects. C. Independent projects. D. Preference projects.

C. Independent projects.

Which of the following is not a characteristic of an annuity? A. It is a series of equal payments. B. It earns an equal interest rate each interest period. C. Interest is compounded annually. D. Interest periods are of equal length.

C. Interest is compounded annually.

Almond, Inc uses a balanced scorecard. One of the measures on the scorecard is the average age of raw materials inventory. Which balanced scorecard perspective would this measure most likely fit into? A. Customer perspective B. Learning and growth perspective C. Internal business perspective D. Financial perspective

C. Internal business perspective

Cost of goods sold divided by average inventory is the calculation for which of the following ratios? A. Net profit margin ratio. B. Current ratio. C. Inventory turnover ratio. D. Asset turnover ratio.

C. Inventory turnover ratio.

The ratio that measures how many times a company replenishes its inventory in a year is the: A. Days to sell. B. Accounts receivable turnover ratio. C. Inventory turnover ratio. D. Days to collect ratio.

C. Inventory turnover ratio.

Which of the following balanced scorecard perspectives measures an organization's ability to change? A. Customer B. Internal business processes C. Learning and growth D. Financial

C. Learning and growth

The method that compares the present value of a project's future cash flows to the initial investment is A. Accounting rate of return. B. Payback period. C. Net present value. D. Internal rate of return.

C. Net present value.

Which of the following is calculated by dividing net income by net sales? A. Gross profit margin. B. Current ratio. C. Net profit margin. D. Asset turnover.

C. Net profit margin.

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.

C. Pepsico's net profit margin for 2015.

Which of the following is a disadvantage of decentralization? A. Fosters competition among divisions B. Managers have specialized knowledge C. Potential duplication of resources D. Allows top managers to focus on strategic issues

C. Potential duplication of resources

If an analyst wants to examine a company's current ability to generate income, which of the following would best be considered? A. Liquidity. B. Market share. C. Profitability. D. Solvency.

C. Profitability.

40. Return on investment can be calculated as A. ROI = sales revenue/average invested assets B. ROI = operating income/sales revenue C. ROI = operating income/average invested assets D. ROI = average invested assets/sales revenue

C. ROI = operating income/average invested assets

Return on investment can be calculated as A. ROI = sales revenue/average invested assets B. ROI = operating income/sales revenue C. ROI = operating income/average invested assets D. ROI = average invested assets/sales revenue

C. ROI = operating income/average invested assets

Which of the following measures would assist in assessing the liquidity of a company? A. Return on equity. B. Fixed asset turnover ratio. C. Receivables turnover ratio. D. Times interest earned ratio

C. Receivables turnover ratio.

Which of the following ratios does not use total revenue in its calculation? A. Net profit margin. B. Asset turnover. C. Return on equity. D. Fixed asset turnover.

C. Return on equity.

Which of the following is not something that should be compiled for each dimension of the balanced scorecard? A. Performance measures B. Targets C. Strategic vision D. Specific objectives

C. Strategic vision

The responsibility center in which the manager has responsibility and authority over only revenues and costs is A. a cost center. B. an investment center. C. a profit center. D. a revenue center.

C. a profit center.

54. A decrease in accounts receivable turnover ratio is indicative of: A. an increase in sales revenue. B. slower-selling inventory. C. an increase in accounts receivable. D. a decline in cost of goods sold.

C. an increase in accounts receivable.

A problem in which you must calculate how much money you will have in the future as a result of depositing a fixed amount of money each period is a A. future value of a single amount problem. B. present value of a single amount problem. C. future value of an annuity problem. D. present value of an annuity problem.

C. future value of an annuity problem.

When a project has a positive net present value, it has a profitability index A. greater than zero. B. less than zero. C. greater than one. D. less than one.

C. greater than one.

A current ratio of less than one is not so much of a concern when the company has a: A. low fixed asset turnover ratio. B. high days to collect number. C. high inventory turnover ratio. D. high debt-to-equity ratio.

C. high inventory turnover ratio.

If cash flows are not equal each year, the payback period A. cannot be calculated. B. is calculated by dividing the initial investment by the average cash flows. C. is calculated by subtracting each year's cash flows from the initial investment until zero is reached. D. is calculated by dividing the total years in the project by two.

C. is calculated by subtracting each year's cash flows from the initial investment until zero is reached.

When negotiating a transfer price, the highest price the buyer will be willing to pay is the _____________, while the lowest price the seller will be willing to accept is the _______________. A. market price...full cost B. full cost...variable cost C. market price...variable cost D. variable cost...market price

C. market price...variable cost

When negotiating a transfer price, the highest price the buyer will be willing to pay is the, while the lowest price the seller will be willing to accept is the . A. market price...full cost B. full cost...variable cost C. market price...variable cost D. variable cost...market price

C. market price...variable cost

Which of the following responsibility centers will use a segmented income statement as an evaluation tool? A. cost center B. revenue center C. profit center D. balanced center

C. profit center

The debt-to-assets ratio is the: A. ratio of current liabilities to current assets. B. ratio of long term liabilities to fixed assets. C. ratio of total liabilities to total assets. D. proportion of short-term liabilities to total liabilities.

C. ratio of total liabilities to total assets.

A decision that occurs when managers evaluate a proposed capital investment to determine whether it meets some minimum criteria is a(n) A. preference decision. B. capital decision. C. screening decision. D. incremental analysis.

C. screening decision.

When making screening decisions using the net present value method, a project is acceptable if A. the NPV is greater than the hurdle rate. B. the NPV is greater than the IRR. C. the NPV is positive. D. the NPV is negative.

C. the NPV is positive.

Which of the following is calculated by dividing net sales by average accounts receivable? A. Days to sell ratio. B. Current ratio. C. Profit margin. D. Accounts receivable turnover ratio.

D. Accounts receivable turnover ratio.

Which of the following ratios is used to evaluate a company's efficiency in using its assets? A. Current ratio. B. Debt to assets ratio. C. Return on assets ratio. D. Asset turnover ratio.

D. Asset turnover ratio.

Which of the following ratios is calculated by dividing current assets by current liabilities? A. Quick ratio. B. Solvency ratio. C. Debt ratio. D. Current ratio.

D. Current ratio.

Which of the following ratios is used to evaluate a company's liquidity? A. Debt to assets ratio. B. Asset turnover ratio. C. Return on equity ratio. D. Current ratio.

D. Current ratio.

Which of the following is calculated by dividing cost of goods sold by average inventory and then dividing this result into 365 days? A. Inventory turnover. B. Current ratio. C. Days to collect ratio. D. Days to sell ratio.

D. Days to sell ratio.

Which of the following is not a profitability ratio? A. Return on equity (ROE). B. Earnings per share. C. Asset turnover. D. Days to sell.

D. Days to sell.

Which of the following ratios is a solvency ratio? A. Net profit margin ratio. B. Current ratio. C. Asset turnover ratio. D. Debt to assets ratio.

D. Debt to assets ratio.

Which of the following factors would not necessarily contribute to a going-concern problem? A. Excessive reliance on debt financing. B. Loss of key personnel without comparable replacement. C. Inadequate maintenance of long-lived assets. D. Declining profit margins.

D. Declining profit margins.

Which of the following balanced scorecard perspectives measures how an organization satisfies its stakeholders? A. Customer B. Internal business processes C. Learning and growth D. Financial

D. Financial

Almond, Inc uses a balanced scorecard. One of the measures on the scorecard is the change in stock price. Which balanced scorecard perspective would this measure most likely fit into? A. Customer perspective B. Learning and growth perspective C. Internal business perspective D. Financial perspective

D. Financial perspective

Almond, Inc uses a balanced scorecard. One of the measures on the scorecard is the change in stock price. Which balanced scorecard perspective would this measure most likely fit into? A. Customer perspective B. Learning and growth perspective C. Internal business perspective D. Financial perspective

D. Financial perspective

The discount rate that would return a net present value equal to zero is the A. Annual rate of return. B. Accounting rate of return. C. Hurdle rate. D. Internal rate of return.

D. Internal rate of return.

Which of the following is the formula for accounting rate of return? A. Initial investment/net income B. Annual net cash flow/Initial investment C. Initial investment/Annual net cash flow D. Net income/Initial investment

D. Net income/Initial investment

Which of the following is not a limitation of return on investment? A. Use of ROI may lead to goal incongruence. B. ROI is a lagging indicator of financial performance. C. ROI evaluates the short-term. D. ROI is a commonly used measure for financial performance.

D. ROI is a commonly used measure for financial performance.

In a common size income statement, each item on the income statement is expressed as a percentage of: A. Net income. B. Gross margin (gross profit). C. Total expenses. D. Sales revenue.

D. Sales revenue.

A ratio that may be used to evaluate solvency is the: A. Asset turnover ratio. B. Quick ratio. C. Current ratio. D. Times interest earned ratio.

D. Times interest earned ratio.

The ratio that measures the company's ability to meet required interest payments is the: A. Debt to equity ratio. B. Current ratio. C. Price/earnings ratio. D. Times interest earned ratio.

D. Times interest earned ratio.

Which of the following analysis techniques does not pertain to changes over time? A. Trend analysis. B. Horizontal analysis. C. Time-series analysis. D. Vertical analysis.

D. Vertical analysis.

The responsibility center in which the manager does not have responsibility and authority over costs is A. a cost center. B. an investment center. C. a profit center. D. a revenue center.

D. a revenue center

Which of the following is not a method used to determine transfer prices? A. market price method B. cost-based method C. negotiation D. balanced scorecard method

D. balanced scorecard method

A company that has a current ratio less than one cannot cover: A. current liabilities with its current cash flow. B. current expenses with its current sales revenue. C. expenses with its current revenues. D. current liabilities with its current assets.

D. current liabilities with its current assets.

The payback method A. is a complex method of analysis. B. is infrequently used. C. incorporates the time value of money. D. ignores benefits and costs that occur after the project has paid for itself.

D. ignores benefits and costs that occur after the project has paid for itself.

A times interest earned ratio of 11 means that the company's: A. net income is large enough to pay interest and taxes 11 times. B. net cash flow from operations before taxes and interest is large enough to pay interest and taxes 11 times. C. net cash flow from operations is large enough to pay interest and taxes 11 times. D. income before taxes and interest is large enough to pay interest 11 times.

D. income before taxes and interest is large enough to pay interest 11 times.

The total time to recover an original investment is the A. net present value. B. internal rate of return. C. accounting rate of return. D. payback period

D. payback period

The total time to recover an original investment is the A. net present value. B. internal rate of return. C. accounting rate of return. D. payback period.

D. payback period.

A problem in which you must calculate the value now of a series of equal amounts to be received for some specified number of periods in the future is a A. future value of a single amount problem. B. present value of a single amount problem. C. future value of an annuity problem. D. present value of an annuity problem.

D. present value of an annuity problem.

An analysis that reveals whether changing the underlying assumptions would affect the decision is a A. net present value analysis. B. internal rate of return analysis. C. payback period analysis. D. sensitivity analysis.

D. sensitivity analysis.

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.

D. to provide useful information to decision makers, especially investors and creditors.

A __________ is the amount that one division charges when it sells goods or services to another division in the same company A. residual income B. negotiated price C. related price D. transfer price

D. transfer price

A ________________ is the amount that one division charges when it sells goods or services to another division in the same company A. residual income B. negotiated price C. related price D. transfer price

D. transfer price

In a common size balance sheet, each item on the balance sheet is expressed as a percentage of: A. Total assets. B. Total liabilities. C. Net income. D. Total stockholders' equity.

A. Total assets.

Which of the following statements regarding trend analysis is true? A. Time-series analysis is an example of trend analysis. B. Trend data are always in dollars. C. Trend analysis is also known as vertical analysis. D. Common-size analysis is an example of trend analysis.

A. Time-series analysis is an example of trend analysis.

Which type of analysis could reveal that a company is relying heavily on debt financing? A. Common size statements. B. Horizontal analysis. C. The asset turnover ratio. D. Trend analysis.

A. Common size statements.

Almond, Inc uses a balanced scorecard. One of the measures on the scorecard is the percentage of revenue from repeat sales. Which balanced scorecard perspective would this measure most likely fit into? A. Customer perspective B. Learning and growth perspective C. Internal business perspective D. Financial perspective

A. Customer perspective

Which of the following measures would assist in assessing the solvency of a company? A. Debt-to-assets ratio. B. Fixed asset turnover ratio. C. Return on equity ratio. D. Quick ratio.

A. Debt-to-assets ratio.

Which of the following statements regarding the effects of a business decision on a financial ratio is true? A. If a company is expanding its facilities, its fixed asset turnover ratio is likely to fall temporarily. B. If a company extends its payment period for customers, its accounts receivable ratio is likely to rise. C. If a company eases its credit granting policies, its days to collect ratio is likely to fall. D. If a company builds up inventories, its days to sell ratio is likely to fall.

A. If a company is expanding its facilities, its fixed asset turnover ratio is likely to fall temporarily.

Which of the following is a liquidity ratio? A. Inventory turnover. B. Price earnings (P/E). C. Net profit margin. D. Times interest earned.

A. Inventory turnover.

If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered? A. Liquidity. B. Market share. C. Profitability. D. Solvency.

A. Liquidity.

Projects that involve a choice among competing alternatives, where selection of one project implies rejection of all the other alternatives, are A. Mutually exclusive projects. B. Screening projects. C. Independent projects. D. Preference projects

A. Mutually exclusive projects.

Which of the following is a profitability measure? A. Net income/Net sales B. Total assets/Total stockholders' equity C. Total liabilities/Total stockholders' equity D. Cost of goods sold/Average inventory

A. Net income/Net sales

Residual income can be calculated as A. Operating income - (hurdle rate × average invested assets) B. Segment margin - (hurdle rate × average invested assets) C. Operating income - (ROI × average invested assets) D. Operating income - investment turnover

A. Operating income - (hurdle rate × average invested assets)

. Which of the following statements contrasting residual income with return on investment is correct? A. ROI may lead to goal incongruence while residual income does not. B. ROI is a lagging indicator while residual income is a leading indicator. C. Residual income is a financial measure while return on investment emphasizes the customer perspective. D. Residual income is a long-term measure while ROI is a short-term measure.

A. ROI may lead to goal incongruence while residual income does not.

Investment turnover can be calculated as A. Sales revenue/average invested assets B. Operating income/sales revenue C. Operating income/average invested assets D. Average invested assets/sales revenue

A. Sales revenue/average invested assets

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.

A. Subtracting the previous period amount from the current amount.