Exam 2

Front 1

Why is the figure for operating profit important?

Back 1

The figure for operating profit provides a basis for assesing the sucess of a company apart from its financing and investment cativities and seperate from its tax status

Front 2

What is a creditors' objective in performing an analysis of financial statements?

Back 2

To decide whether the borrower has the ability to repay interest and principal on burrowed funds

Front 3

Which of the following ratios would you MOST like to see decrease?

Back 3

Average collection period

Front 4

Use any of the above data that you this is relevant to determine Goodbye Doggie's dividends for the year ended December 31,2003.

Back 4

$55,891

Front 5

Which of the following items would NOT be classified as an operatin expense on a muti-step income statement?

Back 5

Cost of Goods Solg

Front 6

How are costs of assets that benefit a firm for more than one year allocated?

Back 6

Both A and B
Depreciation, Depeletion and Amortization

Front 7

Which of the following statements is TRUE regardgin common stock?

Back 7

Common Stockholders have more risk and more potential and either preferred of bonholders.

Front 8

Which of the following is FALSE concerning goodwill?

Back 8

As of 2004 goodwill is written off through amortization over a perioid of a year.

Front 9

What do the asset turnover ratios measure?

Back 9

Management's effectiveness in generating sales from investments in assets.

Front 10

Which of the following expenses for a manufacturing company/plant would be considered a fixed cost?

Back 10

Straight line depreciation for the manufacturing plant/business.

Front 11

What is the impact of operating leverage on business?

Back 11

it increases both risk and potential for profit

Front 12

Which of the folowing ANALYSIS would NOT be appropriate when explaining the following financial data for research and development expenses incurred by a company in the pharmaceutical business?

Back 12

The common size R&D ratio is decreasing because net income is increasing at a faster rate than R&D

Front 13

Which of the following would be classified as long-term debt?

Back 13

Mortgages, Long-term notes payable, bonds due in 10 years

Front 14

Which of the following statements is FALSE regarding Commitments and Contingencies?

Back 14

Information related to disputes between a company and the IRS can be found in the Commitments section of the notes

Front 15

If telly company has MORE operating leverage than tubby, an equivalent increase in sales for both companies should result in:

Back 15

A greater increase in net income for Telly than Tubby

Front 16

Which of the following ratios is NOT a liquidity ratio?

Back 16

Cash Interest coverage

Front 17

All of the following expenses rely on estimates from managment and therefor are potential areas for earnings management EXCEPT

Back 17

salaries

Front 18

Which of the following statements is TRUE regarding closing entries?

Back 18

Closing entries zero out balances for income statement accounts at the end of each year

Front 19

If you did accounts receivable analysis and found the the companys Salges Growth Rate was 15% their gross Accounts receivable growth rate was 30% and their allowance for bad debt growth rate was 45%, which of the following would be the BEST statement for your ANALYSIS statement?

Back 19

This company may have loosened its credit policy

Front 20

Which statement is FALSE?

Back 20

deferred taxes arise from the use of the same methods of depreciation for tax and reporting purposes.

Front 21

Which of the following would NOT be helpful to a creditor/investor when analyzing a company's financial data?

Back 21

random Sampling

Front 22

when can high Financial Leverage be beneficial for a company?

Back 22

The company has predictable earnings

Front 23

Which of the following ANALYZIZ statements WOULD NOT be appropriate when explaining the following financial date for a manufacturing companys PPE balances?

Back 23

The company's common size PPE ratio indicates that they should have financial leverage

Front 24

If a company is in the airline industry,some of their costs are fixed over a certain level of activity. Which of the following statements would be correct regarding the cost driver for airline industry fixed costs?

Back 24

For this industy, the number of passengers would be considered the cost driver for fixed costs.

Front 25

Based on the ratio information below, which company's operating strategy is "cost leader"?

Back 25

Company A- Net profit margin is 1.87% and Total asset turnover is 3.12x

Front 26

Which of the following ANALYSIS statements WOULD NOT be appropriate when explainin the financial data for a retail clothing store's inventory balances?

Back 26

The common size inventory ratio is increasing because inventory is increasing at a faster rate than current assets

Front 27

Which of the following expenses WOULD be considered either nonrecurring or non-operating in nature?

Back 27

Interest Expense

Front 28

Under what circumstances could Basic EPS and Diluted EPS be the same?

Back 28

If the company does not have any stock options

Front 29

If a company's debt ratio is 22%, what prediction can be made about the company's financial leverage?

Back 29

You can predict the company has financial leverage of greater than 1

Front 30

What accounts are most likely to be found in the stockholders' equity section of the balance sheet?

Back 30

Common stock, additional paid-in capital. retained earnings

Front 31

you have the following information for bigger and better company..

Back 31

ROA is being driven by net profit margin and ROE is being driven by ROA

Front 32

which of following is a TRUE statement regarding solvency and profitability

Back 32

A company can be solvent but not be profitable