B. Acy Bachelor of Accountancy Financial Statement Analysis

Question 1

The current ratio is calculated as:

Accepted Answer

Current assets divided by current liabilities

Answer

Net income divided by total assets

Answer

Total assets divided by total liabilities

Answer

Cash divided by current liabilities

Question 2

Earnings per share (EPS) is calculated by dividing net income available to common shareholders by:

Accepted Answer

Weighted average shares outstanding

Answer

Total shares authorized

Answer

Shares issued

Answer

Total shares outstanding at year-end

Question 3

A high accounts receivable turnover ratio generally indicates:

Accepted Answer

Efficient collection of credit sales

Answer

Slow collection of receivables

Answer

High levels of bad debt

Answer

Excessive credit extended to customers

Question 4

The debt-to-equity ratio measures:

Accepted Answer

Relative use of debt versus equity financing

Answer

A company's liquidity

Answer

Profitability of operations

Answer

Asset utilization efficiency

Question 5

Common-size financial statements express each line item as a percentage of:

Accepted Answer

Total equity for balance sheets; net sales for income statements

Answer

Net income

Answer

Total assets for both statements

Answer

Prior year amounts

Question 6

The price-to-earnings (P/E) ratio is most useful for:

Accepted Answer

Comparing a stock's market price relative to earnings

Answer

Measuring operational efficiency

Answer

Assessing short-term liquidity

Answer

Evaluating dividend policy