1) The working capital of a company is equal to a Long term assets less current assets b Current assets less current liabilities c Stockholders' equity d Total assets less current assets 2) A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds received from a Common stockholders only b Preferred and common stockholders c Borrowing d Customers 3) When a financial analyst determines the percentage change in operating income for the five year period from 2011 to 2015, she is performing a a Time series analysis b Vertical analysis c Profitability analysis d Cross sectional analysis 4) Horizontal analysis is analysis in which a Ratio increases and decreases are presented for the past two accounting periods b A statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements c Financial statement lines are expressed as a percent of the base (earliest) year d All items are presented as a percentage of one selected item on the financial statement 5) Most companies a Try to maintain protection from creditors by keeping only a small amount of cash available b Strive for an appropriate balance between debt and equity financing c Agree that a current ratio of 0 75 is sufficient for business operations d Are not concerned with the debt management ratios when cash flows are good 6) In a common size income statement to be used in vertical analysis, the 100 amount is a Operating income b Net income c Gross profit d Net sales 7) Which of the following is a measure of liquidity a Accounts receivable turnover ratio b Operating cash flows ratio c Return on common equity d Earnings per share 8) A financial analyst is comparing two companies using a top down approach Which of the following would cause problems in the evaluation process a One company has been in business significantly longer than the other company b The companies operate in different industries c One company's fiscal year end is October 31, while the other company's fiscal year end is December 31 d Inflation has been low for several years 9) Turnover ratios differ from the current and quick ratios in that they a Measure the profitability of a company instead of its liquidity b Measure the efficiency with which a company uses its assets c Are based on a point in time rather than a period of time d Are based on net sales instead of cash 10) All of the following are examples of questions that a financial analyst would ask about a company's use of estimates in the recording of expenses except a Are sales taxes included in revenues b Do warranty provisions cover actual expenditures c Is the allowance for uncollectible accounts sufficient to cover bad debts d What expected lives and residual values are used for depreciation computations 11) Which of the following is considered a measure of short term liquidity a Return on assets ratio b Gross profit percentage c Quick ratio d Dividend yield ratio 12) The gross profit percentage decreased from 36 5 in 2014 to 24 8 in 2015 What is the trend in this change a This increase represents an upward, or favorable, trend b The answer depends upon whether net sales increased or decreased during the period c The trend cannot be determined unless the dollar amount of the change is also know d This increase represents a downward, or negative, trend 13) A company issued additional shares of stock Which of the following is true with regard to the effect of the stock issuance transaction on the company's ratio computations a Earnings per share decreased b Return on equity remained unchanged c The debt to equity ratio increased d The asset turnover ratio decreased 14) A company reported the following amounts in its financial statements 2015 2014 Average inventory $100,000 $60,000 Cost of goods sold 2,000,000 1,500,000 From 2014 to 2015, the company's efficiency in managing inventory was a Improving, because the inventory turnover ratio is increasing b Improving, because the inventory turnover ratio is decreasing c Declining, because the inventory turnover ratio is decreasing d Declining, because the inventory turnover ratio is increasing 15) A company purchased inventory on credit The effect of this transaction is that the a Working capital increased b Debt to equity ratio increased c Earnings per share increased d Earnings per share decreased 16) Annual reports are filed with the SEC on a Form 10 K b Form 10 Q c The MD A section d Form 8 K 17) Which of the following would report the market price of the company's stock a Balance sheet b Statement of cash flows c Income statement d Item 5 in Form 10 K 18) Time series (or trend) analysis is analysis in which a Dollar changes and percentage changes in a company's financial statement lines are compared over several years b A statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements c All items are presented as a percentage of one selected item on a financial statement d Ratio increases and decreases are presented for the past two accounting periods

Question

1) The working capital of a company is equal to a  Long term assets less current assets b  Current assets less current liabilities c  Stockholders' equity d  Total assets less current assets 2) A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds received from a  Common stockholders only  b  Preferred and common stockholders  c  Borrowing  d  Customers  3) When a financial analyst determines the percentage change in operating income for the five year period from 2011 to 2015, she is performing a  a  Time series analysis  b  Vertical analysis  c  Profitability analysis  d  Cross sectional analysis  4) Horizontal analysis is analysis in which a  Ratio increases and decreases are presented for the past two accounting periods  b  A statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements  c  Financial statement lines are expressed as a percent of the base (earliest) year  d  All items are presented as a percentage of one selected item on the financial statement  5) Most companies a  Try to maintain protection from creditors by keeping only a small amount of cash available  b  Strive for an appropriate balance between debt and equity financing  c  Agree that a current ratio of 0 75 is sufficient for business operations  d  Are not concerned with the debt management ratios when cash flows are good  6) In a common size income statement to be used in vertical analysis, the 100  amount is  a  Operating income b  Net income c  Gross profit d  Net sales 7) Which of the following is a measure of liquidity  a  Accounts receivable turnover ratio b  Operating cash flows ratio c  Return on common equity d  Earnings per share 8) A financial analyst is comparing two companies using a top down approach  Which of the following would cause problems in the evaluation process  a  One company has been in business significantly longer than the other company  b  The companies operate in different industries  c  One company's fiscal year end is October 31, while the other company's fiscal year end is December 31  d  Inflation has been low for several years  9) Turnover ratios differ from the current and quick ratios in that they a  Measure the profitability of a company instead of its liquidity  b  Measure the efficiency with which a company uses its assets  c  Are based on a point in time rather than a period of time  d  Are based on net sales instead of cash  10) All of the following are examples of questions that a financial analyst would ask about a company's use of estimates in the recording of expenses except   a  Are sales taxes included in revenues  b  Do warranty provisions cover actual expenditures  c  Is the allowance for uncollectible accounts sufficient to cover bad debts  d  What expected lives and residual values are used for depreciation computations  11) Which of the following is considered a measure of short term liquidity  a  Return on assets ratio b  Gross profit percentage c  Quick ratio d  Dividend yield ratio 12) The gross profit percentage decreased from 36 5  in 2014 to 24 8  in 2015  What is the trend in this change  a  This increase represents an upward, or favorable, trend  b  The answer depends upon whether net sales increased or decreased during the period  c  The trend cannot be determined unless the dollar amount of the change is also know  d  This increase represents a downward, or negative, trend  13) A company issued additional shares of stock  Which of the following is true with regard to the effect of the stock issuance transaction on the company's ratio computations  a  Earnings per share decreased  b  Return on equity remained unchanged  c  The debt to equity ratio increased  d  The asset turnover ratio decreased 14) A company reported the following amounts in its financial statements  2015 2014 Average inventory $100,000 $60,000 Cost of goods sold 2,000,000 1,500,000 From 2014 to 2015, the company's efficiency in managing inventory was  a  Improving, because the inventory turnover ratio is increasing  b  Improving, because the inventory turnover ratio is decreasing  c  Declining, because the inventory turnover ratio is decreasing  d  Declining, because the inventory turnover ratio is increasing  15) A company purchased inventory on credit  The effect of this transaction is that the  a  Working capital increased  b  Debt to equity ratio increased  c  Earnings per share increased  d  Earnings per share decreased  16) Annual reports are filed with the SEC on a  Form 10 K b  Form 10 Q  c  The MD A section  d  Form 8 K  17) Which of the following would report the market price of the company's stock  a  Balance sheet  b  Statement of cash flows  c  Income statement  d  Item 5 in Form 10 K  18) Time series (or trend) analysis is analysis in which a  Dollar changes and percentage changes in a company's financial statement lines are compared over several years  b  A statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements  c  All items are presented as a percentage of one selected item on a financial statement  d  Ratio increases and decreases are presented for the past two accounting periods

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1) The working capital of a company is equal to a. Long-term assets less current assets b. Current assets less current liabilities c. Stockholders' equity

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