1. Users typically evaluate financial statement information along all of the following dimensions except _____.

a. objectivity

b. solvency

c. profitability

d. liquidity

2. A companys ability to convert assets into cash is called _____.

a. objectivity

b. solvency

c. profitability

d. liquidity

3. Which of the following analytical methods involve the analysis of increases and decreases in the amount and percentage of comparative financial statement items?

a. Horizontal analysis

b. Vertical analysis

c. Common-sized statements

d. None of these are correct.

Washington Company had the following financial data taken from its two most recent balance sheets:

Year 2

Year 1

Current assets

$700,000

$633,000

Intangible assets

42,000

42,000

Total assets

1,275,000

1,100,000

Based on this data, if Washington Company were to conduct a vertical analysis, it would find that current assets __________ by _____ from Year 1 to Year 2.

a. decreased; 14.0%

b. decreased; 2.6%

c. increased; 14.0%

d. increased; 2.6%

4. Which of the following analytical methods expresses all financial statement items as percentages, with no dollar amounts shown?

a. Horizontal analysis

b. Vertical analysis

c. Common-sized statements

d. None of these are correct.

5. Patton Corporation had the following items on its financial statements for two recent years:

Year 2

Year 1

Sales

$2,500,000

$2,000,000

Cost of merchandise sold

1,975,000

1,600,000

Cash

500,000

475,000

Temporary investments

150,000

150,000

Accounts receivable (net)

200,000

175,000

Merchandise inventory

325,000

300,000

Accounts payable

450,000

400,000

Based on these data, calculate Patton Corporations working capital for Year 2.

a. $725,000

b. $1,625,000

c. $2,050,000

d. None of these are correct.

6. Patton Corporation had the following items on its financial statements for two recent years:

Year 2

Year 1

Sales

$2,500,000

$2,000,000

Cost of merchandise sold

1,975,000

1,600,000

Cash

500,000

475,000

Temporary investments

150,000

150,000

Accounts receivable (net)

200,000

175,000

Merchandise inventory

325,000

300,000

Accounts payable

450,000

400,000

Based on these data, calculate Patton Corporations accounts receivable turnover for Year 2.

a. 0.70

b. 12.50

c. 13.33

d. None of these are correct.

7. Patton Corporation had the following items on its financial statements for two recent years:

Year 2

Year 1

Sales

$2,500,000

$2,000,000

Cost of merchandise sold

1,975,000

1,600,000

Cash

500,000

475,000

Temporary investments

150,000

150,000

Accounts receivable (net)

200,000

175,000

Merchandise inventory

325,000

300,000

Accounts payable

450,000

400,000

Based on these data, calculate Patton Corporations number of days sales in inventory for Year 2.

a. 5.9

b. 57.75

c. 32

d. None of these are correct.

8. Johnston & Myers Incorporated had the following balance sheet data for a recent year:

Current assets

$720,000

Property, plant, and equipment (net)

1,110,000

Current liabilities

230,000

Long-term liabilities

450,000

Common stock, $10 par

250,000

Retained earnings

1,000,000

What is Johnston & Myers Incorporateds ratio of fixed assets to long-term liabilities?

a. 0.9

b. 2.1

c. 4.1

d. 2.5