Horizontal analysis examines how an account, like cash for example, changes over time.

A) True B) False

2.

Principles of vertical analysis are used to prepare common size financial statements.

A) True B) False

3.

Factors such as industry trends and economic conditions should not be ignored when analyzing a company.

A) True B) False

4.

A common size income statement would report inventory as a percentage rate, not as a dollar amount.

A) True B) False

5.

The ability of a business to pay its debt is called liquidity.

A) True B) False

6.

Assets and earnings are reported on balance sheets.

A) True B) False

7.

Working capital measures the abilty of a business to pay off its short term debt.

A) True B) False

8.

Current ratios are used to analyze profitability.

A) True B) False

9.

Quick ratio calculations analyze earnings.

A) True B) False

10.

Liquidity, solvency, and profitability are interrelated.

A) True B) False

11.

All else being equal, turning receivables over more often improves liquidity.

A) True B) False

12.

All else being equal, the lower the inventory turnover the more days sales in inventory.

A) True B) False

13.

Research suggests that salaries paid to CFO's are linked to meeting earnings forecasts made by financial analysts.

A) True B) False

14.

GAAP requires CPA's to express unqualified opinions when auditing financial statements.

A) True B) False

15.

By definition, all extraordinary items must be both unusual in nature and infrequent in occurence.

A) True B) False

16.

GAAP requires separate earnings per share calculations for income from continuing operations, discountinued operations, and extraordinary items.

A) True B) False

17.

In many cases, GAAP is irrelevant to the decison making needs of management.

A) True B) False

18.

For manufacturers, cost objects may be products, departments, territories, or activities.

A) True B) False

19.

Not all direct manufacturing costs can be can be traced to specific cost objects.

A) True B) False

20.

Factory overhead is a prime cost.

A) True B) False

21.

Direct labor is both a prime and converison cost.

A) True B) False

22.

Product costs are initially reported on income statements as expenses.

A) True B) False

23.

Manufacturers typically report three types of inventory on their balance sheets.

A) True B) False

24.

The difference between total manufacturing costs and cost of goods manufactured is ending work in process.

A) True B) False

25.

Total manufacturing costs add up to the sum of beginning work in process and total manufacturing costs incurred.

A) True B) False

26.

Depreciation on factory equipment is a prime cost.

A) True B) False

27.

Factory overhead is reported as a separate product cost on the balance sheets of manufacturers.

A) True B) False

28.

Operating expenses are conversion costs.

A) True B) False

29.

In EX 18-16 on page 876, Crouching Alligator Manufacturing's gross profit would be $453,800.

A) True B) False

30.

On a Statement of Cost of Goods Manufactured prepared for Bahadir Company in Ex 18-17 on page 876, the cost of direct material Bahadir purchased would be the same as the cost of direct materail Bahadir actually used.

A) True B) False