QUESTION 1

Sales reported on the income statement were $372,000. The accounts receivable balance declined $4,500 over the year. The amount of cash received from customers was $367,500.

	1.	False
	2.	True

QUESTION 2

Free cash flow is cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends.

	1.	False
	2.	True

QUESTION 3

Any gains or losses on the sale of long-term investments normally would be reported in the Other Income or Other Loss section of the income statement.

	1.	True
	2.	False

QUESTION 4

In horizontal analysis each item is expressed as a percentage of the

	1.	net income figure.
	2.	total assets figure.
	3.	retained earnings figure.
	4.	base year figure.

QUESTION 5

A common measure of liquidity is

	1.	dividends per share of common stock.
	2.	profit margin.
	3.	ratio of net sales to assets.
	4.	receivable turnover.

QUESTION 6

Based on the following data for the current year, what is the number of days' sales in accounts receivable?

Net sales on account during year			$584,000
Cost of merchandise sold during year			300,000
Accounts receivable, beginning of year			45,000
Accounts receivable, end of year			35,000
Inventory, beginning of year			90,000
Inventory, end of year			110,000
	1.	25
	2.	2.5
	3.	14.6
	4.	7.3

QUESTION 7

The percent of fixed assets to total assets is an example of

	1.	horizontal analysis
	2.	profitability analysis
	3.	vertical analysis
	4.	solvency analysis

QUESTION 8

The best way to study the relationship of the components within a financial statement is to prepare

	1.	profitability analysis.
	2.	common size statements.
	3.	a trend analysis.
	4.	ratio analysis.

QUESTION 9

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as

	1.	solvency and leverage
	2.	solvency and equity
	3.	solvency and profitability
	4.	solvency and liquidity

QUESTION 10

Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year			$500,000
Cost of merchandise sold during year			330,000
Accounts receivable, beginning of year			45,000
Accounts receivable, end of year			35,000
Inventory, beginning of year			90,000
Inventory, end of year			110,000
	1.	3.3
	2.	3.7
	3.	8.3
	4.	3.0

QUESTION 11

In a common size balance sheet the 100 percent figure is

	1.	total current assets.
	2.	total liabilities.
	3.	total assets.
	4.	total property, plant and equipment.

QUESTION 12

When a corporation discontinues a segment of its operations at a loss, the loss should be reported as a separate item before income from continuing operations on the income statement.

	1.	True
	2.	False

QUESTION 13

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

	1.	True
	2.	False