Question 1

1. You are given the following information:

   Income before interest expense and taxes	$500,000
   Less: Interest expense	40,000
   Income before federal income taxes	$460,000
   Less: Taxes (at 40% rate)	184,000
   Net income	$276,000
   Less: Preferred dividends	30,000
   Earnings available for common stockholders	$246,000

   The number of times the interest is earned is:

   	A.	25.5
   	B.	12.5
   	C.	11.5
   	D.	4.6

2 points

Question 2

1. The accounts receivable turnover ratio measures (select the best answer):

   	A.	how rapidly a company pays its obligations.
   	B.	how rapidly the accounts receivable are collected.
   	C.	how rapidly uncollectible accounts are written off.
   	D.	The other answers are all incorrect.

2 points

Question 3

1. Trend percentages are basically a type of:

   	A.	horizontal analysis.
   	B.	vertical analysis.
   	C.	ratio analysis.
   	D.	All of the above answers are incorrect.

2 points

Question 4

1. Horizontal analysis and trend percentages are quite similar forms of financial statement analysis.

   True

   False

2 points

Question 5

1. You are given the following information:

   Income before interest and taxes	$1,400,000
   Less: Interest expense	(200,000)
   Balance	$1,200,000
   Less: Taxes (at 40% rate)	(480,000)
   Income after taxes	$ 720,000
   Less: Preferred dividends	(180,000)
   Income available to common stockholders	$ 540,000

   The number of times interest was earned is:

   	A.	6.00 times
   	B.	3.60 times
   	C.	2.70 times
   	D.	7.00 times

2 points

Question 6

1. The information gained from an analysis of financial statements has its greatest value in assisting the user in making predictions.

   True

   False

2 points

Question 7

1. Trend percentages are useful in budgeting for future periods.

   True

   False

2 points

Question 8

1. Common-size statements show only period-to-period percentage changes in financial statement items.

   True

   False

2 points

Question 9

1. One of the most well-known and often-used liquidity ratios is the current ratio.

   True

   False

2 points

Question 10

1. The following data are from the Gold Company's August 31, 2013, balance sheet:

   Accounts payable	$280,000		Accounts receivable	$390,000
   Allowance for			Cash	48,000
   uncollectible accounts	36,000		Merchandise inventory	800,000
   Bonds payable	200,000		Prepaid expenses	30,000
   Notes receivable
   (due 9/30/13)	50,000

   The acid-test ratio is:

   	A.	1.6:1
   	B.	4.6:1
   	C.	.94:1
   	D.	1.4:1

2 points

Question 11

1. In conducting vertical analysis of an income statement, what element is expressed as 100% so that all others are relative to it?

   	A.	Cost of goods sold
   	B.	Net income
   	C.	Gross margin
   	D.	Net sales

2 points

Question 12

1. Trend percentages:

   	A.	are especially useful in examining trends when base year amounts are negative or zero.
   	B.	point out which items in a base year statement need further investigation.
   	C.	are applied to an income statement to obtain a percentage comparison of each element to net sales.
   	D.	are used to compare financial information over time to a base year.

2 points

Question 13

1. The gross margin amounts for Blue Co. were $40,000, $44,000, and $50,000, respectively, for the years 2010 through 2012. If 2010 is the base year for a trend analysis, the appropriate percentages for 2011 and 2012 are:

   	A.	10% and 25%.
   	B.	220% and 250%.
   	C.	22% and 25%.
   	D.	110% and 125%.

2 points

Question 14

1. The times interest earned ratio reflects the ability of a company to make interest payments.

   True

   False

2 points

Question 15

1. Public corporations must publish annual financial reports.

   True

   False

2 points

Question 16

1. In evaluating a company, the financial analyst must be sure that any data and techniques being used are comparable.

   True

   False

2 points

Question 17

1. Comparative financial statements are statements in which figures for a single company are presented for each of two or more periods.

   True

   False

2 points

Question 18

1. The current ratio is computed as total assets divided by total liabilities.

   True

   False

2 points

Question 19

1. The stockholders' equity to debt ratio is a measure of the corporation's profitability.

   True

   False

2 points

Question 20

1. Trend percentages emphasize changes that have occurred over a period of time.

   True

   False

2 points

Question 21

1. A company that has favorable financial leverage is using debt or preferred stock to magnify the earnings per share on common stock.

   True

   False

2 points

Question 22

1. Percentages in financial analysis are useful for comparison purposes, but actual dollar amounts are often necessary to make financial judgments.

   True

   False

2 points

Question 23

1. According to the Grafton Furniture Profit video,third generation businesses have what fail rate according to Marcus?

   	30%
   	70%
   	60%
   	90%

2 points

Question 24

1. According to the Grafton Furniture Profit video,in order to prevent future quality issues,Marcus gives Stephan what to mark furniture that meets quality standards and is ready to ship?

   	Green ribbons
   	Approval stamp
   	Pink slips
   	Yellow dots

2 points

Question 25

1. According to the Grafton Furniture Profit video,when initially surveying the business processes,Marcus discusses the Work-in-Process (WIP) Master List with the employees and determines that:

   	All the WIPson the Master list are at zero.
   	The company keeps adequate WIP records.
   	The company does not have a master list.
   	The company initially sets all projects at 50%complete.

2 points

Question 26

1. According to the Grafton Furniture Profit video,how much revenue did Grafton furniture do last year?

   	$1 million
   	$2,448,000
   	$1.5million
   	$500,000

2 points

Question 27

1. According to the Grafton Furniture Profit video,how much does Marcus offer in exchange for 45%ownership in the business?

   	$1million
   	$2,448,000
   	$1.5million
   	$500,000

2 points

Question 28

1. According to the Grafton Furniture Profit video,which is not one of the 4types of accent chairs Marcus asks Stephan to design?

   	California
   	Florida
   	Midwest
   	Southwest
   	East Coast

2 points

Question 29

1. According to the Grafton Furniture Profit video,what is the actual retail price for a Quick ship line,ready-to-buy chair that Grafton quotes a large,nationwide retailer?

   	$495
   	$250
   	$1,700
   	$1,000

2 points

Question 30

1. According to the Grafton Furniture Profit video,how much does Marcus estimate that he spent to renovate Grafton furniture including the costs of the new roof,air conditioner,design center, and employee lunch room?

   	$150,000
   	$1,000,000
   	$500,000
   	$700,000