Which of the following is not a way to accurately determine the financial performance of a company?

• A.carefully examining one year's data
• B.from year to year
• C.with a competing company
• D.with the same industry as a whole

Annual reports ________.

• A.are required to be prepared by every corporation
• B.discuss the company's competitors and the risks related to the company's business
• C.are also called a Form 10-Q
• D.only include the company's financial statements

Which of the following best describes horizontal analysis?

• A.comparing financial statement amounts from year to year for the same company
• B.expressing each financial statement amount as a percentage of a budgeted amount
• C.comparing a company's financial statements with other companies
• D.calculating key ratios to evaluate performance

Which of the following best describes trend analysis?

• A.calculating key ratios to evaluate performance
• B.expressing each financial statement amount as a percentage of a budgeted amount
• C.comparing a company's financial statements with that of other companies
• D.expressing each year's financial statement amounts as a percentage of the base year amounts

When performing vertical analysis of an income statement, the base amount is ________.

• A.total expenses
• B.net sales
• C.sales revenue
• D.gross profit

In regards to benchmarking, which of the following statements is correct?

• A.The two main types of benchmarks in financial statement analysis include benchmarking against a prior year of the same company and benchmarking against a key competitor.
• B.Benchmarking is the practice of comparing a company with information provided by the Financial Standards Accounting Board.
• C.Risk Management Association provides common-size statements for most industries.
• D.It is not helpful to provide common-size percentages in a graphical manner.

Which of the following is not a decision tool based on working capital?

• A.cash ratio
• B.acid-test ratio
• C.current ratio
• D.dividend payout ratio

Analysts look for red flags in financial statements that may signal financial trouble. Which of the following is a red flag that suggests that a company may be in trouble?

• A.a significant decrease in net income for several years in a row
• B.a consistent movement in sales, merchandise inventory, and accounts receivable
• C.a reduction in the debt ratio
• D.operating activities as a major source of cash flows

Which of the following is not included in continuing operations?

• A.gain on sale of machinery
• B.a segment of a business that has been discontinued
• C.cost of goods sold
• D.losses due to lawsuits

Regarding the profit margin ratio, which of the following statements is incorrect?

• A.The higher the profit margin ratio, the more sales dollars end up as profit.
• B.The profit margin ratio is computed by dividing net sales by net income.
• C.The profit margin ratio shows how much net income a business earns on every $1.00 of sales.
• D.The profit margin ratio focuses on the profitability of a company and is often reported in the business press.