ACC 211 Final Ch 15

Term

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When a current period amount is expressed as a percentage of a prior period amount, it is referred to as:
a.vertical analysis.
b.horizontal analysis.
c.ratio analysis.
d.leverage analysis.

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Terms in this set (17)

When a current period amount is expressed as a percentage of a prior period amount, it is referred to as:
a.vertical analysis.
b.horizontal analysis.
c.ratio analysis.
d.leverage analysis.

b.horizontal analysis.

Which of the following is an example of common-size analysis?
a.Depreciation expense is expressed as a percentage of sales
b.Quick ratio is calculated for the company's different divisions
c.Operating expenses are expressed as a percentage of industry average
d.Current ratio is compared to industry average

a.Depreciation expense is expressed as a percentage of sales

Magenta Company provided the following information from its income statement:
Net sales$140,000
Cost of goods sold 50% of sales
Operating expense 14% of sales
Using the information above, calculate net income (net loss) for Magenta Company. Assume the income tax rate is 40%.
a.$42,000
b.$30,240
c.($3,400)
d.$38,600

b.$30,240

Area
The analysis which expresses a line item as a percentage of some other line item for the same period is known as:
a.scenario analysis.
b.variance analysis.
c.horizontal analysis.
d.vertical analysis.

d.vertical analysis.

From Goodwin Company's income statement of this year, the following information was provided:Sales$1,700,000Cost of goods sold($935,000)Operating expenses($595,000)Net Income$170,000Using vertical analysis, calculate the operating expense as a percent of sales.
a.35%
b.55%
c.45%
d.25%

a.35%

Operating Expense as a Percent of Sales = (Operating Expenses / Sales) × 100 = ($595,000 / $1,700,000) × 100 = 35%

Which of the following statements is true about profitability ratios?
a.They measure the earning ability of a company.
b.They measure the ability of a company to purchase assets.
c.They measure the ability of a company to meet its long- and short-term obligations.
d.They measure the ability of a company to meet its current obligations.

a.They measure the earning ability of a company.

The ratios that measure the ability of a company to meet its current obligations are called:
a.profitability ratios.
b.capital structure ratios.
c.liquidity ratios.
d.leverage ratios.

c.liquidity ratios.

Which of the following current assets is excluded while computing the quick ratio of a company?
a.Inventory
b.Cash
c.Accounts receivable
d.Marketable securities

a.Inventory

Which of the following is the formula to compute the current ratio?
a.Current Ratio = Current Liabilities / Current Assets
b.Current Ratio = Current Assets / Current Liabilities
c.Current Ratio = (Total Liabilities - Current Liabilities) / Current Assets
d.Current Ratio = (Total Assets - Current Assets) / Current Liabilities

b.Current Ratio = Current Assets / Current Liabilities

Insula Company's cost of goods sold during the year is $585,000. The average inventory during the year is $90,000. Calculate the inventory turnover of Insula Company in days. (Round your answer to one decimal place.)
a.56.2 days
b.49.1 days
c.7.7 days
d.43.4 days

a.56.2 days

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory = $585,000 / $90,000 = 6.50 times
Turnover in Days = 365/Inventory Turnover Ratio = 365 / 6.50 = 56.2 days