Financial Statement Analysis Test bank Part 1

Financial Statement Analysis Test bank Part 1 - Financial...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Financial Statement Analysis Financial Statement Analysis - Test Bank True/False Questions 1. Common-size statements are financial statements of companies of similar size. 2. One limitation of vertical analysis is that it cannot be used to compare two companies that are significantly different in size. 3. The gross margin percentage is computed by dividing the gross margin by total assets. 4. The sale of used equipment at book value for cash will increase earnings per share. 5. Earnings per share is computed by dividing net income (after deducting preferred dividends) by the average number of common shares outstanding. 6. The dividend payout ratio divided by the dividend yield ratio equals the price-earnings ratio. 7. An increase in the number of shares of common stock outstanding will decrease a company's price-earnings ratio if the market price per share remains unchanged. 8. A company's financial leverage is negative when its return on total assets is less than its return on common stockholders' equity. 9. When computing return on common stockholders' equity, retained earnings should be included as part of common stockholders' equity. 10. When a retailing company purchases inventory, the book value per share of the company increases. 11. If a company's acid-test ratio increases, its current ratio will also increase. 12. Assuming a current ratio greater than 1, acquiring land by issuing more of the company's common stock will increase the current ratio. 13. If a company successfully implements lean production, its inventory turnover ratio should decrease. 14. Short-term borrowing is not a source of working capital. 15. Working capital is computed by subtracting long-term liabilities from long-term assets.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Financial Statement Analysis Multiple Choice Questions 16. Common size financial statements help an analyst to: A) Evaluate financial statements of companies within a given industry of the approximate same size. B) Determine which companies in a similar industry are at approximately the same stage of development. C) Compare the mix of assets, liabilities, capital, revenue, and expenses within a company over a period of time or between companies within a given industry without respect to size. D) Ascertain the relative potential of companies of similar size in different industries.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern