# Accounting: Chapter 17

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1. Based on the following data, what is the amount of working capital?

Accounts payable
\$34,300

Accounts receivable
\$72,398

Accrued liabilities
\$6,699

Cash
\$17,115

Intangible assets
\$41,812

Inventory
\$74,061

Long-term investments
\$97,531

Long-term liabilities
\$78,179

Marketable securities
\$34,592

Notes payable (short-term)
\$23,022

Property, plant, and equipment
\$644,131

Prepaid expenses
\$2,086

a. \$136,231

b. \$983,726

c. \$124,105

d. \$200,252
a. \$136,231
2. The percentage analysis of increases and decreases in individual items in comparative financial statements is called

a. vertical analysis

b. solvency analysis

c. profitability analysis

d. horizontal analysis
d. horizontal analysis
3. The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

True or False
False
4. In a common size income statement, the 100% figure is

a. gross profit.

b. net cost of merchandise sold.

c. net income.

d. net sales.
d. net sales.
5. Factors which reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.

True or False
True
6. The current ratio is

a. used to evaluate a company's liquidity and short-term debt paying ability.

b. calculated by dividing current liabilities by current assets.

c. calculated by subtracting current liabilities from current assets.

d. is a solvency measure that indicated the margin of safety of a noteholder or bondholder.
a. used to evaluate a company's liquidity and short-term debt paying ability.
7. The excess of current assets over current liabilities is referred to as working capital.

True or False
True
8. The number of days' sales in inventory is one means of expressing the relationship between the cost of merchandise sold and inventory.

True or False
True
9. An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

a. horizontal analysis

b. common-size analysis

c. liquidity analysis

d. vertical analysis
d. vertical analysis
10. A balance sheet shows cash, \$75,000; marketable securities, \$115,000; receivables, \$150,000 and \$222,500 of inventories. Current liabilities are \$225,000. The current ratio is 2.5 to 1.
True or False
True
11. 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
\$452,624

Cost of merchandise sold during year
169,206

Accounts receivable, beginning of year
44,669

Accounts receivable, end of year
54,968

Inventory, beginning of year
95,158

Inventory, end of year
111,029

a. 83 days

b. 90 days

c. 40 days

d. 136 days
c. 40 days
12. Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 15%; therefore, the cost of merchandise sold as a percentage of sales must be 85%.

True or False
False
13. Based on the following data, what is the amount of quick assets?

Accounts payable
\$26,374

Accounts receivable
\$66,609

Accrued liabilities
\$6,971

Cash
\$16,636

Intangible assets
\$39,366

Inventory
\$88,954

Long-term investments
\$90,994

Long-term liabilities
\$70,947

Marketable securities
\$32,081

Notes payable (short-term)
\$24,871

Property, plant, and equipment
\$603,253

Prepaid expenses
\$1,780

a. \$740,924

b. \$1,474,537

c. \$48,717

d. \$115,326
d. \$115,326
14. A balance sheet that displays only component percentages is called

a. comparative balance sheet

b.
common-sized balance sheet

c. trend balance sheet

d. condensed balance sheet
b. common-sized balance sheet
15. Based on the following data for the current year, what is the accounts receivable turnover?

Net sales on account during year
\$406,154

Cost of merchandise sold during year
200,455

Accounts receivable, beginning of year
44,254

Accounts receivable, end of year
52,836

Inventory, beginning of year
80,033

Inventory, end of year
107,533

a. 8.4

b. 3.8

c. 9.2

d. 2
a. 8.4
16. Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

a. number of days' sales in receivables
b. rate earned on stockholders' equity

c. ratio of fixed assets to long-term liabilities

d. ratio of net sales to assets
c. ratio of fixed assets to long-term liabilities
17. The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

True or False
True
18. Assume the following sales data for a company: What is the percentage increase in sales from 2009 to 2010?

a. 80%

b. 180%

c. 100%

d. 44.4%
a. 80%
19. In a common size balance sheet the 100 percent figure is

a. total assets.

b. total property, plant and equipment

c. total current assets.

d. total liabilities.
a. total assets.
20. Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year
\$576,634

Cost of merchandise sold during year
208,778

Accounts receivable, beginning of year
41,824

Accounts receivable, end of year
54,932

Inventory, beginning of year
37,788

Inventory, end of year
37,831

a. 3

b. 1

c. 6

d. 24
c. 6
 Author: bepena09 ID: 91207 Card Set: Accounting: Chapter 17 Updated: 2011-06-19 05:43:29 Tags: accounting Folders: Description: Chapter 17 Show Answers: