ACCT370 Read & Interact: Chapter 6
Test Questions with Complete/Accurate
Answers 2026-2027 Edition.
Identifying similarities and differences across companies or business units at a single point in
time is referred to as - Answer cross-sectional analysis.
True or false: The use of GAAP and management's accounting discretion can distort the
reported financial information of a company and an analyst's view of the company. - Answer
True.
Jefferson Beach Marina included the following information in its financial statements. Sales in
the current year of $575,000 and $400,000 in the previous year. Operating income of $75,000 in
the current year and $25,000 in the previous year. In comparison to the previous year, the effect
of sales growth on operating income was - Answer $10,938
Operating margin $25,000/$400,000 = 0.0625
Sales growth ($575,000 - $400,000) x 0.0625 = $10,938 (rounded)
Stockers Market shows sales of $25,000 and gross profit of $15,000 for the current year on its
common-size income statement. For the previous year, it had sales of $22,000 and gross profit
of $12,100. This means that, - Answer the current year percentage for gross profit is 60%.
Stockers Market shows sales of $25,000 and gross profit of $15,000 for the current year on its
trend income statement. For the previous year, it had sales of $22,000 and gross profit of
$12,100. This means that - Answer the current year percentage for gross profit is 124%
$15,000/$12,100 = 124%
Identifying trends for a single company or business unit refers to ____-____ analysis. - Answer
time-series.
Financial reports don't always include the data needed for a complete and faithful picture of a
company's activities and operations because that data is filtered by - Answer - management's
accounting discretion.
- generally accepted accounting principles.
Common-size balance sheets show each statement item as a percentage of - Answer assets.
, A way to quantify components of change is - Answer cause-of-change analysis.
Common-size income statements show each statement item as a percentage of - Answer
sales.
Statements that recast each item as a percentage of a base year number are called ____
statements. - Answer trend.
Common-size cash flow statements show each statement item as a percentage of - Answer
sales.
Rogers Inc. has the following items on its balance sheet: Accounts payable $37,220, Cash
$60,032, Total Current Liabilities $103,390, Total Liabilities of $620,300, and Total Assets of
$1,861,000. On its common-size balance sheet, the percentage for Accounts Payable is - Answer
2%
$37,220/$1,861,000 = 2%
Return on assets is calculated as - Answer earnings before interest divided by average assets.
An income statement that shows each statement item as a percentage of sales is called a(n)
____-____ income statement. - Answer common-size.
Which of the following will cause a company's ROA to decrease? - Answer Decrease in the
intensity of asset utilization.
Trend income statements show each statement item as a percentage of - Answer a base year
amount.
Rogers Inc. has the following items in its financial statements: Net cash provided by operating
activities $37,500, Cash $93,750, Sales $750,000, and Total Assets of $1,250,000. On its
common-size statement of cash flow, the percentage for net cash provided by operating
activities is - Answer 5%
$37,500/$750,000 = 5%
Companies are said to have a ____ ____ if they consistently earn rates of return above the
competitive floor. - Answer competitive advantage.
Test Questions with Complete/Accurate
Answers 2026-2027 Edition.
Identifying similarities and differences across companies or business units at a single point in
time is referred to as - Answer cross-sectional analysis.
True or false: The use of GAAP and management's accounting discretion can distort the
reported financial information of a company and an analyst's view of the company. - Answer
True.
Jefferson Beach Marina included the following information in its financial statements. Sales in
the current year of $575,000 and $400,000 in the previous year. Operating income of $75,000 in
the current year and $25,000 in the previous year. In comparison to the previous year, the effect
of sales growth on operating income was - Answer $10,938
Operating margin $25,000/$400,000 = 0.0625
Sales growth ($575,000 - $400,000) x 0.0625 = $10,938 (rounded)
Stockers Market shows sales of $25,000 and gross profit of $15,000 for the current year on its
common-size income statement. For the previous year, it had sales of $22,000 and gross profit
of $12,100. This means that, - Answer the current year percentage for gross profit is 60%.
Stockers Market shows sales of $25,000 and gross profit of $15,000 for the current year on its
trend income statement. For the previous year, it had sales of $22,000 and gross profit of
$12,100. This means that - Answer the current year percentage for gross profit is 124%
$15,000/$12,100 = 124%
Identifying trends for a single company or business unit refers to ____-____ analysis. - Answer
time-series.
Financial reports don't always include the data needed for a complete and faithful picture of a
company's activities and operations because that data is filtered by - Answer - management's
accounting discretion.
- generally accepted accounting principles.
Common-size balance sheets show each statement item as a percentage of - Answer assets.
, A way to quantify components of change is - Answer cause-of-change analysis.
Common-size income statements show each statement item as a percentage of - Answer
sales.
Statements that recast each item as a percentage of a base year number are called ____
statements. - Answer trend.
Common-size cash flow statements show each statement item as a percentage of - Answer
sales.
Rogers Inc. has the following items on its balance sheet: Accounts payable $37,220, Cash
$60,032, Total Current Liabilities $103,390, Total Liabilities of $620,300, and Total Assets of
$1,861,000. On its common-size balance sheet, the percentage for Accounts Payable is - Answer
2%
$37,220/$1,861,000 = 2%
Return on assets is calculated as - Answer earnings before interest divided by average assets.
An income statement that shows each statement item as a percentage of sales is called a(n)
____-____ income statement. - Answer common-size.
Which of the following will cause a company's ROA to decrease? - Answer Decrease in the
intensity of asset utilization.
Trend income statements show each statement item as a percentage of - Answer a base year
amount.
Rogers Inc. has the following items in its financial statements: Net cash provided by operating
activities $37,500, Cash $93,750, Sales $750,000, and Total Assets of $1,250,000. On its
common-size statement of cash flow, the percentage for net cash provided by operating
activities is - Answer 5%
$37,500/$750,000 = 5%
Companies are said to have a ____ ____ if they consistently earn rates of return above the
competitive floor. - Answer competitive advantage.
