Test Bank For
Financial Accounting, 16th
Edition By Carl Warren,
Jefferson Jones, William
Tayler
(All Chapters 1-14, 100%
Original Verified, A+ Grade)
All Chapters Arranged
Reverse: 14-1
This is The Original Test Bank
For 16th Edition, All other
Files in The Market are
Fake/Old/Wrong Edition.
,Name: Class: Date:
Chapter 14: Financial Statement Analysis
1. Comparative financial statements are designed to compare the financial statements of two or more corporations.
a. True
b. False
ANSWER: False
2. In horizontal analysis, the current year is normally used as the base year.
a. True
b. False
ANSWER: False
3. On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.
a. True
b. False
ANSWER: False
4. The analysis of increases and decreases in the amount and percentage of comparative financial statement items is
referred to as horizontal analysis.
a. True
b. False
ANSWER: True
5. A 15% change in sales will result in a 15% change in net income.
a. True
b. False
ANSWER: False
6. A financial statement showing each item on the statement as a percentage of one key item on the statement is called
a common-sized financial statement.
a. True
b. False
ANSWER: True
7. The relationship of each asset item as a percent of total assets is an example of vertical analysis.
a. True
b. False
ANSWER: True
8. Vertical analysis refers to comparing the financial statements of a single company over several years.
a. True
b. False
ANSWER: False
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,Name: Class: Date:
Chapter 14: Financial Statement Analysis
9. In a common-sized income statement, each item is expressed as a percentage of net income.
a. True
b. False
ANSWER: False
10. In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.
a. True
b. False
ANSWER: False
11. Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore,
the cost of goods sold as a percentage of sales must be 85%.
a. True
b. False
ANSWER: False
12. In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.
a. True
b. False
ANSWER: False
13. Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to
as solvency, profitability, and liquidity.
a. True
b. False
ANSWER: True
14. The excess of current assets over current liabilities is referred to as working capital.
a. True
b. False
ANSWER: True
15. Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in
comparing such amounts with industry figures.
a. True
b. False
ANSWER: True
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, Name: Class: Date:
Chapter 14: Financial Statement Analysis
16. Using measures to assess a business's ability to pay its current liabilities is called current position analysis.
a. True
b. False
ANSWER: True
17. Current position analysis is used by short-term creditors to assess how quickly they will be repaid.
a. True
b. False
ANSWER: True
18. An advantage of the current ratio is that it considers the makeup of the current assets.
a. True
b. False
ANSWER: False
19. If two companies have the same current ratio, their ability to pay short-term debt is the same.
a. True
b. False
ANSWER: False
20. The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current
ratio.
a. True
b. False
ANSWER: False
21. A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories,
$222,500. Current liabilities are $225,000. The current ratio is 2.5.
a. True
b. False
ANSWER: True
22. If a firm has a current ratio of 2, the subsequent collection of a 60-day note receivable on account will cause the
ratio to decrease.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 3
Financial Accounting, 16th
Edition By Carl Warren,
Jefferson Jones, William
Tayler
(All Chapters 1-14, 100%
Original Verified, A+ Grade)
All Chapters Arranged
Reverse: 14-1
This is The Original Test Bank
For 16th Edition, All other
Files in The Market are
Fake/Old/Wrong Edition.
,Name: Class: Date:
Chapter 14: Financial Statement Analysis
1. Comparative financial statements are designed to compare the financial statements of two or more corporations.
a. True
b. False
ANSWER: False
2. In horizontal analysis, the current year is normally used as the base year.
a. True
b. False
ANSWER: False
3. On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.
a. True
b. False
ANSWER: False
4. The analysis of increases and decreases in the amount and percentage of comparative financial statement items is
referred to as horizontal analysis.
a. True
b. False
ANSWER: True
5. A 15% change in sales will result in a 15% change in net income.
a. True
b. False
ANSWER: False
6. A financial statement showing each item on the statement as a percentage of one key item on the statement is called
a common-sized financial statement.
a. True
b. False
ANSWER: True
7. The relationship of each asset item as a percent of total assets is an example of vertical analysis.
a. True
b. False
ANSWER: True
8. Vertical analysis refers to comparing the financial statements of a single company over several years.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 14: Financial Statement Analysis
9. In a common-sized income statement, each item is expressed as a percentage of net income.
a. True
b. False
ANSWER: False
10. In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.
a. True
b. False
ANSWER: False
11. Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore,
the cost of goods sold as a percentage of sales must be 85%.
a. True
b. False
ANSWER: False
12. In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.
a. True
b. False
ANSWER: False
13. Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to
as solvency, profitability, and liquidity.
a. True
b. False
ANSWER: True
14. The excess of current assets over current liabilities is referred to as working capital.
a. True
b. False
ANSWER: True
15. Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in
comparing such amounts with industry figures.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
, Name: Class: Date:
Chapter 14: Financial Statement Analysis
16. Using measures to assess a business's ability to pay its current liabilities is called current position analysis.
a. True
b. False
ANSWER: True
17. Current position analysis is used by short-term creditors to assess how quickly they will be repaid.
a. True
b. False
ANSWER: True
18. An advantage of the current ratio is that it considers the makeup of the current assets.
a. True
b. False
ANSWER: False
19. If two companies have the same current ratio, their ability to pay short-term debt is the same.
a. True
b. False
ANSWER: False
20. The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current
ratio.
a. True
b. False
ANSWER: False
21. A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories,
$222,500. Current liabilities are $225,000. The current ratio is 2.5.
a. True
b. False
ANSWER: True
22. If a firm has a current ratio of 2, the subsequent collection of a 60-day note receivable on account will cause the
ratio to decrease.
a. True
b. False
ANSWER: False
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