C213 Test Questions and Answers Well Prepared For Excel in Exam

C213 Test Questions and Answers Well Prepared For Excel in Exam Financial statement analysis - CORRECT ANSWER-Involves relationships and trends Analyzing financial statements, prognosis is - CORRECT ANSWER-Prediction of how a business will perform in the future External users of financial statements use financial statement analysis for - CORRECT ANSWER-Investing decisions Purpose of financial statement analysis - CORRECT ANSWER-Diagnosis and Prognosis Liquidity - CORRECT ANSWER-Ability a company has to pay its debts in the short run Asset turnover - CORRECT ANSWER-Measures a firm's efficiency at using its assets Return on Equity (ROE) 1 - CORRECT ANSWER-Fundamental measure of overall company performance Price-earnings ratio - CORRECT ANSWER-Represents an indication of investor's expectations concerning a firm's growth potential Return on Equity (ROE) 2 - CORRECT ANSWER-Calculated using numbers from both the income statement and the balance sheet Debt Ratio - CORRECT ANSWER-used to measure a firm's leverage Return on Sales - CORRECT ANSWER-Used to measure the profit earned on each dollar of sales in a firm Asset turnover equation - CORRECT ANSWER-Sales revenue/Common stock + Total investments + Total PPE (property, plant, equip) Return on equity equation - CORRECT ANSWER-Net income/Common stock + Add paid-in captial +Retained earnings Current Ratio - CORRECT ANSWER-Measure of the liquid position of a corporation Return on Sales equation - CORRECT ANSWER-Net Income/Sales Revenue Price-earnings ratio equation - CORRECT ANSWER-Shares x Market price per share of common stock/Net income Payment of accounts payable - CORRECT ANSWER-Could increase a firm's current ratio Debt Ratio equation - CORRECT ANSWER-Total current liabilities + Total long-term liabilities/Common stock + Total investments + Total PPE Revenue - CORRECT ANSWER-In a common-size income statement, each item on the statement is expressed as a % of Sales revenue - CORRECT ANSWER-Common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do? - CORRECT ANSWER-Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size. When using common-size statements - CORRECT ANSWER-Data may be selected for the same business as of different dates, or for two or more businesses as of the same date Sales revenue on a common-size income statement EQUATION - CORRECT ANSWER-Sales revenue/Sales revenue Common-sized financial statements - CORRECT ANSWER-Most useful in analyzing companies of different sizes Cost of goods sold on a common-size income statement EQUATION - CORRECT ANSWER-Current assets/Sales revenue