Financial Statements Demystified

Bonita Kramer, Christie Johnson

Chapter 8 Analysis of Financial Statements - all with Video Answers

Educators

Chapter Questions

Problem 1

Horizontal analysis:
a. Helps one see the relative changes in accounts over time
b. Begins by setting the dollar amount of total assets to equal 100 percent, and then everything else on the balance sheet is computed as a percentage of total assets
c. Also is called common-size analysis
d. Requires that one compare subsequent years with the immediately preceding year

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Problem 2

When conducting a horizontal or vertical analysis, one will want to compare the results with:
a. Competitors
b. Industry averages
c. The company over a period of time
d. Any or all of the above

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Problem 3

Liquidity ratios measure a company's:
a. Ability in the near future to pay its debts as they become due
b. Success or failure at earning a profit
c. Effectiveness at using various assets
d. Long-term ability to pay debt as it becomes due

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Problem 4

Leverage ratios are also known as:
a. Turnover ratios
b. Activity ratios
c. Efficiency ratios
d. Capital structure ratios

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Problem 5

Current assets divided by current liabilities is called the:
a. Quick ratio
b. Acid test ratio
c. Current ratio
d. Return on assets

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Problem 6

Profitability ratios and liquidity ratios are the same.
a. True
b. False

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02:00

Problem 7

What is Annie Cooper Corporation's gross margin on sales?
a. $10 \%$
b. $12 \%$
c. $25 \%$
d. $33 \%$

Lily An

Numerade Educator

02:00

Problem 8

What is Annie Cooper Corporation's return on sales?
a. $10 \%$
b. $12 \%$
c. $25 \%$
d. $33 \%$

Lily An

Numerade Educator

Problem 9

What is Annie Cooper Corporation's return on assets?
a. $10 \%$
b. $20 \%$
c. $24 \%$
d. $25 \%$

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Problem 10

What is Annie Cooper Corporation's return on equity?
a. $15 \%$
b. $25 \%$
c. $30 \%$
d. $62.5 \%$

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