BMAL 590 WEEK 2 ACCOUNTING
1. The percentage analysis of increases and decreases in individual items in comparative
financial statements is called? HORIZONTAL ANALYSIS
2. The percent of fixed assets to total assets is an example of? VERTICAL ANALYSIS
3. An analysis in which all the components of an income statement are
expressed as a percentage of net sales is called? VERTICAL ANALYSIS
4. Statements in which all items are expressed only in relative terms
(percentages of a common base) are? COMMON-SIZE STATEMENTS
5. The ability of a business to pay its debts as they come due and to earn a
reasonable amount of income is referred to as? SOLVENCY AND
PROFITABILITY
6. Which of the following is NOT an analysis used in assessing solvency? RATIO
OF NET SALES TO ASSETS
7. The ratio computed by dividing current assets by current liabilities is the?
CURRENT RATIO
8. The ratio of the sum of cash, receivables, and marketable securities to
current liabilities is called the? QUICK RATIO
9. An acceleration in the collection of receivables will tend to cause the
accounts receivable turnover to? INCREASE
10. 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? RATIO OF FIXED ASSETS TO LONG TERM LIABILITIES
11. The number of times interest charges are earned is computed as? INCOME
BEFORE INCOME TAX PLUS INTEREST CHARGES DIVIDED BY INTEREST
CHARGES
12. The blank______________ measures the profitability of total assets, without
considering how the assets are financed. RATE EARNED ON TOTAL ASSETS
13. For most profitable companies, the rate earned on total assets will be less
than? THE RATE EARNED ON STOCKHOLDERS EQUITY
14. Which one of the following is NOT a characteristic generally evaluated in ratio analysis?
MARKETABILITY
15. Which additional report is required of independent auditors since the passage
of the Sarbanes-Oxley Act in 2002? A REPORT ATTESTING TO MANAGEMENT’S
ASSESSMENT OF INTERNAL CONTROL
16. Decisions to install new equipment, replace old equipment, and purchase or
construct a new building are examples of? CAPITAL INVESTMENT ANALYSIS
17. Which of the following are present value methods of analyzing capital
investment proposals? NET PRESENT VALUE AND INTERNAL RATE OF RETURN
18. By converting dollars to be received in the future into current dollars, the
present value methods take into consideration that money? HAS A TIME
VALUE
19. The primary advantages of the average rate of return method are its ease of
computation and the fact that? IT EMPHASIZES THE AMOUNT OF INCOME
EARNED OVER THE LIFE OF THE PROPOSAL
20. Which of the following can be used to place capital investment proposals
