• Question 1. Earning power is equal to actual net earnings.
  Choose your answer from the pull-down menu below.
  
  True. False.

• Question 2. Horizontal analysis is a technique for evaluating several companies over time.
  Choose your answer from the pull-down menu below.
  
  True. False.

• Question 3. Vertical analysis is a technique for evaluating financial statement data by expressing each item in a financial statement as a percent of a base amount.
  Choose your answer from the pull-down menu below.
  
  True. False.

• Question 4. Solvency ratios measure a company's ability to pay its currently maturing obligations.
  Choose your answer from the pull-down menu below.
  
  True. False.

• Question 5. The usefulness of financial ratios is limited by the use of historical cost in valuing assets.
  Choose your answer from the pull-down menu below.
  
  True. False.

PART TWO: MULTIPLE CHOICE

• Question 6. Which of the following is not an irregular item on the statement of earnings?
  Choose your answer from the pull-down menu below.
  
  Discontinued operations. Extraordinary items. Other revenues and expenses. Changes in accounting principle.

• Question 7. Which of the following would be considered a disposal of a segment?
  Choose your answer from the pull-down menu below.
  
  Shifting production activities from one location to another. Elimination of a major class of customers. Phasing out of a model. Disposal of part of a line of business.

• Question 8. Extraordinary items are reported on the statement of earnings immediately:
  Choose your answer from the pull-down menu below.
  
  Below income from continuing operations. After the cumulative effect of a change in accounting principle. Below earnings before taxes. After discontinued operations.

• Question 9. Which of the following would not represent a change in accounting principle?
  Choose your answer from the pull-down menu below.
  
  Changing the estimated percentage used in calculating bad debt expense. Changing the inventory costing method used from FIFO to LIFO. Changing from straight-line amortization to double-declining balance amortization. Changing from the cash basis of accounting to the accrual basis.

• Question 10.  Assume the following cost of goods sold data for a company:

  	2002	$2,000,000
  	2001	1,500,000
  	2000	1,200,000
  	1999	900,000

  If 1999 is the base year, what is the percentage increase in cost of goods sold from 1999 to 2001?
  Choose your answer from the pull-down menu below.
  
  167%. 67%. 60%. 40%.

• Question 11.  Given the following data for a company:

  	Current liabilities	$360
  	Long-term debt	480
  	Common shares	640
  	Retained earnings	520
  Total liabilities & shareholders’ equity		$2,000

  How would common shares appear on a common size balance sheet?
  Choose your answer from the pull-down menu below.
  
  75.0%. 55.1%. 32.0%. Cannot be determined from the data given.

• Question 12.  Solvency is of most interest to:
  Choose your answer from the pull-down menu below.
  
  Short-term creditors. Customers. Competitors. Long-term creditors.

• Question 13. The acid-test ratio would be of most interest to:
  Choose your answer from the pull-down menu below.
  
  Short-term creditors. Long-term creditors. Shareholders. Customers.

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  Use the following information for the next two questions.
  
  The following information is available for Barkley Company:
  
  

  	2003	2002
  Accounts receivable	$360,000	$400,000
  Inventory	$280,000	$320,000
  Net Credit Sales	$3,000,000	$1,400,000
  Cost of goods sold	$1,200,000	$1,060,000
  Net Income	$300,000	$170,000

  
  

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• Question 14. The receivables turnover ratio for 2003 is:
  Choose your answer from the pull-down menu below.
  
  8.3 times. 3.9 times. 7.9 times. 10.0 times.

• Question 15.  The inventory turnover ratio for 2003 is:
  Choose your answer from the pull-down menu below.
  
  4.3 times. 4.0 times. 2.0 times. 2.4 times.

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  Use the following information for the next two questions.
  
  The following amounts were taken from the financial statements of Friendly Company:
  
  

  	2003	2002
  Current liabilities	$280,000	$220,000
  Long-term liabilities	$800,000	$600,000
  Interest expense	$100,000	$50,000
  Income tax expense	$120,000	$58,000
  Net earnings	$300,000	$170,000
  Net cash operating activities	$480,000	$270,000

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• Question 16.  The times interest earned ratio for 2003 is:
  Choose your answer from the pull-down menu below.
  
  3.0 times. 4.8 times. 4.0 times. 5.2 times.

• Question 17. The cash total debt coverage ratio for 2003 is:
  Choose your answer from the pull-down menu below.
  
  50.5%. 44.4%. 31.6%. 62.5%.

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  Use the following information for next three questions.
  
  The following amounts were taken from the financial statements if Nicklaus company:
  
  

  	2003	2002
  Total assets	$800,000	$1,000,000
  Net sales	$720,000	$650,000
  Net earnings	$144,000	$117,000
  Weighted avg. # of common shares	120,000	120,000
  Market Price of Common Shares	$36.00	$40.00

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• Question 18. The return on assets ratio for 2003 is:
  Choose your answer from the pull-down menu below.
  
  18%. 16%. 36%. 32%.

• Question 19. The profit margin ratio for 2003 is:
  Choose your answer from the pull-down menu below.
  
  10%. 15%. 20%. 30%.

• Question 20. The price-earnings ratio for 2001 is:
  Choose your answer from the pull-down menu below.
  
  30 times. 20 times. 10 times. 5 times.