Q&A Hero

Q: David and Tom Gardner created The Motley Fool to help investors. What do David and Tom believe is their mission?

Q: Describe the purpose of vertical financial statement analysis and how it is applied.

Q: Describe the purpose of horizontal financial statement analysis and how it is applied.

Q: Explain the form and content of a complete income statement.

Q: What is the purpose of a good financial statement analysis report? What are the key components?

Q: Identify and describe three common tools of financial statement analysis.

Q: What are the standards for financial analysis comparison? Give examples of each.

Q: Explain the purpose of financial statement analysis for both external and internal users.

Q: Match each of the following terms with the appropriate formulas. 1. Total asset turnover (Ending inventory/ cost of goods sold) x 365 2. Days' sales in inventory Annual cash dividends per share /Market price per share 3. Days' sales uncollected Net sales/ Average total assets 4. Debt ratio Cost of goods sold /Average inventory 5. Times interest earned (Net income - preferred dividends)/ Average common stockholders' equity 6. Return on common stockholders' equity (Net sales - Cost of goods sold)/ Net sales 7. Gross margin ratio (Accounts receivable / Net sales) x 365 8. Dividend yield Net income /Net sales 9. Inventory turnover Income before interest expense and income taxes/ Interest expense 10. Profit margin ratio Total liabilities /Total assets

Q: Match each of the following terms with the appropriate definitions. 1. Solvency A statement with data for two or more successive accounting periods placed in side-by-side columns, often with changes shown in dollar amounts and percents. 2. Comparative financial statement Examination of financial data across time. 3. Equity ratio The availability of resources to meet short-term obligations and to efficiently generate revenues. 4. Common-size financial statement The comparison of a company's financial condition and performance to a base amount. 5. Vertical analysis The application of analytical tools to general-purpose financial statements and related data for making business decisions. 6. Market prospects A company's ability to generate positive market expectations. 7. Horizontal analysis A company's ability to cover long-term obligations. 8. Liquidity and efficiency The portion of total assets provided by equity, computed as total equity divided by total assets. 9. Profitability A company's ability to provide financial rewards sufficient to attract and retain capital. 10. Financial statement analysis A statement where each amount is expressed as a percent of a base amount to reveal the relative importance of each financial statement item.

Q: A company has total assets of $5,600,482, common stock of $2,111,111, retained earnings of $1,058,473. What is the companys equity ratio? A. 43.41% B. 65.00% C. 41.57% D. 56.59% E. 54.22%

Q: A company has total assets of $5,600,482, common stock of $2,111,111, retained earnings of $1,058,473. What is the companys debt ratio? A. 43.41% B. 65.00% C. 41.57% D. 50.00% E. 42.81%

Q: A company has long-term notes payable of $175,625, taxes of $9,500, ending merchandise inventory of $450,290, interest expense of $14,050, net sales of $720,000 a gross profit ratio of 35%, a times interest earned ratio of 4.23, and total assets of $1,300,417. What is the companys earnings before interest and taxes? A. $252,000 B. $65,814 C. $269,710 D. 106,696 E. $59,432

Q: A company has sales of $5,417,000, a gross profit ratio of 35%, ending merchandise inventory of $201,425, and total current assets of $1,539,600. What is the days sales in inventory ratio for the year? A. 6.10 B. 20.88 C. 26.15 D. 22.67 E. 15.77

Q: A company has sales of $2,458,422, a gross profit ratio of 23%, a days sales in inventory ratio of 12.4, and total current assets of $539,600. What is the ending inventory for the year? A. $46,013 B. $58,000 C. $64,310 D. $61,715 E. $55,951

Q: A companys balance sheet and income statement accounts follow: At December 31 2014 2013 2012 Assets Cash $30,872 $36,086 $37,974 Accounts receivable, net 89,476 63,151 50,632 Merchandise inventory 112,499 83,450 54,467 Prepaid expenses 9,942 9,473 4,219 Plant assets, net 291,143 268,126 244,108 Total assets $533,932 $460,286 $391,400 Liabilities and Equity Accounts payable $130,290 $76,233 $50,632 Long-term notes payable secured by mortgages on plant assets 98,372 103,748 107,769 Common stock, $10 par value 142,500 132,500 102,500 Retained earnings 182,770 147,805 130,499 Total liabilities and equity $533,932 $460,286 $391,400 For Year Ended December 31 2014 2013 Sales $694,112 $547,740 Cost of goods sold $423,408 $356,031 Other operating expenses 215,175 138,578 Interest expense 11,800 12,598 Income taxes 9,023 8,216 Total costs and expenses 659,406 515,423 Net income $34,706 $32,317 Earnings per share $2.14 $1.99 What is the companys gross margin ratio for 2013? A. 65% B. 35% C. 67% D. 33% E. 39%

Q: A companys balance sheet and income statement accounts follow: At December 31 2014 2013 2012 Assets Cash $30,872 $36,086 $37,974 Accounts receivable, net 89,476 63,151 50,632 Merchandise inventory 112,499 83,450 54,467 Prepaid expenses 9,942 9,473 4,219 Plant assets, net 291,143 268,126 244,108 Total assets $533,932 $460,286 $391,400 Liabilities and Equity Accounts payable $130,290 $76,233 $50,632 Long-term notes payable secured by mortgages on plant assets 98,372 103,748 107,769 Common stock, $10 par value 142,500 132,500 102,500 Retained earnings 182,770 147,805 130,499 Total liabilities and equity $533,932 $460,286 $391,400 For Year Ended December 31 2014 2013 Sales $694,112 $547,740 Cost of goods sold $423,408 $356,031 Other operating expenses 215,175 138,578 Interest expense 11,800 12,598 Income taxes 9,023 8,216 Total costs and expenses 659,406 515,423 Net income $34,706 $32,317 Earnings per share $2.14 $1.99 What is the companys profit margin ratio for 2014? A. 65% B. 12% C. 3.7% D. 5.9% E. 5.0%

Q: A companys balance sheet and income statement accounts follow: At December 31 2014 2013 2012 Assets Cash $30,872 $36,086 $37,974 Accounts receivable, net 89,476 63,151 50,632 Merchandise inventory 112,499 83,450 54,467 Prepaid expenses 9,942 9,473 4,219 Plant assets, net 291,143 268,126 244,108 Total assets $533,932 $460,286 $391,400 Liabilities and Equity Accounts payable $130,290 $76,233 $50,632 Long-term notes payable secured by mortgages on plant assets 98,372 103,748 107,769 Common stock, $10 par value 142,500 132,500 102,500 Retained earnings 182,770 147,805 130,499 Total liabilities and equity $533,932 $460,286 $391,400 For Year Ended December 31 2014 2013 Sales $694,112 $547,740 Cost of goods sold $423,408 $356,031 Other operating expenses 215,175 138,578 Interest expense 11,800 12,598 Income taxes 9,023 8,216 Total costs and expenses 659,406 515,423 Net income $34,706 $32,317 Earnings per share $2.14 $1.99 What is the companys times interest earned ratio for 2013? A. 3.57% B. 4.22% C. 3.69% D. 2.75% E. 2.57%

Q: A companys balance sheet and income statement accounts follow: At December 31 2014 2013 2012 Assets Cash $30,872 $36,086 $37,974 Accounts receivable, net 89,476 63,151 50,632 Merchandise inventory 112,499 83,450 54,467 Prepaid expenses 9,942 9,473 4,219 Plant assets, net 291,143 268,126 244,108 Total assets $533,932 $460,286 $391,400 Liabilities and Equity Accounts payable $130,290 $76,233 $50,632 Long-term notes payable secured by mortgages on plant assets 98,372 103,748 107,769 Common stock, $10 par value 142,500 132,500 102,500 Retained earnings 182,770 147,805 130,499 Total liabilities and equity $533,932 $460,286 $391,400 For Year Ended December 31 2014 2013 Sales $694,112 $547,740 Cost of goods sold $423,408 $356,031 Other operating expenses 215,175 138,578 Interest expense 11,800 12,598 Income taxes 9,023 8,216 Total costs and expenses 659,406 515,423 Net income $34,706 $32,317 Earnings per share $2.14 $1.99 What is the companys return on common stockholders equity ratio for 2013? A. 27.5% B. 25.4% C. 12.6% D. 29.4% E. 19.5%

Q: Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash $25,868 $31,163 $31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets, net 241,854 218,932 199,542 Total assets $449,206 $385,680 $321,400 Liabilities and Equity Accounts payable $108,058 $67,135 $42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity $449,206 $385,680 $321,400 What is Corona Companys current ratio for 2014? A. 1.96 B. 2.32 C. 1.07 D. 1.92 E. 2.17

Q: Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash $25,868 $31,163 $31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets, net 241,854 218,932 199,542 Total assets $449,206 $385,680 $321,400 Liabilities and Equity Accounts payable $108,058 $67,135 $42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity $449,206 $385,680 $321,400 What is Corona Companys days sales in inventory ratio for 2014, assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively? A. 86.75 B. 112.29 C. 105.41 D. 75.35 E. 107.11

Q: Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash $25,868 $31,163 $31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets, net 241,854 218,932 199,542 Total assets $449,206 $385,680 $321,400 Liabilities and Equity Accounts payable $108,058 $67,135 $42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity $449,206 $385,680 $321,400 What is Corona Companys days sales uncollected ratio for 2014 assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively? A. 25.20 B. 23.03 C. 20.99 D. 24.58 E. 22.17

Q: Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash $25,868 $31,163 $31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets, net 241,854 218,932 199,542 Total assets $449,206 $385,680 $321,400 Liabilities and Equity Accounts payable $108,058 $67,135 $42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity $449,206 $385,680 $321,400 What is Corona Companys inventory turnover ratio for 2014, assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively? A. 10.96 B. 3.25 C. 3.00 D. 3.65 E. 4.20

Q: Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash $25,868 $31,163 $31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets, net 241,854 218,932 199,542 Total assets $449,206 $385,680 $321,400 Liabilities and Equity Accounts payable $108,058 $67,135 $42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity $449,206 $385,680 $321,400 What is Corona Companys accounts receivable turnover ratio for 2013, assuming net sales for the period were $1,236,783? A. 27.21 B. 25.99 C. 22.91 D. 30.05 E. 15.85

Q: Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash $25,868 $31,163 $31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets, net 241,854 218,932 199,542 Total assets $449,206 $385,680 $321,400 Liabilities and Equity Accounts payable $108,058 $67,135 $42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity $449,206 $385,680 $321,400 What is Corona Companys debt to equity ratio for 2013? A. 1.49 B. .71 C. .40 D. 4.39 E. .67

Q: A company had a return on common stockholders' equity of 25%. Net income equaled $200,000 and average common stockholders' equity equaled $700,000. Compute the amount of the preferred dividends declared. A. $200,000 B. $500,000 C. $50,000 D. $25,000 E. $175,000

Q: A company had a return on common stockholders' equity of 22%. Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000. Compute the amount of the preferred dividends declared. A. $50,000 B. $550,000 C. $132,000 D. $10,763,636 E. $10,000

Q: A company had a profit margin of 5%. If net income equaled $83,000 and average total assets equaled $45,000, how much were net sales? A. $4,150 B. $2,250 C. $1,660,000 D. $6,400 E. $128,000

Q: A company had a profit margin of 12%. If net income equaled $450,000 and average total assets equaled $600,500, how much were sales? A. $1,050,500 B. $126,060 C. $72,060 D. $54,000 E. $3,750,000

Q: A company had a profit margin of 8%. If net income equaled $40,000 and average total assets equaled $332,500, how much were net sales? A. $3,200 B. $500,000 C. $26,600 D. $4,156,250 E. $372,500

Q: A company had a market price of $8.22 per share, earnings per share of $1.01, and dividends per share of $0.32. Its price-earnings ratio is equal to: A. 8.14 B. 25.69 C. 6.18 D. .039 E. .123

Q: A company had a market price of $83.12 per share, dividends per share of $5.40, and earnings per share of $4.87. Its price-earnings ratio is equal to: A. .056 B. .065 C. 8.09 D. 15.39 E. 17.07

Q: A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio is equal to: A. 3.1 B. 30.0 C. 93.8 D. 32.0 E. 3.3

Q: One of several ratios that reflects solvency includes the: A. Acid-test ratio B. Current ratio C. Times interest earned ratio D. Total asset turnover E. Days' sales in inventory

Q: A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is equal to the: A. Acid-test ratio B. Merchandise turnover C. Price earnings ratio D. Accounts receivable turnover E. Profit margin ratio

Q: The average number of times a company's inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance, is equal to the: A. Accounts receivable turnover B. Inventory turnover C. Days' sales uncollected D. Current ratio E. Price earnings ratio

Q: Annual cash dividends per share divided by market price per share is equal to the: A. Price-earnings ratio B. Price-dividends ratio C. Profit margin D. Dividend yield ratio E. Earnings per share

Q: Net income divided by average total assets is equal to the: A. Profit margin B. Total asset turnover C. Return on total assets D. Days' income in assets E. Current ratio

Q: Net income divided by net sales is equal to the: A. Return on total assets B. Profit margin C. Current ratio D. Total asset turnover E. Days' sales in inventory

Q: Net sales divided by average total assets is equal to the: A. Profit margin B. Total asset turnover C. Current ratio D. Sales return ratio E. Return on total assets

Q: Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the: A. Inventory turnover ratio B. Profit margin C. Days' sales in inventory D. Current ratio E. Total asset turnover

Q: Net sales divided by average accounts receivable is equal to the: A. Days' sales uncollected B. Average accounts receivable ratio C. Current ratio D. Profit margin E. Accounts receivable turnover ratio

Q: Quick assets divided by current liabilities is equal to the: A. Acid-test ratio B. Current ratio C. Working capital ratio D. Current liability turnover ratio E. Quick asset turnover ratio

Q: Current assets divided by current liabilities is equal to the: A. Current ratio B. Quick ratio C. Debt ratio D. Liquidity ratio E. Solvency ratio

Q: Current assets minus current liabilities is equal to: A. Profit margin B. Financial leverage C. Current ratio D. Working capital E. Quick assets

Q: Oakley Corporation has the following comparative income statements. Which of the following statements is false with regard to this comparative data? OAKLEY CORPORATION Comparative Income Statements For Years Ended December 31, 2014 and 2013 2014 2013 Sales $360,000 $267,500 Cost of goods sold 237,600 140,170 Gross profit 122,400 127,330 Operating expenses 75,600 51,895 Net income $46,800 $75,435 A. The common-size sales percent for 2014 equals 100%. B. The common-size net income percent for 2013 equals 28.04%. C. The common-size gross profit percent for 2014 equals (3.87)%. D. The common-size cost of goods sold for 2013 equals 52.4%. E. The common-size operating expenses for 2014 equals.

Q: A company is preparing a common-size balance sheet and wishes the base amount to be the total amount of assets. What are the 2013 and 2014 common-size percents for cash? 2013 2014 Cash $21,904 $32,203 Total current assets 101,769 141,128 Property and equipment 112,577 202,558 Long-term investments 12,700 4,344 Intangible assets 16,621 48,703 Other long-term assets 11,709 13,754 Total assets $255,376 $410,487 A. 21.52% in 2013 and 22.82% in 2014. B. 7.90% in 2013 and 7.27% in 2014. C. 8.58% in 2013 and 7.85% in 2014. D. 19.30% in 2013 and 20.79 in 2014. E. The percent cannot be computed for 2013 and it is 47.01% in 2014.

Q: The common-size percent is computed by: A. Dividing the analysis amount by the base amount. B. Dividing the base amount by the analysis amount. C. Dividing the analysis amount by the base amount and multiplying the result by 100. D. Dividing the base amount by the analysis amount and multiplying the result by 1,000. E. Subtracting the base amount from the analysis amount and multiplying the result by 100.

Q: Common-size statements: A. Reveal changes in the relative magnitude of each financial statement item. B. Do not emphasize the relative magnitude of each item. C. Compare financial statements over time. D. Show the dollar amount of change for financial statement items. E. Consist of two or more balance sheets arranged side-by-side.

Q: Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100% are called: A. Comparative statements. B. Common-size comparative statements. C. General-purpose financial statements. D. Base line statements. E. Index statements.

Q: In which comparative financial statements is each amount expressed as a percentage of a base amount? A. Asset comparative statements. B. Percentage comparative statements. C. Common-size comparative statements. D. Sales comparative statements. E. General-purpose financial statements.

Q: Based on the data given below, which of the following statements are true? Case Analysis Period Base Period A $1,500 $(4,500) B (1,000) 2,000 C 8,000 --- D 0 $10,000 A. The percent change for case C is 100%. B. A percent change either cannot be computed or is not meaningful for cases A, B, C, and D. C. A percent change either cannot be computed or is not meaningful for case C. D. A percent change either cannot be computed or is not meaningful for cases B and C. E. A percent change either cannot be computed or is not meaningful for cases A, B, and C.

Q: Selected comparative income statement amounts for a company are shown below. Using 2013 as the base year for a horizontal analysis, compute the account with the most significant change. 2013 2014 Sales $400,000 $520,000 General and administrative expenses $27,000 $29,700 Interest expense $1,000 $1,700 Miscellaneous expense $100 $200 A. Sales. B. General and administrative expenses. C. Interest expense. D. Miscellaneous expense. E. Cannot be determined from the given data.

Q: In horizontal analysis the percent change is computed by: A. Subtracting the analysis period amount from the base period amount. B. Subtracting the base period amount from the analysis period amount. C. Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. D. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. E. Subtracting the base period amount from the analysis amount, then dividing the result by the analysis period amount.

Q: The dollar change for a financial statement item is calculated by: A. Subtracting the analysis period amount from the base period amount. B. Subtracting the base period amount from the analysis period amount. C. Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. D. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. E. Subtracting the base period amount from the analysis amount, then dividing the result by the base amount.

Q: Trend analysis is also called: A. Financial analysis B. Ratio analysis C. Index number trend analysis D. Industry analysis E. Output analysis

Q: Horizontal analysis: A. Is a method used to evaluate changes in financial data across time. B. Is also called vertical analysis. C. Is the presentation of financial ratios. D. Is a tool used to evaluate financial statement items relative to industry statistics. E. Evaluates financial data across industries.

Q: Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as: A. Period-to-period statements. B. Controlling statements. C. Successive statements. D. Comparative statements. E. Serial statements.

Q: Which of the following items is not likely to be considered an extraordinary item? A. Loss from an unexpected union strike. B. Condemnation of property by the city government. C. Loss of use of property due to a new and unexpected environmental regulation. D. Loss due to an earthquake in Florida. E. Expropriation of property by a foreign government.

Q: A change in inventory reporting from LIFO to FIFO is: A. An extraordinary item. B. A discontinued item. C. Not allowed once lower of cost or market is applied. D. Allowed, if it improves the usefulness of information in the financial statements. E. Not reported, as it is considered a change in accounting estimate.

Q: Extraordinary items: A. Are not reported on a corporate income statement. B. Are included in income from operations. C. Are unusual and infrequent. D. Include changes in accounting principle. E. Are disclosed before discontinued operations on the income statement.

Q: Reporting of discontinued segments includes: A. Income or loss from operating the discontinued segment net of tax and gain or loss from disposal of the segment's net assets net of tax. B. Extraordinary items. C. Changes in accounting principle. D. Items that are both unusual and infrequent. E. Writing off of receivables.

Q: Which of the following financial statement sections includes information on the background on a company, its industry, and its economic setting? A. Executive summary B. Analysis overview C. Evidential conclusions D. Factor analysis E. Inferences

Q: The comparison of a company's financial condition and performance to a base amount is known as: A. Financial reporting B. Horizontal ratios C. Investment analysis D. Risk analysis E. Vertical analysis

Q: The measurement of key relations among financial statement items is known as: A. Financial reporting. B. Horizontal analysis. C. Investment analysis. D. Ratio analysis. E. Risk analysis.

Q: The comparison of a company's financial condition and performance across time is known as: A. Horizontal analysis. B. Vertical analysis. C. Political analysis. D. Financial reporting. E. Investment analysis.

Q: The three most common tools of financial analysis are: A. Financial reporting, ratio analysis, vertical analysis. B. Ratio analysis, horizontal analysis, financial reporting. C. Horizontal analysis, vertical analysis, ratio analysis. D. Trend analysis, financial reporting, ratio analysis. E. Vertical analysis, political analysis, horizontal analysis.

Q: General standards of comparisons (rules-of-thumb) are developed from: A. Industry statistics from the government. B. Past experience. C. Analysis of competitors. D. Relations between financial items. E. Dun and Bradstreet.

Q: Industry standards for financial statement analysis: A. Are based on a company's prior performance. B. Are set by the government. C. Are set by the financial performance and condition of the company's industry. D. Are based on rules of thumb. E. Compare a company's income with the prior year's income.

Q: Intracompany standards for financial statement analysis: A. Are often based on a company's prior performance. B. Are often set by competitors. C. Are set by the company's industry. D. Are based on rules of thumb. E. Are published in Dun and Bradstreet.

Q: The ability to generate positive market expectations is called: A. Liquidity and efficiency. B. Liquidity and solvency. C. Profitability. D. Market prospects. E. Creditworthiness.

Q: The ability to provide financial rewards sufficient to attract and retain financing is called: A. Liquidity and efficiency. B. Solvency. C. Profitability. D. Market prospects. E. Creditworthiness.

Q: The ability to generate future revenues and meet long-term obligations is referred to as: A. Liquidity and efficiency. B. Solvency. C. Profitability. D. Market prospects. E. Creditworthiness.

Q: The ability to meet short-term obligations and to generate revenues using the least amount of resources is called: A. Liquidity and efficiency. B. Solvency. C. Profitability. D. Market prospects. E. Creditworthiness.

Q: Financial reporting refers to: A. The application of analytical tools to general-purpose financial statements. B. The communication of relevant financial information to decision makers. C. Financial statements only. D. Ratio analysis. E. Profitability.

Q: Internal users of financial information: A. Are not directly involved in operating a company. B. Are those individuals involved in managing and operating the company. C. Include shareholders and lenders. D. Include directors and customers. E. Include suppliers, regulators and the press.

Q: External users of financial information: A. Are those individuals involved in managing and operating the company. B. Include internal auditors and consultants. C. Are not directly involved in operating the company. D. Make strategic decisions for a company. E. Make operating decisions for a company.

Q: A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equal is equal to 21.4%.

Q: A high level of expected risk suggests a low price-earnings ratio.

Q: The return on common stockholders equity measures a company's success in reaching the goal of earning net income for its owners.