UNIT 3 SUMMARY
UNIT 3: FINANCIAL STATEMENTS, CASH FLOWS, AND FORECASTING QUIZ
Step 1 of 1
Question 1 of 16
Which answer is the correct
... [Show More] definition of the accounting equation?
Assets = Liabilities + Owner's Equity Assets = Liabilities + Expenses Liabilities = Assets + Owners Equity Owner's Equity = Assets + Liabilities
Correct! The accounting equation is: Assets = Liabilities + Shareholder Equity. The balance sheet is a complex display of this equation, showing that the total assets of a company are equal to the total of liabilities and shareholder equity.
Question 2 of 16
Which answer is the best example of a noncash item that would be included on the income statement?
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Question 3 of 16
Which of the following is the correct order of how assets should be presented on a balance sheet?
Cash; accounts receivable; inventory; property, plant, and equipment (PPE).
Accounts receivable; cash; inventory property, plant, and equipment (PPE).
Cash; inventory; accounts receivable; property, plant, and equipment (PPE).
Cash; inventory; property, plant, and equipment (PPE); accounts receivable.
Correct! Cash is always presented first, followed by marketable securities, then accounts receivable, then inventory, and then fixed assets. Goodwill is listed last.
Question 4 of 16
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Question 6 of 16
Financial Ratios help to identify some of the financial strengths and weaknesses of a company. What are two ways that the ratios provide for making meaningful comparisons of a firm's financial data?
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Identifying year over year changes in balance sheet and income statement items.
Smoothing out differences when comparing firms that use different accounting practices and restating accounting data in relative terms.
Examining ratios across time to identify trends and comparing the firm’s ratios with those of other firms.
Determining how long it takes to collect the firm’s receivables and how long it takes to pay it accounts payables.
Correct! Ratios are meaningful only when compared against a standard.
Question 7 of 16
Which of the following is not an example of benchmarking using ratio analysis?
Contrast a company's current ratio with its nearest competitors.
Compare the company's gross profit margin to the average gross profit margin of the top three firms in its industry.
Calculate a company's debt ratio and compare it to its industry's average debt ratio.
Calculate the company's current ratio by comparing its current assets with its current liabilities.
Correct! This is an example of a simple ratio calculation without a comparative analysis.
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Which of the following is an example of trend analysis?
The company compares its current assets to its current liabilities.
The company's gross profit margin is compared with its industry's average profit margins.
All of these answers.
The company's current gross profit margin is compared with its gross profit margin from past years.
Correct! We are comparing the firm's gross profit margin over time.
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Question 12 of 16
The percentage of sales forecasting method is used by management to forecast
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Question 14 of 16
Last year T&J Inc. reported total assets of $250 million, equity of $120 million, net income of $50 million, dividends of $15 million, and retained earnings of $35 million. What is T&J Inc.'s sustainable growth rate?
12.50%
29.17%
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Question 16 of 16
Suppose a company is planning to increase its dividend payout ratio next year. Given this information, which of the following cases do you expect to occur in the upcoming year?
A decrease in the firm's stock price
A reduction in the dividend received by investors A reduction in net income
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