BUSINESS BMAL 590 ALC3 Accounting BUSINESS BMAL 590 ALC3 Accounting / ALC 3 Accounting -The percentage analysis of increases and decreases in individual items in comparative financial statements is called vertical analysis solvency analysis profitability analysis horizontal analysis -The percent of fixed assets to total assets is an example of vertical analysis solvency analysis profitability analysis horizontal analysis -An analysis in which all the components of an income statement are expressed as a percentage of net sales is called horizontal analysis liquidity analysis vertical analysis common-size analysis -Statements in which all items are expressed only in relative terms (percentages of a common base) are horizontal statements common-size statements percentage statements vertical statements -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 leverage solvency and profitability solvency and liquidity solvency and equity -Which of the following is NOT an analysis used in assessing solvency? Number of times interest charges are earned Current position analysis Ratio of net sales to assets Inventory analysis -The ratio computed by dividing current assets by current liabilities is the current ratio earnings ratio acid-test ratio quick ratio -The ratio of the sum of cash, receivables, and marketable securities to current liabilities is called the price-earnings ratio earnings ratio quick ratio current ratio -An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to Decrease remain the same either increase or decrease increase -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 Ratio of net sales to assets Number of days’ sales in receivables Rate earned on stockholders’ equity -The number of times interest charges are earned is computed as net income plus interest charges divided by interest charges income before income tax plus interest charges divided by interest charges net income divided by interest charges income before income tax divided by interest charges -The blank______________ measures the profitability of total assets, without considering how the assets are financed. price-earnings ratio ratio of net sales to assets rate earned on total assets dividend yield -For most profitable companies, the rate earned on total assets will be less than the rate earned on stockholders’ equity the rate earned on total liabilities and stockholders’ equity the rate earned on sales cannot be determined without more information -Which one of the following is NOT a characteristic generally evaluated in ratio analysis? Liquidity Profitability Solvency Marketability -Which additional report is required of independent auditors since the passage of the Sarbanes-Oxley Act in 2002? A report assessing the probability that the company will remain in business A report attesting to management’s assessment of internal control A report assessing the market value of the company’s current stock price A report assessing the competency of the company’s board of directors -Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of sales mix analysis variable cost analysis capital investment analysis absorption cost analysis -Which of the following are present value methods of analyzing capital investment proposals? Internal rate of return and average rate of return Average rate of return and net present value Net present value and internal rate of return Net present value and payback -By converting dollars to be received in the future into current dollars, the present value methods take into consideration that money has an in…
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