Question 1. Which of the following is a potential limitation of financial statement analysis? (Points : 2)
Lack of comparability of firms in different industries
The impact of changing economic conditions
The impact of having more than one acceptable alternative accounting principle for accounting for a given transaction or economic event
All of the above
Question 2. 2. You are considering an investment in Ingram Company stock and wish to assess the company's position in the stock market. All of the following ratios can be used for this purpose except: (Points : 2)
current ratio.
earnings per share.
dividend yield.
price-earnings ratio
Question 3. 3. Select the incorrect statement regarding net margin. (Points : 2)
Net margin refers to the average amount of each sales dollar remaining after all expenses are subtracted
Net margin may be calculated in several ways
The smaller the net margin the better
The amount of net margin is affected by a company- choices of accounting principles
Question 4. 4. Current financial reporting standards assume that users of accounting information: (Points : 2)
have a reasonably informed knowledge of business
have only minimal knowledge of business
have an expert- understanding of economic and financial events and conditions
have widely differing levels of knowledge about business, and that financial reporting must meet these differing needs
Question 5. 5. You are considering an investment in Ingram Company stock and wish to assess the company's position in the stock market. All of the following ratios can be used for this purpose except: (Points : 2)
current ratio
earnings per share
dividend yield
price-earnings ratio
Question 6. 6. Common methods of financial statement analysis include all of the following except: (Points : 2)
horizontal analysis
incremental analysis
vertical analysis
ratio analysis
Question 7. 7. Select the incorrect statement regarding horizontal analysis. (Points : 2)
Percentage analysis involves establishing the relationship of one amount to another
In doing horizontal analysis, an account is expressed as a percentage of the previous balance of the same account
Percentage analysis attempts to eliminate the materiality problem of comparing firms of different sizes
A horizontal analysis of cost of goods sold on the income statement would involve dividing cost of goods sold by total sales revenue
Question 8. 8. Select the in correct statement regarding ratio analysis. (Points : 2)
Ratio analysis is a specific form of horizontal analysis
Ratio analysis involves making comparisons between different accounts in the same set of financial statements
There are many different ratios available for evaluating a firm's performance
Some ratios involve an account from the balance sheet and one from the income statement
Question 9. 9. Select the correct statement regarding vertical analysis. (Points : 2)
Vertical analysis of the income statement involves showing each item as a percentage of sales.
Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets
Vertical analysis examines two or more items from the financial statements of one accounting period
All of the above are correct
Question 10. 10. Solvency refers to a company's ability to: (Points : 2)
sell inventory in a timely manner
generate profits from operations
repay liabilities in the long run
generate cash flows to pay current liabilities
Question 11. 11. Which of the following should not be recorded as an expense? (Points : 2)
Paid office salaries
Paid factory maintenance costs
Paid product advertising costs
Paid sales commissions
Question 12. 12. Which of following practices is considered an effective means of re-engineering business systems? (Points : 2)
Identifying the best practices used by world-class competitors
Improving the accuracy of cost allocations
Eliminating non-value added activities
All of the above
Question 13. 13. During its first year of operations, Martin Company paid $4,000 for direct materials and $8,500 for production workers' wages. Lease payments and utilities on the production facilities amounted to $7,500 while general, selling, and administrative expenses totaled $3,000. The company produced 5,000 units and sold 4,000 units at a price of $7.50 a unit.
What is the amount of gross margin for the first year? (Points : 2)
$20,000
$12,000
$7,500
$14,000
Question 14. 14. Which of the following statements is true with regard to product costs versus general, selling, and administrative costs? (Points : 2)
Product costs associated with unsold units appear on the income statement as general expenses.
General, selling, and administrative costs appear on the balance sheet
Product costs associated with units sold appear on the Income Statement as cost of goods sold expense
All of the above
Question 15. 15. Which of the following is a product cost for a construction company? (Points : 2)
Cost of transporting raw materials to the job site
Selling costs
Wages paid to the company's office manager
All of the above
Question 16. 16. During its first year of operations, Martin Company paid $4,000 for direct materials and $8,500 for production workers' wages. Lease payments and utilities on the production facilities amounted to $7,500 while general, selling, and administrative expenses totaled $3,000. The company produced 5,000 units and sold 4,000 units at a price of $7.50 a unit.
What is the amount of finished goods inventory for the first year? (Points : 2)
$4,000
$5,000
$2,5000
$16,000
Question 17. 17. Select the incorrect statement regarding upstream and downstream costs. (Points : 2)
Profitability analysis should consider only manufacturing and downstream costs
Companies must recover the total cost of developing, producing, and delivering products
Pricing decisions must consider both upstream and downstream costs
The total cost per unit includes upstream, manufacturing, and downstream costs
Question 18. 18. Susan Mason is the manager of one department in a large store. In this capacity, which of the following kinds of information would she be interested in? (Points : 2)
Information that is local, relevant, and timely
Information that is global and pertains to the business as a whole
Information that meets cost/benefit criteria
Both A and C
Question 19. 19. Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants? (Points : 2)
Competence
Confidentiality
Integrity
Education
Question 20. 20. As a Certified Management Accountant, Jill is bound by the standards of ethical conduct issued by the Institute of Management Accountants. If she accepts an expensive gift from a vendor trying to win a contract with her firm, which of the following standards will she violate? (Points : 2)
Competence
Confidentiality
Integrity
Objectivity
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