Chapters 12 & 13 Quiz Score for this quiz: 41 out of 43 Question 1 2 / 2 pts Which of the following does not accurately discuss horizontal analysis? Correct! Compares changes in reporting based on a line item within the income statement or balance sheet Allows us to compare financial statement results over multiple periods Provides greater insight into performance trends Helps to identify areas that may require change or intervention Question 2 2 / 2 pts Which of the following does not accurately discuss the debt to equity ratio? Communicates how assets are financed Communicates to potential lender how much in assets are available which are not already claimed by other creditors Total liabilities/stockholder’s equity Correct! Communicates company’s ability to pay interest on borrowed funds Question 3 2 / 2 pts Which of the following types of ratios would help communicate how well a company can meet its current liabilities? Leverage ratios Profitability ratios Market ratios Correct! Liquidity ratios Question 4 2 / 2 pts Which of the following does not accurately describe the acid test ratio? A more conservative look at the company’s ability to meet current liabilities by focusing only on cash and cash equivalents as they relate to current liabilities Correct! Tells us how many times the company can meet its current liabilities with all current asset in consideration Answers the question “If we do not make another sell, how well positioned are we to meet our current obligations?” Is also referred to as the quick ratio Question 5 0 / 2 pts Market ratios can answer all the following except You Answered Short term return expectations on investment Correct Answer How well the company has rewarded investment in prior accounting periods Amount of income earned per share of stock Market expectations of future profitability Question 6 2 / 2 pts When financial statements are converted to percentages, they are referred to as: Percent of change analysis Correct! Common size financial statements Pro forma financial statements Ratio analysis Question 7 2 / 2 pts Which of the following statements about vertical analysis is not true Compares changes in reporting based on a line item within the income statement or balance sheet Helps to identify areas that may require change or intervention Correct! Compares financial reporting results over multiple periods of operations Restates financial reporting results as a percentage of a base amount Question 8 2 / 2 pts Which of the following types of ratios relate to the company’s ability to effectively use its assets to generate revenue? Leverage ratios Correct! Profitability ratios Market ratios Liquidity ratios Question 9 2 / 2 pts The evaluation of a corporation’s financial performance based on the restatement of financial reporting dollar amounts as percentages is referred to as: Financial analysis Ratio analysis Correct! Trend analysis Percent of change analysis Question 10 2 / 2 pts Which of the following would not be a benefit of ratio analysis Provides a comparable result to compare against industry averages A common basis for evaluation which allows us to fairly compare performance with any company, regardless of size Provides insight into areas that might require further investigation/intervention Correct! Reliability for forecasting use as it does not account for operational or cost changes Question 11 2 / 2 pts Which of the following types of ratios relate to the relationship of company assets among creditors and shareholder/owners? Correct! Leverage ratios Profitability ratios Market ratios Liquidity ratios Question 12 2 / 2 pts In addition to results of application of ratio analysis, which of the following considerations/comparisons would be relevant to gaining additional, useful insight into performance? Comparison of results against industry averages Comparison of results against operational goals/objectives Comparison of results over multiple periods Correct! All of the above Question 13 2 / 2 pts Which of the following is not an example of a liquidity ratio? Current ratio Correct! Debt to equity ratio Inventory turnover ratio Accounts receivable collection period Question 14 2 / 2 pts Assume Larry, Moe, and Curly each own 33.33 % of a general partnership. The partnership shows $126,000 in net income for the 2018 year. Which of the following statements is true? Larry, Moe, and Curly will report 1/3 of what remains of net income after the tax on their partnership is levied Correct! Larry, Moe, and Curly will each report $42,000 of taxable income on their personal tax returns The partnership will be taxed for any applicable income taxes on these earnings. Larry, Moe, and Curly will each report partnership earnings of $126,000 on their personal tax returns Question 15 2 / 2 pts Assume the following partnership scenario: Alfalfa (50%), Darla (25), Spanky (12.5%) and Stymie (12.5%) share ownership in their company. Upon establishing this company, the following details capital contribution; Alfalfa contributed 40% of capital, Darla contributed 30% of capital, and Spanky and Stymie each contributed 15% of capital. Assuming that earnings are allocated based on the contribution base method, how would the annual earnings of $78,000 be distributed? This cannot be determined with the information provided. Alfalfa’s capital account increases by $39,000. Darla’s capital account increases by $19,500. Spanky and Stymie’s capital accounts each increase by $9,750. Alfalfa’s capital account increases by $39,000 because he owns most of the partnership. The remaining $39,000 is distributed evenly among Darla, Spanky, and Stymie. Correct! $31,200 increases Alfalfa’s capital account. $23,400 increases Darla’s capital account. Spanky and Stymie’s capital accounts are each increased by $11,700. Question 16 2 / 2 pts Where can we find the information that establishes percentage of ownership and allocation of earnings to partners? in the Articles of Incorporation this is usually a verbal contract in initial IRS filings Correct! in the Partnership Agreement Question 17 2 / 2 pts The most significant accounting implication of having multiple owners/partners is determining who will keep the books determining who will keep the books determining how to split earnings Correct! keeping individual capital accounts for each owner accounting for the proprietorship and partnership do not differ Question 18 2 / 2 pts The partnership and proprietorship structures differ mainly in that the partnership incurs an income tax obligation at the company level the proprietorship is a flow through tax entity Correct! the partnership will have multiple owners partners/owners will face personal liability for business debt obligations Question 19 2 / 2 pts Assume the following partnership scenario: Alfalfa (50%), Darla (25), Spanky (12.5%) and Stymie (12.5%) share ownership in their company. Upon establishing this company, the following details capital contribution; Alfalfa contributed 40% of capital, Darla contributed 30% of capital, and Spanky and Stymie each contributed 15% of capital. Assuming that earnings are allocated based on % of ownership, how would the annual earnings of $78,000 be distributed? This cannot be determined with the information provided. Correct! Alfalfa’s capital account increases by $39,000. Darla’s capital account increases by $19,500. Spanky and Stymie’s capital accounts each increase by $9,750. Alfalfa’s capital account increases by $39,000 because he owns most of the partnership. The remaining $39,000 is distributed evenly among Darla, Spanky, and Stymie. $31,200 increases Alfalfa’s capital account. $23,400 increases Darla’s capital account. Spanky and Stymie’s capital accounts are each increased by $11,700. Question 20 2 / 2 pts Which of the following statements about the partnership structure is not true? Correct! The partnership is recognized as a separate legal entity of the state. The partnership is a flow through tax entity Partners can/will be held liable for business debt obligations There are options available to have partners with limited liability for business debt obligations Question 21 2 / 2 pts Which of the following statements does not accurately discuss the impact of new ownership in a partnership structure? A new partnership agreement must be drawn up The old partnership agreement will be dissolved This creates a new partnership Correct! Operations will cease until the new agreement has been approved by the state Question 22 1 / 1 pts The most significant accounting implication of having multiple owners/partners is determining who will keep the books determining how to split earnings Correct! keeping individual capital accounts for each owner accounting for the proprietorship and partnership do not differ Quiz Score: 41 out of 43 Previous Next Submission Details: