Financial Accounting Chapter 15 Quiz

Liquidity, profitability, and solvency.

The relationship among selected items of financial statement data.

<p>Liquidity Ratios</p> Signup and view all the answers

<p>Current Ratio, Acid-Test Ratio, Accounts Receivable Turnover, and Inventory Turnover.</p> Signup and view all the answers

<p>Current Assets / Current Liabilities</p> Signup and view all the answers

<p>(Cash + Short-Term Investments + Accounts Receivable (net)) / Current Liabilities</p> Signup and view all the answers

<p>Net Credit Sales / Average Net Accounts Receivable</p> Signup and view all the answers

<p>Cost of Goods Sold / Average Inventory</p> Signup and view all the answers

<p>The income or operating success of a company for a given period of time.</p> Signup and view all the answers

<p>It affects the company's ability to obtain debt and equity financing, maintain a strong liquidity position, and achieve future growth.</p> Signup and view all the answers

<p>Return on Assets</p> Signup and view all the answers

<p>(Net Income - Preference Dividends) / Average Ordinary Shareholders' Equity</p> Signup and view all the answers

<p>The net income earned on each ordinary share.</p> Signup and view all the answers

<p>Market Price per Share / Earnings per Share</p> Signup and view all the answers

<p>The percentage of earnings distributed in the form of cash dividends.</p> Signup and view all the answers

<p>The ability of a company to survive over a long period of time.</p> Signup and view all the answers

<p>Acid-Test Ratio</p> Signup and view all the answers

<p>Total Liabilities / Total Assets</p> Signup and view all the answers

<p>(Net Income + Interest Expense + Income Tax Expense) / Interest Expense</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>A variant of the Accounts Receivable Turnover ratio is to convert it to an average collection period in terms of days.</p> Signup and view all the answers

<p>It indicates the percentage of earnings distributed in the form of cash dividends.</p> Signup and view all the answers

<p>Debt to Total Assets and Times Interest Earned.</p> Signup and view all the answers

<p>It provides an indication of the company's ability to meet interest payments as they come due.</p> Signup and view all the answers

<p>It measures the percentage of total assets provided by creditors.</p> Signup and view all the answers

<p>The ending retained earnings increased 38.6%.</p> Signup and view all the answers

<p>The company's gross profit and net income increased substantially, with gross profit increasing 17.1% and net income increasing 26.5%.</p> Signup and view all the answers

<p>It summarizes the company's revenues and expenses over a period of time, resulting in a net income or net loss.</p> Signup and view all the answers

<p>John Cully Group has experienced growth in both its net income and total assets, signifying a positive trend.</p> Signup and view all the answers

<p>Liquidity, profitability, and solvency, as they demonstrate a company's ability to manage short-term obligations, generate profits, and meet its long-term financial commitments.</p> Signup and view all the answers

<p>They offer valuable insights into a company's performance, liquidity, and solvency by comparing different financial metrics.</p> Signup and view all the answers

<p>It presents a snapshot of a company's assets, liabilities, and equity at a point in time.</p> Signup and view all the answers

<p>Financial statements analysis helps assess a company's performance, liquidity, and solvency, providing valuable information for investors, creditors, and management decisions.</p> Signup and view all the answers

<p>To generate profits while managing its financial obligations effectively, aimed at achieving sustainable growth and maximizing shareholder value.</p> Signup and view all the answers

<p>They are interconnected as the income statement shows financial performance over a period, while the statement of financial position presents a snapshot of the company's financial health at a point in time.</p> Signup and view all the answers

<p>Both aspects are crucial to assess a company's financial well-being, as liquidity ensures short-term solvency, while profitability drives long-term sustainability and growth.</p> Signup and view all the answers

<p>It ensures the company has the capacity to meet its long-term financial obligations, signifying a safer investment and the potential for long-term growth.</p> Signup and view all the answers

<p>Analyze the financial statements (income statement, statement of financial position, and statement of cash flow) to gain a clear understanding of the company's performance and its financial trajectory.</p> Signup and view all the answers

<p>It helps identify any strengths or weaknesses relative to its competitors, providing valuable insights for making informed decisions.</p> Signup and view all the answers

<p>Creditors prioritize liquidity and solvency to ensure a company's ability to meet its financial obligations, minimizing their risk of financial loss.</p> Signup and view all the answers

<p>It helps understand a company's financial performance and its ability to meet financial obligations, providing valuable information for investors, creditors, and management decisions.</p> Signup and view all the answers

<p>Investors typically focus on profitability, growth, and risk, aiming to identify companies that generate strong returns, have potential for future expansion, and present a reasonable level of risk.</p> Signup and view all the answers

<p>Ratios can be misleading if used in isolation without considering the company's overall financial position and business context.</p> Signup and view all the answers

<p>Profitability is influenced by various factors such as efficient management, sales growth, cost control, and the competitive environment.</p> Signup and view all the answers

<p>High debt levels can increase a company's financial risk, potentially leading to difficulty in servicing its debt, higher interest expenses, and reduced financial flexibility.</p> Signup and view all the answers

<p>Management should focus on key metrics like profitability, efficiency, liquidity, and solvency, ensuring the company's financial health and its ability to achieve its strategic goals.</p> Signup and view all the answers