34 Questions
Basket Wonders has above average long-term debt utilization compared to the industry average.
False
The interest coverage ratio for Basket Wonders has been increasing since 2005.
False
The financial leverage ratio for Basket Wonders in 2007 is 0.47.
True
Basket Wonders' total capitalization ratio in 2006 is higher than the industry average.
False
In 2005, Basket Wonders had better interest coverage than the industry average.
True
Long-term debt constitutes a higher percentage of Basket Wonders' total capitalization in 2007 compared to 2006.
False
A strong current ratio indicates that a firm can cover its current liabilities with its current assets.
True
The acid-test ratio includes inventory in the calculation of liquidity.
False
A current ratio of 2.39 for Basket Wonders is weaker than the industry average in 2006.
False
Comparing "apples to apples" implies that one should evaluate similar companies using the same financial ratios.
True
A weak acid-test ratio suggests potential issues with the firm's inventory management.
True
The acid-test ratio is always higher than the current ratio for a company.
False
The Balance Sheet summarizes a firm's financial position by showing total assets equal to total liabilities minus owners' equity.
False
The Income Statement presents a firm's revenues and expenses over a specific period, concluding with net profit or loss for the period.
True
Basket Wonders had $1,195 in total current assets on December 31, 2007.
True
The amount owed by customers is categorized as fixed assets on the Balance Sheet.
False
Long-term investments are considered part of Basket Wonders' total liabilities on December 31, 2007.
False
Accumulated Tax Prepayments are included in Basket Wonders' net fixed assets on December 31, 2007.
False
Basket Wonders had a Gross Profit Margin of 31.3% in 2005.
False
In 2007, Basket Wonders had a higher Net Profit Margin than the industry average.
False
Return on Investment for Basket Wonders in 2006 was 5.0%.
True
Basket Wonders' Return on Equity in 2007 was 9.4%.
False
The Du Pont Approach equation for Earning Power is Sales profitability X Asset efficiency.
False
All the profitability ratios for Basket Wonders have been increasing since 2005.
False
Basket Wonders' COGS and administrative costs have been above industry averages for the past three years.
False
The interest coverage ratio of Basket Wonders is high.
False
According to the Common-size Analysis, all balance sheet items are divided by total liabilities.
False
Basket Wonders' inventories are at an acceptable level according to the analysis.
False
The Indexed Balance Sheets show that Basket Wonders' cash decreased from 2006 to 2007.
True
Basket Wonders' net fixed assets increased by 80.8% from 2005 to 2006.
False
In 2007, Basket Wonders' total liabilities and equity were equal.
False
According to the Indexed Income Statements, EBIT decreased from 2005 to 2006.
False
EAT stands for 'Extraordinary Accounting Transactions'.
False
Basket Wonders paid out all of its earnings as cash dividends in 2006.
True
Test your knowledge on the internal uses of statement analysis, including focusing on profitability, assessing financial position, evaluating opportunities, and understanding supplier analysis. Explore examples and primary types of financial statements such as the balance sheet.
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