FUND FINCL ACCT (LL) W/CONNECT >IB<
5th Edition
ISBN: 9781260036138
Author: PHILLIPS
Publisher: MCG
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Textbook Question
Chapter 13, Problem 14ME
Describing the Effect of Accounting Decisions on Ratios
For each of the following three accounting choices, indicate the decision that will yield (a) a higher net profit margin and (b) a lower
- 1. Straight-line versus accelerated
depreciation (in the first year of the asset’s life). - 2. FIFO versus LIFO (in periods of constantly rising costs and rising inventory levels).
- 3. Straight-line depreciation with a four-year useful life versus a seven-year useful life (no residual value).
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Students have asked these similar questions
Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (I), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken.
CAn you explain how to solve these not just the answers?
1. Issuance of long-term bonds
2. Issuance of short-term notes
3. Payment of accounts payable
4. Purchase of inventory on account
5. Purchase of inventory for cash
6. Purchase of equipment with a 4-year note
7. Retirement bonds
8. Sale of common stock
9. Write-off of obsolete inventory
10. Purchase of short-term investment for cash
11. Decision to refinance on a long-term basis some currently maturing debt
TRUE OR FALSE
Horizontal analysis is possible for both an income statement and a statement of financial position.
Financial analysis is primarily a matter of making relevant mechanical computations.
It is possible that a decrease in gross profit rate may be offset by a decrease in expenses, thus resulting in an increase in net income.
On a, common-size income statement, net income is given an equivalent of 100%
Short-term creditors generally are more concerned with vertical analysis than with horizontal analysis.
Percentage changes are usually computed by using the latest figure as a base.
Industry standards tend to place the performance of a company in a more meaningful perspective.
The peso amount of change during an accounting period for an item appearing in financial statements is less significant than the change measured as a percentage.
An increase in sales volume generally is accompanied by a proportionate increase in net income.
Common-size financial statements show peso…
1.
Swing Ltd uses FIFO for its inventory, which is valued at $21,000. It is considering a change to moving weighted average, which would change the valuation of inventory to $22,500. Which of the following would be decreased by the change?
a.
Cost of goods sold
b.
Sales
c.
Liabilities
d.
Withdrawals
2.
Which of the following is NOT an accounting method that could be chosen by a company to increase reported profits in a particular year?
a.
Understating allowance for doubtful debts
b.
Classifying longer-term receivables as current assets
c.
Changing estimates of the useful life of plant and equipment
d.
Changing inventory valuation method
3.
Which of the following statements about the use of the FIFO assumption is NOT true?
a.
The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account.
b.
The FIFO assumption is not affected by the inventory control method.
c.
In periods of rising prices it produces a higher profit than…
Chapter 13 Solutions
FUND FINCL ACCT (LL) W/CONNECT >IB<
Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...
Ch. 13 - What are the two essential characteristics of...Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - 1. Which of the following ratios is not used to...Ch. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Analysts use ratios to a. Compare different...Ch. 13 - Which of the following ratios incorporates stock...Ch. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - A bank is least likely to use which of the...Ch. 13 - Prob. 9MCCh. 13 - (Supplement 13A) Which of the following items is...Ch. 13 - Calculations for Horizontal Analyses Using the...Ch. 13 - Calculations for Vertical Analyses Refer to M13-1....Ch. 13 - Interpreting Horizontal Analyses Refer to the...Ch. 13 - Interpreting Vertical Analyses Refer to the...Ch. 13 - Prob. 5MECh. 13 - Prob. 6MECh. 13 - Prob. 7MECh. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Inferring Financial Information Using the Current...Ch. 13 - Prob. 10MECh. 13 - Identifying Relevant Ratios Identify the ratio...Ch. 13 - Prob. 12MECh. 13 - Analyzing the Impact of Accounting Alternatives...Ch. 13 - Describing the Effect of Accounting Decisions on...Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Matching Each Ratio with Its Computational Formula...Ch. 13 - Computing and Interpreting Selected Liquidity...Ch. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Analyzing the Impact of Alternative Inventory...Ch. 13 - Prob. 1CPCh. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - Prob. 6CPCh. 13 - Prob. 7CPCh. 13 - Prob. 1PACh. 13 - Prob. 2PACh. 13 - Prob. 3PACh. 13 - Prob. 4PACh. 13 - Prob. 5PACh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PACh. 13 - Prob. 1PBCh. 13 - Prob. 2PBCh. 13 - Prob. 3PBCh. 13 - Prob. 4PBCh. 13 - Prob. 5PBCh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PBCh. 13 - Prob. 1SDCCh. 13 - Prob. 2SDCCh. 13 - Prob. 5SDCCh. 13 - Prob. 6SDCCh. 13 - Prob. 7SDCCh. 13 - Prob. 1CC
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