Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Chapter 15, Problem 2MCQ
To determine
Identify the advantage of common-size analysis.
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Students have asked these similar questions
Which of the following is true about the quick ratio?
a. The quick ratio is calculated by dividing the least liquid of current assets by current liabilities.
b. Quick ratios will tend to be much larger than current ratio for manufacturing firms or other industries that have a lot of inventory.
c. Inventory, being not very liquid, is subtracted from total current assets to determine the most liquid assets.
d. Service firms that tend not to carry too much inventory will see significantly higher quick ratios than current ratios.
Which of the following statements regarding the current ratio is true?
a.The current ratio is more useful than working capital in making comparisons across companies.
b.The current ratio is not useful in making comparisons with industry averages.
c.Working capital is more useful than the current ratio in making comparisons across companies.
d.All of these statements are true.
When converting dollar amounts on our financial statements to percentages for vertical analysis, what is it that makes this an easier way to compare companies to each other?
A
It provides a way for outside stakeholders to understand the numbers better in an easier format
B
It forces us to look closer at our financial statements to ensure we don't have missing amounts
C
It allows us to compare things based on growth or decline easier than comparing dollar amounts that could be vastly different values
D
It allows the analysis of numbers too large to comprehend by most stakeholders
Chapter 15 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 15 - Name the two major types of financial statement...Ch. 15 - Prob. 2DQCh. 15 - Explain how creditors, investors, and managers can...Ch. 15 - What are liquidity ratios? Leverage ratios?...Ch. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - A high inventory turnover ratio provides evidence...Ch. 15 - A loan agreement between a bank and a customer...Ch. 15 - Prob. 10DQ
Ch. 15 - Explain why an investor would be interested in a...Ch. 15 - Prob. 12DQCh. 15 - Prob. 13DQCh. 15 - When a company participates in a stock buyback...Ch. 15 - Explain the significance of the inventory turnover...Ch. 15 - In a JIT manufacturing environment, the current...Ch. 15 - Prob. 1MCQCh. 15 - Prob. 2MCQCh. 15 - Fractions or percentages computed by dividing one...Ch. 15 - Prob. 4MCQCh. 15 - Pedee Companys inventory turnover in days is 80...Ch. 15 - Prob. 6MCQCh. 15 - Prob. 7MCQCh. 15 - Prob. 8MCQCh. 15 - A small pizza restaurant, founded and owned by the...Ch. 15 - Prob. 10MCQCh. 15 - Prob. 11BEACh. 15 - Scherer Company provided the following income...Ch. 15 - Chen Company has current assets equal to...Ch. 15 - Last year, Nikkola Company had net sales of...Ch. 15 - Last year, Nikkola Company had net sales of...Ch. 15 - Paxton Company provided the following income...Ch. 15 - Ernst Companys balance sheet shows total...Ch. 15 - Prob. 18BEACh. 15 - Prob. 19BEACh. 15 - The income statement, statement of retained...Ch. 15 - The income statement, statement of retained...Ch. 15 - The income statement, statement of retained...Ch. 15 - The income statement, statement of retained...Ch. 15 - Jasmine Company provided the following income...Ch. 15 - Jasmine Company provided the following income...Ch. 15 - LoLo Lemon Company has current assets equal to...Ch. 15 - Last year, Tobys Hats had net sales of 45,000,000...Ch. 15 - Last year, Tobys Hats had net sales of 45,000,000...Ch. 15 - Alessandra Makeup Manufactures provided the...Ch. 15 - Klynveld Companys balance sheet shows total...Ch. 15 - Prob. 31BEBCh. 15 - Prob. 32BEBCh. 15 - The income statement, statement of retained...Ch. 15 - The income statement, statement of retained...Ch. 15 - The income statement, statement of retained...Ch. 15 - The income statement, statement of retained...Ch. 15 - Sundahl Companys income statements for the past 2...Ch. 15 - Sundahl Companys income statements for the past 2...Ch. 15 - Cuneo Companys income statements for the last 3...Ch. 15 - Cuneo Companys income statements for the last 3...Ch. 15 - Prob. 41ECh. 15 - Upton Company has current assets equal to...Ch. 15 - Montalcino Company had net sales of 54,000,000....Ch. 15 - Whalen Company had net sales of 125,500,250,000....Ch. 15 - Prob. 45ECh. 15 - Prob. 46ECh. 15 - Bryce Company manufactures pet supplies. However,...Ch. 15 - Prob. 48ECh. 15 - Prob. 49ECh. 15 - Juroe Company provided the following income...Ch. 15 - Juroe Company provided the following income...Ch. 15 - Juroe Company provided the following income...Ch. 15 - Rebert Inc. showed the following balances for last...Ch. 15 - Rebert Inc. showed the following balances for last...Ch. 15 - Rebert Inc. showed the following balances for last...Ch. 15 - The following selected information is taken from...Ch. 15 - Grammatico Company has just completed its third...Ch. 15 - The following information has been gathered for...Ch. 15 - Mike Sanders is considering the purchase of Kepler...Ch. 15 - Prob. 60PCh. 15 - Mike Sanders is considering the purchase of Kepler...Ch. 15 - Mike Sanders is considering the purchase of Kepler...Ch. 15 - Mike Sanders is considering the purchase of Kepler...Ch. 15 - Albion Inc. provided the following information for...Ch. 15 - Prob. 65PCh. 15 - Prob. 66PCh. 15 - Prob. 67C
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Similar questions
- Common-Size Analysis. Common-size analysis is a simple way to make financial statements of different firms comparable. What are possible shortcomings of comparing two different firms using common-size analysis?arrow_forwardWhich of the following statements is most correct? Select one: A. A company with a current ratio of 0.5, should purchase additional inventory on credit if it wants to improve this ratio. B. Return on assets is a function of two variables, the profit margin and current asset turnover. C. A company with a current ratio of 0. 5, should sell some of the existing inventory at cost if it wants to improve this ratio. D. Firms with low rates of return on stockholders’ equity tend to sell at relatively high ratios of market price to book value.arrow_forwardIf company A has a higher degree of operating leverage than company B, then: company A is more profitable. company A has higher variable expenses. company A is less risky. company A's profits are more sensitive to percentage changes in sales.arrow_forward
- Give typing answer with explanation and conclusion 5. Which of the following statements is correct?  A-- All the answers are correct.  B-- A more direct method of calculating the DOL is to use the following equation is DOL = (Sales - Variable Costs)/EBIT.  C-- Because the amount of debt is determined by managerial choice, the business risk that a firm faces is also determined by management.  D-- Fixed costs are those costs that are expected to change at the same rate as the firm’s sales.  E-- If a firm’s operating costs are all variable, then any variation in sales will be less than the variation in EBIT.arrow_forwardWhich of the following statements is true? A In linear break-even analysis, the contribution margin is the difference between the selling price and the average fixed cost. B The Theory of the Business Firm assumes perfect market competition. This means it assumes that the selling price decreases as a firm's production rate increases. C In the Theory of the Business Firm, profits per period are maximized at the production rate at which marginal cost equals average cost. D In the Theory of the Business Firm, profits per period are maximized at the production rate at which average cost is minimized. E All four statements are false.arrow_forwardIs it possible for a firm to have price-earnings ratio that is higher than other similar firms? Why or why not?arrow_forward
- What analysis ensures that the income for the firm will cover its variable costs?  a. ratio analysis b. financial analysis c. cost volume profit analysis d. sales analysisarrow_forwardWhich of the following statements is usually correct? A low receivables turnover is good for the business The lower the total debt-to-equity ratio, the lower the financial risk for a firm The higher the tax rate for a firm, the lower the interest coverage ratio An increase in net profit margin with no change in sales or assets means a poor ROIarrow_forwardwhen comparing a firm's ratios to an industry, is it bad to he below average? explain your answer with an examplearrow_forward
- For each of the following cases, state whether the statement is true for LIFO or for FIFO. Assume that prices are rising. (a) Results in a higher quality of earnings ratio. (b) Results in lower net cash provided by operating activities. (c) Results in higher net income. (d) Results in lower taxes. (e) Results in higher phantom profits.arrow_forwardWhich one of the following is an advantage of LIFO? a. In periods of rising prices, less income taxes are paid b. In periods of rising prices, more holding gains are reported in net income c. Record keeping and financial statement preparation are easier d. Conservative income statement and balance sheet disclousures result from falling pricesarrow_forwardWhich of the following typically is true for profitability ratios? a. Growth stocks have lower price to earnings ratios.b. Companies in more competitive industries have higher profit margins.c. The gross profit ratio declines as competition increases.d. When a company has debt, its return on equity will be lower than its return on assets.arrow_forward
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