QUESTION: 1557

Which of the following would not be included as an asset on a corporate balance sheet?

Inventory
Marketable securities
Buildings
Accounts receivable
Common stock

Answer(s): E

Explanation:

Common stock. Common stock is not as asset; it represents funds received from the sale of stock to owners of the firm. It is ownership equity, not an asset.

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QUESTION: 1558

Which of the following groups are least likely to be creditors of a company?

suppliers
investors
banks
customers

Answer(s): D

Explanation:

The customers that buy on credit owe the company; they are not creditors of the company unless the company owes them.

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QUESTION: 1559

A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?

Determine which companies in the same industry are at approximately the same stage of development.
Evaluate financial statements of companies within a given industry of approximately the same value.
Ascertain the relative potential of companies of similar size in different industries.
Compare the mix of assets, liabilities, capital, revenue, and expenses within a given industry without respect to relative size.
None of these answers.

Answer(s): D

Explanation:

Common-size financial statements present items in a financial statement as percentages of a common base.
Comparison among firms in the same industry is made possible despite differences in size. Comparison of firms in different industries has drawbacks because the optimum mix of assets, liabilities, etc. will vary from industry to industry.

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QUESTION: 1560

The following data have been extracted from the financial statements of a firm for two years, 1995 and 1996:

1995 1996
Assets 8,174 8,439
Net Sales 9,412 8,949
Receivables 1,135 986
Inventory 2,119 2,464
COGS 6,948 7,089

The receivables turnover ratio and the average receivables collection period for 1996 equal ________.

8.44, 43.25 days
9.07, 40.22 days
7.88, 46.29 days
none of these answers

Answer(s): A

Explanation:

Receivables turnover ratio = Net annual sales/average receivables Average receivables collection period = 365/ receivables turnover. For 1996, the average receivables equal (986+1135)/2 = 1061. Receivables turnover ratio = 8949/1061 = 8.44. Average receivables collection period = 365/8.44 = 43.25 days.

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QUESTION: 1557

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QUESTION: 1558

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QUESTION: 1559

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QUESTION: 1560

Explanation: