Principles of Accounting II Module 5 - Chapter 15

Corporate annual reports typically do not contain

• management's discussion and analysis

• an SEC statement expressing an opinion

• accompanying notes

• an auditor's report

What is the percentage increase in sales from the preceding year to the current year?

• 70.0%

• 76.9%

• 30.0%

• 50.0%

Which of the following measures how effectively a company uses its assets?

• return on stockholders’ equity

• asset turnover

• ratio of fixed assets to long-term liabilities

• inventory turnover

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

• True

• False

The price-earnings ratio on common stock is computed as

• market price per share of common stock divided by earnings per share on common stock

• earnings per share of common stock divided by market price per share of common stock

• market price per share of common stock divided by dividends per share of common stock

• dividends per share of common stock divided by earnings per share on common stock

A company can compare its financial data to the data of other companies and industry averages to evaluate its position.

• True

• False

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

• True

• False

The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company’s auditors.

• True

• False

Horizontal analysis of comparative financial statements includes

• development of common-sized statements

• computation of liquidity ratios

• computation of dollar amount changes and percentage changes from the previous to the current year

• evaluation of each component in a financial statement to a total within the statement

Which of the following is required by the Sarbanes-Oxley Act?

• price-earnings ratio

• report on internal control

• corporate social responsibility report

• common-sized statement