Chapter 17—Financial Statement Analysis

TRUE/FALSE

29. The number of days' sales in inventory is one means of

expressing the relationship between the cost of goods sold and
inventory.

ANS: T PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

30. Assuming that the quantities of inventory on hand during the

current year were sufficient to meet all demands for sales, a
decrease in the inventory turnover for the current year when
compared with the turnover for the preceding year indicates an
improvement in inventory management.

ANS: F PTS: 1 DIF: Moderate OBJ: 17-

02
NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

31. The ratio of fixed assets to long-term liabilities provides a

measure of a firm’s ability to pay dividends.

ANS: F PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

32. A decrease in the ratio of liabilities stockholders' equity indicates

an improvement in the margin of safety for creditors.

ANS: T PTS: 1 DIF: Easy OBJ: 17-02

 NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

33. In computing the ratio of net sales to assets, long-term

investments are excluded from average total assets.

ANS: T PTS: 1 DIF: Easy OBJ: 17-03

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis