1 A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.
a. TRUE
b. FALSE

2 A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.
a. TRUE
b. FALSE

3 Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.
a. TRUE
b. FALSE

4 Financial reporting includes not only general purpose financial statements, but also information from SEC filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports, and Webcasts.
a. TRUE
b. FALSE

5 Vertical analysis is the comparison of a company's financial condition and performance across time.
a. TRUE
b. FALSE

6-Capital structure refers to a company's long-run financial viability and its ability to cover long-term obligations.
a. TRUE
b. FALSE

7-Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.
a. TRUE
b. FALS

8-The return on common stockholder's equity measures a company's success in reaching the goal of earning net income for its owners.
a. TRUE
b. FALSE

9-Financial statement analysis may be used for personal investment decisions.
a. TRUE
b. FALSE

10-Graphical analysis of the balance sheet can be useful in assessing sources of financing.
a. TRUE
b. FALSE

11-The greater the times interest earned ratio, the greater the risk a company is exposed to.
a. TRUE
b. FALSE

12-A rough guideline states that for a company with no discounts offered, days' sales uncollected should not exceed 1 1/3 times the days in its credit period.
a. TRUE
b. FALSE

13-A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.
a. TRUE
b. FALSE

14-Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.
a. TRUE
b. FALSE

15-The evaluation of company performance and financial condition includes evaluation of (1) past and current performance, (2) current financial position, and (3) future performance and risk.
a. TRUE
b. FALSE

16-A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.
a. TRUE
b. FALSE

17-Ratios, like other analysis tools, are only historically oriented.
a. TRUE
b. FALSE