1.Assume the following sales data for a company: 2010 $700000 2011 $600000 What

Question

1.Assume the following sales data for a company:
2010 $700000
2011 $600000
What is the percentage increase in sales from 2009 to 2010? (To the nearest percent.)
a. 117%
b. 17%
c. 14%
d. 114%
2. In a common size financial statement, which of the following is given a percentage of 100 percent?
a. Total liabilities
b. Net income
c. Net sales
d. Property, Plant and Equipment
3. In horizontal analysis each item is expressed as a percentage of the
a. base year figure.
b. latest year.
c. total assets.
d. net income figure
4. The independent auditors do which of the following?
a. describe which financial statements are covered by the audit.
b. examine and verify management's conclusions regarding the adequacy of its internal control.
c. summarize what the auditor did.
d. state that the financial statements are truthful.
5. An annual report includes all of the following except:
a. notes to the financial statements.
b. management discussion and analysis section.
c. salary information for the key executives.
d. an auditor's report.
6. n the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results?
a. in the notes to the financial statements
b. in the management discussion and analysis section
c. in the balance sheet
d. in the auditor's report on the fairness of the financial statements

Explanation / Answer

1. (700000-600000) / 600000 = .1666 = (b. 17%)

2. [b. Net sales]In a common size income statement, all components are stated as a percent of net sales

3. [a. base year figures]In horizontal analysis the earliest or base year is the figure each item is compared to. It may be done for one or more earlier statements.

4. [b. examine and verify management's conclusions regarding the adequacy of its internal control.]The Sarbanes-Oxley Act of 2002 requires management to provide a report on the effectiveness of its internal controls over financial reporting and the external auditor to examine and verify management's conclusions regarding internal control.

5. [c. salary information for the key executives.]Salary information for key executives would not be required to be included in the annual report.

6. [d. in the auditor's report on the fairness of the financial statements]The auditor is required to include a report giving its opinion on whether or not the company's financial statements fairly reprevent the financial condition of the company.

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