Multiple Choice Problems (FABM 2) November 16, 2018

(For numbers 1 to 5) The financial statements of Merdana Trading Ltd. are given below:

1. Horizontal analysis of 2014 Merdana’s balance sheet would report

a. Cash as 9.50% of total assets.
b. 17% increase in Prepaid Expenses.
c. 19% increase in Cash.
d. All of the above

2. Vertical analysis of 2014 Merdana’s balance sheet would report

a. Cash as 9.50% of total assets.
b. 17% increase in Prepaid Expenses.
c. 19% increase in Cash.
d. All of the above

3. A common-size income statement for Merdana would report (amounts rounded)

a. Net income of 19%.
b. Sales of 100%.
c. Cost of sales at 34%.
d. All of the above

4. A common-size balance sheet for Merdana would report (amounts rounded)

a. Current liabilities as 28% of total assets.
b. Owner’s capital is 53% of total liabilities and equity
c. Receivables is 7% of total liabilities and equity
d. All of the above

5. Trend analysis will show which of the following?

a. 15% increase in Current Liabilities.
b. 33% increase in Owner’s Capital.
c. 19% increase in Long Term Liabilities
d. All of the above
6. If current assets are ₱270,000 and total assets are ₱810,000, what percentage of total assets are
current assets?
a. 3.5 percent
b. 30 percent
c. 25 percent
d. 33 percent

7. Comparing the amount of a balance sheet item in one year to the amount for the same item in a
prior year is called
a. common-size analysis.
b. vertical analysis.
c. horizontal analysis.
d. ratio analysis.

8. A firm has liabilities of ₱30,000 and owner’s capital of ₱90,000. The percentage oftotal liabilities to
total assets is
1. 25 percent.
2. 20 percent.
3. 50 percent.
4. 75 percent.

9. A firm had owner’s capital of ₱150,000 in 2013 and ₱187,500 in 2013. The increase in owner’s capital
from 2013 to 2014 is
a. 12.5 percent.
b. 20 percent.
c. 25 percent.
d. 125 percent.

10. If long-term liabilities are ₱300,000 and total assets are ₱2,100,000, what percentage of total assets
are long-term liabilities?
a. 7 percent
b. 16.7 percent
c. 12.5 percent
d. 14.3 percent

ANSWERS:
1. B
2. A
3. D
4. D
5. B
6. D
7. C
8. A
9. C
10. D