Q: If a segment's revenue is $$12 million and the combined revenue of all segments is 100 $$million, does this segment meet the FASB reportable segment criteria?

Yes, because $$12\text{ million} \div 100$$\text{ million} = 12\%$, which is above the 10\% threshold.

Q: Which formula correctly calculates the current ratio?

$$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$$

Q: Which of the following is a correct formula for Return on Investment (ROI)?

$$\text{ROI} = \frac{\text{Operating Profit}}{\text{Identifiable Assets}} \times 100$$

Q: A company’s quick ratio is calculated as:

$$\text{Quick Ratio} = \frac{\text{Cash} + \text{Marketable Securities} + \text{Accounts Receivable}}{\text{Current Liabilities}}$$

Question 1

Which of the following is NOT a required disclosure under FASB segmental reporting standards?

Accepted Answer

Information about segment liabilities

Question 2

Luna Inc.'s current ratio has increased and is above the industry average, while its average collection period has shortened. What does this most likely indicate?

Accepted Answer

Luna has no obvious problems with liquidity or management of inventory and receivables.

Question 3

If a segment's revenue is $$12 million and the combined revenue of all segments is 100 $$million, does this segment meet the FASB reportable segment criteria?

Accepted Answer

Yes, because $$12	ext{ million} \div 100$$	ext{ million} = 12\%$, which is above the 10\% threshold.

Question 4

Which formula correctly calculates the current ratio?

Accepted Answer

$$	ext{Current Ratio} = \frac{	ext{Current Assets}}{	ext{Current Liabilities}}$$

Question 5

During periods of rising prices, which inventory method results in higher reported net income and why?

Accepted Answer

FIFO, because older, lower-cost inventory is matched against current sales.

Question 6

ABC Company has a debt ratio of 76\% and a cash flow adequacy ratio of 0.43. What does this suggest about ABC's financial position?

Accepted Answer

ABC is highly leveraged and may have difficulty covering capital expenditures and debt repayments from operations.

Question 7

Which segment of Sage Inc. had the highest operating profit margin in all years according to the segmental data?

Accepted Answer

Sporting apparel

Question 8

If a company uses LIFO during inflation, what is the likely effect on its ending inventory and cost of goods sold (COGS)?

Accepted Answer

Ending inventory is undervalued and COGS is higher.

Question 9

Which of the following is a correct formula for Return on Investment (ROI)?

Accepted Answer

$$	ext{ROI} = \frac{	ext{Operating Profit}}{	ext{Identifiable Assets}} 	imes 100$$

Question 10

Which segment of Sage Inc. had the largest percentage contribution to total revenue in 2024?

Accepted Answer

Sporting gear and equipment

Question 11

A company’s quick ratio is calculated as:

Accepted Answer

$$	ext{Quick Ratio} = \frac{	ext{Cash} + 	ext{Marketable Securities} + 	ext{Accounts Receivable}}{	ext{Current Liabilities}}$$

Question 12

Which of the following is a plausible reason for a declining asset turnover ratio in a company?

Accepted Answer

Expansion of capital assets has been more rapid than sales growth.

Question 13

If a segment’s operating profit is $$2 million and the combined profit of all segments with profit is 15 $$million, does the segment meet the FASB reportable segment criteria for operating profit?

Accepted Answer

Yes, because $$2	ext{ million} \div 15$$	ext{ million} = 13.3\%$, which is above the 10\% threshold.

Question 14

Which segment of Sage Inc. had the highest capital expenditures in 2024?

Accepted Answer

Sporting gear and equipment

Question 15

What is the main effect of using FIFO instead of LIFO during inflation on a company’s tax payments?

Accepted Answer

Tax payments will be higher under FIFO because taxable income is higher.

Question 16

Which of the following best describes the relationship between capital expenditures and return on investment (ROI) for Sage Inc.'s segments in 2024?

Accepted Answer

Sporting gear and equipment had the highest capital expenditures but a decreasing ROI.

Question 17

Which of the following is NOT a criterion for a segment to be reportable under FASB standards?

Accepted Answer

Segment liabilities exceed 10\% of combined liabilities.

Question 18

If XYZ Company has a current ratio and quick ratio both above one, and a cash-flow liquidity ratio close to one, what does this suggest about XYZ’s liquidity?

Accepted Answer

XYZ should be able to pay current liabilities as they come due.

Question 19

Which of the following analytical tools is NOT typically used to assess segmental data?

Accepted Answer

Net working capital turnover

Financial Statement Analysis and Segmental Data: Study Notes and Problems

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