Question 1

Which of the following statements is correct?

Accepted Answer

A) When cost of goods sold as a percentage of sales increases,the gross profit percentage will increase. 
B) It is possible that when cost of goods sold in dollars increases,cost of goods sold as a percentage of sales decreases. 
C) If gross profit percentage is the same for the current and past year,then sales and cost of goods sold in dollars did not change. 
D) If gross profit percentage increases from one year to the next,then the net income percentage will also increase from one year to the next. 
A) When cost of goods sold as a percentage of sales increases,the gross profit percentage will increase. 
B) It is possible that when cost of goods sold in dollars increases,cost of goods sold as a percentage of sales decreases. 
C) If gross profit percentage is the same for the current and past year,then sales and cost of goods sold in dollars did not change. 
D) If gross profit percentage increases from one year to the next,then the net income percentage will also increase from one year to the next.

Question 2

The inventory turnover ratio is significantly affected by the choice of inventory accounting method.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is false?

Accepted Answer

A) The major difference between the quick and current ratios is inventory. 
B) Current liabilities are the denominator in the cash,quick,and current ratios. 
C) Companies that sell expensive merchandise tend to have high inventory turnover ratios. 
D) Some analysts do not use the cash ratio because it is very sensitive to individual events. 
A) The major difference between the quick and current ratios is inventory. 
B) Current liabilities are the denominator in the cash,quick,and current ratios. 
C) Companies that sell expensive merchandise tend to have high inventory turnover ratios. 
D) Some analysts do not use the cash ratio because it is very sensitive to individual events.

Question 4

The quality of income ratio increases when net income increases.

Accepted Answer

A) True 
 B)False

Question 5

MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2019 and 2018.MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2019 and 2018 respectively.The company paid cash dividends per share of $0.85 in 2019 and $0.63 in 2018.Total stockholders' equity was $13,572 million and $11,896 million in 2019 and 2018 respectively.The common shares outstanding were approximately 1,782,000 in both 2019 and 2018. 
-MusicPod's price/earnings ratio for 2019 is closest to:

Accepted Answer

A) 21.5 
B) 62.4 
C) 20.0 
D) 2.9 
A) 21.5 
B) 62.4 
C) 20.0 
D) 2.9

Question 6

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17.Apple Pie declared dividends of $2 per share of common stock during 2019.On December 31,2019,the stock had a market price of $18.50 per share.Apple Pie's price/earnings ratio is closest to:

Accepted Answer

A) 9.25 
B) 8.11 
C) 5.84 
D) 0.17 
A) 9.25 
B) 8.11 
C) 5.84 
D) 0.17

Question 7

Which of the following statements is incorrect about fundamental business strategies?

Accepted Answer

A) A company implementing a cost differentiation strategy is attempting to increase operating efficiency of assets and improve the inventory turnover ratio. 
B) A company implementing a product differentiation strategy is attempting to improve its net profit margin through charging higher prices. 
C) A company will be more profitable because it will attract a higher volume of customers and sales revenue when it follows a product differentiation strategy versus a cost differentiation strategy. 
D) In general,a cost differentiation strategy results in lower profit margins whereas a product differentiation strategy results in higher profit margins. 
A) A company implementing a cost differentiation strategy is attempting to increase operating efficiency of assets and improve the inventory turnover ratio. 
B) A company implementing a product differentiation strategy is attempting to improve its net profit margin through charging higher prices. 
C) A company will be more profitable because it will attract a higher volume of customers and sales revenue when it follows a product differentiation strategy versus a cost differentiation strategy. 
D) In general,a cost differentiation strategy results in lower profit margins whereas a product differentiation strategy results in higher profit margins.

Question 8

If an investor is considering two different companies as an investment,the investor should choose to invest with the company that has the highest net profit margin.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following ratios will not increase when net income increases?

Accepted Answer

A) Gross profit percentage. 
B) Return on assets. 
C) Return on equity. 
D) Net profit margin. 
A) Gross profit percentage. 
B) Return on assets. 
C) Return on equity. 
D) Net profit margin.

Question 10

Cecilia Company reported net income of $1,200,000.The average total liabilities were $4,300,000 and average total stockholders' equity was $5,200,000.Interest expense was $100,000 and the tax rate was 40%.Cecilia's return on assets ratio (calculated using the modified method discussed in the text)is closest to:

Accepted Answer

A) 13.7% 
B) 12.6% 
C) 11.6% 
D) 13.3% 
A) 13.7% 
B) 12.6% 
C) 11.6% 
D) 13.3%

Question 11

Lucas Company has provided the following information: • Cash flow from operating activities,$360,000
• Net income,$306,000
• Interest expense,$30,000
• Interest cash payments,$20,000
• Income tax payments,$240,000
• Income tax expense,$246,000
-
Using the modified method discussed in the text,what was Lucas' cash coverage ratio?

Accepted Answer

A) 21.0 
B) 31.8 
C) 21.2 
D) 31.0 
A) 21.0 
B) 31.8 
C) 21.2 
D) 31.0

Question 12

The following data were reported by Universe Company at year-end:
   Calculate each of the following ratios:
A.Debt-to-equity
B.Current ratio
C.Quick ratio
D.Which of the above ratios,if any,are liquidity ratios?
E.Which of the above ratios,if any,are profitability ratios?

Accepted Answer

A.Debt-to-equity = ($75,000 + $75,000)÷

Question 13

The operating cycle includes the number of days it takes to:

Accepted Answer

A) Purchase goods,sell goods,pay cash to suppliers. 
B) Purchase goods,pay cash,collect cash from customers. 
C) Borrow money,collect cash from customers,repay cash borrowed. 
D) Pay cash for goods,sell goods,collect cash from customers. 
A) Purchase goods,sell goods,pay cash to suppliers. 
B) Purchase goods,pay cash,collect cash from customers. 
C) Borrow money,collect cash from customers,repay cash borrowed. 
D) Pay cash for goods,sell goods,collect cash from customers.

Question 14

Which of the following ratios is not part of the DuPont model?

Accepted Answer

A) Total asset turnover. 
B) Debt-to-equity. 
C) Net profit margin. 
D) Return on equity. 
A) Total asset turnover. 
B) Debt-to-equity. 
C) Net profit margin. 
D) Return on equity.

Question 15

Which of the following transactions would increase the current ratio of a company if the ratio is currently greater than 1?

Accepted Answer

A) Paid the principal on a long-term note payable. 
B) Borrowed cash on a short-term note. 
C) Sold inventory for more than cost. 
D) Purchased supplies with cash. 
A) Paid the principal on a long-term note payable. 
B) Borrowed cash on a short-term note. 
C) Sold inventory for more than cost. 
D) Purchased supplies with cash.

Question 16

Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing unit costs?

Accepted Answer

A) Net profit margin. 
B) Inventory turnover. 
C) Quick. 
D) Current. 
A) Net profit margin. 
B) Inventory turnover. 
C) Quick. 
D) Current.

Question 17

Trenton Company has provided the following information: • Net income,$240,000
• Preferred shares issued,6,000
• Weighted average number of shares of common stock issued,24,000
• Cash dividends declared and paid on common stock,$30,000
• Market price per share,$36
• Weighted average number of treasury shares of common stock,4,000
-
What is Trenton's earnings per share?

Accepted Answer

A) $8.00. 
B) $7.00. 
C) $10.50. 
D) $12.00. 
A) $8.00. 
B) $7.00. 
C) $10.50. 
D) $12.00.

Question 18

When comparing a fixed asset turnover ratio to a total asset turnover ratio,a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Accepted Answer

A) True 
 B)False

Question 19

Indicate the effect of each item on the particular ratio of that row of the schedule.In the last column of the schedule,place the answer of the effect of the item on the ratio.Use the letter I for increase in the ratio,D for decrease in the ratio,and N for no effect on the ratio.Each item is independent of the others.

Accepted Answer

@#IMG-DLM& A.Cash increases the numerator of curre

Question 20

Wildlife Co.reported net income of $8.3 million,interest expense of $0.5 million and $0.2 million of income tax expense.Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million.Wildlife's times interest earned ratio is closest to:

Accepted Answer

A) 41.5 times 
B) 6 times 
C) 18 times 
D) 45 times 
A) 41.5 times 
B) 6 times 
C) 18 times 
D) 45 times

Which of the following statements is correct?

The inventory turnover ratio is significantly affected by the choice of inventory accounting method.

Which of the following is false?

The quality of income ratio increases when net income increases.

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17.Apple Pie declared dividends of $2 per share of common stock during 2019.On December 31,2019,the stock had a market price of $18.50 per share.Apple Pie's price/earnings ratio is closest to:

Which of the following statements is incorrect about fundamental business strategies?

If an investor is considering two different companies as an investment,the investor should choose to invest with the company that has the highest net profit margin.

Which of the following ratios will not increase when net income increases?

The following data were reported by Universe Company at year-end: Calculate each of the following ratios: A.Debt-to-equity B.Current ratio C.Quick ratio D.Which of the above ratios,if any,are liquidity ratios? E.Which of the above ratios,if any,are profitability ratios?

The operating cycle includes the number of days it takes to:

Which of the following ratios is not part of the DuPont model?

Which of the following transactions would increase the current ratio of a company if the ratio is currently greater than 1?

Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing unit costs?

When comparing a fixed asset turnover ratio to a total asset turnover ratio,a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Wildlife Co.reported net income of $8.3 million,interest expense of $0.5 million and $0.2 million of income tax expense.Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million.Wildlife's times interest earned ratio is closest to:

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Reporting and Interpreting Investments in Other Corporations

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Exam 13: Analyzing Financial Statements

Which of the following statements is correct?

The inventory turnover ratio is significantly affected by the choice of inventory accounting method.

Which of the following is false?

The quality of income ratio increases when net income increases.

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17.Apple Pie declared dividends of $2 per share of common stock during 2019.On December 31,2019,the stock had a market price of $18.50 per share.Apple Pie's price/earnings ratio is closest to:

Which of the following statements is incorrect about fundamental business strategies?

If an investor is considering two different companies as an investment,the investor should choose to invest with the company that has the highest net profit margin.

Which of the following ratios will not increase when net income increases?

The following data were reported by Universe Company at year-end: Calculate each of the following ratios: A.Debt-to-equity B.Current ratio C.Quick ratio D.Which of the above ratios,if any,are liquidity ratios? E.Which of the above ratios,if any,are profitability ratios?

The operating cycle includes the number of days it takes to:

Which of the following ratios is not part of the DuPont model?

Which of the following transactions would increase the current ratio of a company if the ratio is currently greater than 1?

Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing unit costs?

When comparing a fixed asset turnover ratio to a total asset turnover ratio,a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Wildlife Co.reported net income of $8.3 million,interest expense of $0.5 million and $0.2 million of income tax expense.Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million.Wildlife's times interest earned ratio is closest to:

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Reporting and Interpreting Investments in Other Corporations

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