Question 1

The risk of creditors in relation to the risk taken by stockholders is measured by:

Accepted Answer

A) debt to stockholders' equity ratio. 
B) gross profit ratio. 
C) rate of return to stockholders. 
D) None of these answers is correct. 
A) debt to stockholders' equity ratio. 
B) gross profit ratio. 
C) rate of return to stockholders. 
D) None of these answers is correct. A

Question 2

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Liquidity } & \begin{array} { c } 
\text { Asset } \
\text { Management }
\end{array} & \text { Debt } & \text { Profitability } \
\hline \text { Average collection period } & & & & \
\hline
\end{array}$$

Accepted Answer

$$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Liquidity } & \begin{array} { c } 
\text { Asset } \
\text { Management }
\end{array} & \text { Debt } & \text { Profitability } \
\hline \text { Average collection period } & & X & & \
\hline
\end{array}$$

Question 3

A company has cash of $215,000;short-term investments of $45,000;net receivables of $75,000;and inventory of $100,000.Current liabilities total $80,000.The current ratio is:

Accepted Answer

A) 5)28:1. 
B) 4)44:1. 
C) 5)44:1. 
D) 4)89:1. 
A) 5)28:1. 
B) 4)44:1. 
C) 5)44:1. 
D) 4)89:1. C

Question 4

Which statement below best describes the quick (acid test)ratio?

Accepted Answer

A) The acid test ratio considers only the most liquid assets: cash,accounts receivable,and temporary investments. 
B) The current ratio includes only the assets most easily converted into cash. 
C) The acid test adds merchandise inventory and prepaid expenses in the computation of current assets. 
D) None of these answers is correct. 
A) The acid test ratio considers only the most liquid assets: cash,accounts receivable,and temporary investments. 
B) The current ratio includes only the assets most easily converted into cash. 
C) The acid test adds merchandise inventory and prepaid expenses in the computation of current assets. 
D) None of these answers is correct.

Question 5

If Rick's sales increased from $40,000 to $80,000 and its cost of goods sold increased from $25,000 to $60,000,then vertical analysis based on sales would show the following for cost of goods sold for the two periods:

Accepted Answer

A) 75% and 62.5%. 
B) 62.5% and 75% 
C) 133.33% and 160% 
D) 160% and 133.33%. 
A) 75% and 62.5%. 
B) 62.5% and 75% 
C) 133.33% and 160% 
D) 160% and 133.33%.

Question 6

If management wishes to know the ability to pay off the current debts of a business,they could use the:

Accepted Answer

A) debt to total assets. 
B) current ratio. 
C) inventory turnover ratio. 
D) times interest earned. 
A) debt to total assets. 
B) current ratio. 
C) inventory turnover ratio. 
D) times interest earned.

Question 7

Accounts receivable turnover is calculated by dividing gross sales by the average gross amount of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 8

If management wishes to measure a business's ability to pay upcoming debts,they could refer to measures for:

Accepted Answer

A) leverage. 
B) liquidity. 
C) debt management. 
D) profitability. 
A) leverage. 
B) liquidity. 
C) debt management. 
D) profitability.

Question 9

What is the inventory turnover if the beginning inventory was $75,000,cost of goods sold was $300,000,and ending inventory was $65,000?

Accepted Answer

A) 6)4 times 
B) 4)3 times 
C) 3)8 times 
D) None of the above 
A) 6)4 times 
B) 4)3 times 
C) 3)8 times 
D) None of the above

Question 10

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability
-$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Liquidity } & \begin{array} { c } 
\text { Asset } \
\text { Management }
\end{array} & \text { Debt } & \text { Profitability } \
\hline \text { Rate of return on common } & & & & \
\text { stockholders' equity } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 11

Merchandise inventory turnover measures the relationship between:

Accepted Answer

A) cost of goods sold and merchandise inventory. 
B) expenses and merchandise inventory. 
C) merchandise inventory and current liabilities. 
D) assets and current liabilities. 
A) cost of goods sold and merchandise inventory. 
B) expenses and merchandise inventory. 
C) merchandise inventory and current liabilities. 
D) assets and current liabilities.

Question 12

An accountant is completing a trend analysis for a company by comparing sales for years 2003 through 2013.The base year for the calculations is 2003.

Accepted Answer

A) True 
 B)False

Question 13

Interest expense was $10,000,income tax expense $20,000,and net income after taxes is $40,000.The number of times interest was earned is:

Accepted Answer

A) 9 times. 
B) 8 times. 
C) 7 times. 
D) 6 times. 
A) 9 times. 
B) 8 times. 
C) 7 times. 
D) 6 times.

Question 14

The ratios that measure a company's ability to pay off short-term debt are known as:

Accepted Answer

A) Liquidity Ratios. 
B) Debt Management Ratios. 
C) Profitability Ratios. 
D) None of the above 
A) Liquidity Ratios. 
B) Debt Management Ratios. 
C) Profitability Ratios. 
D) None of the above

Question 15

Smith Company has the following account balances:
$$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 100,000 \
\hline \text { Accounts Receivable } & 50,000 \
\hline \text { Merchandise Inventory } & 250,000 \
\hline \text { Equipment } & 400,000 \
\hline \text { Accounts Payable } & 50,000 \
\hline \text { Bonds Payable due in 10 years } & 300,000 \
\hline
\end{array}$$
Calculate Smith Company's current ratio.

Accepted Answer

A) 8)0 
B) 7)6 
C) 2)0 
D) 16.0 
A) 8)0 
B) 7)6 
C) 2)0 
D) 16.0

Question 16

When net income before taxes and interest is $52,000 and total assets equal $205,000,the rate of return on total assets is 25.4%.

Accepted Answer

A) True 
 B)False

Question 17

The current ratio is:

Accepted Answer

A) quick assets divided by current liabilities. 
B) assets divided by liabilities. 
C) current assets divided by current liabilities. 
D) net sales divided by current liabilities. 
A) quick assets divided by current liabilities. 
B) assets divided by liabilities. 
C) current assets divided by current liabilities. 
D) net sales divided by current liabilities.

Question 18

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability
-$$\begin{array} { | l | c | c | c | c | } 
\hline & & \text { Asset } & & \
& \text { Liquidity } & \text { Management } & \text { Debt } & \text { Profitability } \
\hline \text { Current ratio } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 19

The net sales for James,Inc.were $4,000,000;net income before taxes was $810,000;and gross profit was $1,300,000.The return on sales ratio would be:

Accepted Answer

A) 12.75%. 
B) 32.50%. 
C) 45.25%. 
D) 20.25%. 
A) 12.75%. 
B) 32.50%. 
C) 45.25%. 
D) 20.25%.

Question 20

Rick's Cars had a beginning account receivables balance of $320,000.The ending account receivables balance was $280,000.Net credit sales for the company were $4,200,000.The accounts receivable turnover for Rick's Cars is:

Accepted Answer

A) 12.92. 
B) 14. 
C) 13.44. 
D) None of the above is correct. 
A) 12.92. 
B) 14. 
C) 13.44. 
D) None of the above is correct.

Exam 22: Analyzing Financial Statements

The risk of creditors in relation to the risk taken by stockholders is measured by:

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability. - Liquidity Asset Management Debt Profitability Average collection period

A company has cash of $215,000;short-term investments of $45,000;net receivables of $75,000;and inventory of $100,000.Current liabilities total $80,000.The current ratio is:

Which statement below best describes the quick (acid test)ratio?

If Rick's sales increased from $40,000 to $80,000 and its cost of goods sold increased from $25,000 to $60,000,then vertical analysis based on sales would show the following for cost of goods sold for the two periods:

If management wishes to know the ability to pay off the current debts of a business,they could use the:

Accounts receivable turnover is calculated by dividing gross sales by the average gross amount of accounts receivable.

If management wishes to measure a business's ability to pay upcoming debts,they could refer to measures for:

What is the inventory turnover if the beginning inventory was $75,000,cost of goods sold was $300,000,and ending inventory was $65,000?

Merchandise inventory turnover measures the relationship between:

An accountant is completing a trend analysis for a company by comparing sales for years 2003 through 2013.The base year for the calculations is 2003.

Interest expense was $10,000,income tax expense $20,000,and net income after taxes is $40,000.The number of times interest was earned is:

The ratios that measure a company's ability to pay off short-term debt are known as:

Smith Company has the following account balances: Cash \ 100,000 Accounts Receivable 50,000 Merchandise Inventory 250,000 Equipment 400,000 Accounts Payable 50,000 Bonds Payable due in 10 years 300,000 Calculate Smith Company's current ratio.

When net income before taxes and interest is $52,000 and total assets equal $205,000,the rate of return on total assets is 25.4%.

The current ratio is:

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability - Asset Liquidity Management Debt Profitability Current ratio

The net sales for James,Inc.were $4,000,000;net income before taxes was $810,000;and gross profit was $1,300,000.The return on sales ratio would be:

Rick's Cars had a beginning account receivables balance of $320,000.The ending account receivables balance was $280,000.Net credit sales for the company were $4,200,000.The accounts receivable turnover for Rick's Cars is:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: the Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes:

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property,plant,equipment,and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values,dividends,treasury Stocks,

Corporations and Bonds Payable

Statement of Cash Flows

The Voucher System

Departmental Accounting

Manufacturing Accounting

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