Question 1

The current ratio determines the ability of a company to:

Accepted Answer

A)  pay off all payables. 
B)  pay off current payables. 
C)  manage its ability to earn profit. 
D)  use its equity. 
A)  pay off all payables. 
B)  pay off current payables. 
C)  manage its ability to earn profit. 
D)  use its equity.

Question 2

A company has cash of $221,000; short-term investments of $54,000; net receivables of $75,000; and inventory of $103,000. Current liabilities total $83,000. The current ratio is: (Round your answer two decimal places.)

Accepted Answer

A)  4.22:1. 
B)  4.55:1. 
C)  5.46:1. 
D)  4.81:1. 
A)  4.22:1. 
B)  4.55:1. 
C)  5.46:1. 
D)  4.81:1.

Question 3

The gross profit rate is an example of this type of ratio.

Accepted Answer

A)  Liquidity 
B)  Asset Management 
C)  Debt Management 
D)  Profitability 
A)  Liquidity 
B)  Asset Management 
C)  Debt Management 
D)  Profitability

Question 4

The income before taxes and interest expense of Barry Builders for the year just ended is $213,000. Their interest expense is $21,000 and their income taxes are $82,500. The number of times interest would be earned is: (Round your answer two decimal places.)

Accepted Answer

A)  15.07. 
B)  10.14. 
C)  11.14. 
D)  0.49. 
A)  15.07. 
B)  10.14. 
C)  11.14. 
D)  0.49.

Question 5

The ratio that indicates the amount of assets that are financed by creditors is:

Accepted Answer

A)  debt to stockholders' equity. 
B)  debt to total retained earnings ratio. 
C)  debts to total assets ratio. 
D)  None of the above 
A)  debt to stockholders' equity. 
B)  debt to total retained earnings ratio. 
C)  debts to total assets ratio. 
D)  None of the above

Question 6

The liabilities of a company at the end of the year are $530,000 and the total stockholders' equity at the end of the year is $1,080,000. The debt to stockholders' equity ratio is: (Round your answer two decimal places.)

Accepted Answer

A)  0.49 to 1. 
B)  0.33 to 1. 
C)  0.67 to 1. 
D)  3.04 to 1. 
A)  0.49 to 1. 
B)  0.33 to 1. 
C)  0.67 to 1. 
D)  3.04 to 1.

Question 7

A current ratio of 1.5 times would mean that the business has 1.5 times more assets than liabilities.

Accepted Answer

A) True 
 B)False

Question 8

In a common-size income statement, advertising expenses are 10%. This means that they are 10% of:

Accepted Answer

A)  net income. 
B)  net sales. 
C)  gross profit. 
D)  net profit. 
A)  net income. 
B)  net sales. 
C)  gross profit. 
D)  net profit.

Question 9

If management wishes to evaluate the amount of assets which were financed by creditors, they could use the:

Accepted Answer

A)  debt to total assets. 
B)  rate of return on common stockholders' equity. 
C)  debt to total liabilities. 
D)  times interest earned. 
A)  debt to total assets. 
B)  rate of return on common stockholders' equity. 
C)  debt to total liabilities. 
D)  times interest earned.

Question 10

Coal Company has an income before taxes of $500,700, and an interest expense of $100,400. What is the times interest earned ratio?

Accepted Answer

A)  5.99 times 
B)  4.99 times 
C)  3.99 times 
D)  0.2 times 
A)  5.99 times 
B)  4.99 times 
C)  3.99 times 
D)  0.2 times

Question 11

Which of the following is considered a debt management ratio?

Accepted Answer

A)  Debt to total assets 
B)  Debt to stockholders' equity 
C)  Times interest earned 
D)  All of the above are correct. 
A)  Debt to total assets 
B)  Debt to stockholders' equity 
C)  Times interest earned 
D)  All of the above are correct.

Question 12

Ballard Inc. has net income before taxes of $3,280,000, total assets of $4,500,000, and net sales of $6,450,000. What is the return on sales?

Accepted Answer

A)  50.85% 
B)  72.89% 
C)  69.76% 
D)  None of the above are correct. 
A)  50.85% 
B)  72.89% 
C)  69.76% 
D)  None of the above are correct.

Question 13

An acid test (quick) ratio of 0.75 to 1 would indicate:

Accepted Answer

A)  a ratio that would not allow a company to pay off all current liabilities with quick assets. 
B)  for every $0.75 of short-term debt there is $1.00 of quick assets to meet short-term obligations. 
C)  for every $1 of current assets there is $0.75 of short-term debt. 
D)  Both A and B are correct. 
A)  a ratio that would not allow a company to pay off all current liabilities with quick assets. 
B)  for every $0.75 of short-term debt there is $1.00 of quick assets to meet short-term obligations. 
C)  for every $1 of current assets there is $0.75 of short-term debt. 
D)  Both A and B are correct.

Question 14

To find the percent of increase or decrease of an item in a comparative balance sheet you use the formula: % change = amount of change/base (old year).

Accepted Answer

A) True 
 B)False

Question 15

If Cash is $2,100 in 20X2 and $4,000 in 20X1, what is the percent of increase or (decrease) from 20X1 to 20X2?

Accepted Answer

A)  -90% 
B)  90% 
C)  48% 
D)  -47% 
A)  -90% 
B)  90% 
C)  48% 
D)  -47%

Question 16

The net sales for James, Inc. were $4,000,000; net income before taxes was $830,000; and gross profit was $1,400,000. The return on sales ratio would be: (Round your answer two decimal places, X.XX%.)

Accepted Answer

A)  14.25%. 
B)  35.00%. 
C)  59.29%. 
D)  20.75%. 
A)  14.25%. 
B)  35.00%. 
C)  59.29%. 
D)  20.75%.

Question 17

A form of analysis in which each item on a report is shown as a percent of net sales is called a horizontal analysis of the income statement.

Accepted Answer

A) True 
 B)False

Question 18

A company has $54,000 in cash, $22,000 in accounts receivable, $33,000 in temporary investments and $134,000 in merchandise inventory. The company has $56,000 in current liabilities. The company's acid test (quick) ratio is: (Round your answer two decimal places, X.XX%.)

Accepted Answer

A)  1.36. 
B)  0.51. 
C)  4.34. 
D)  1.95. 
A)  1.36. 
B)  0.51. 
C)  4.34. 
D)  1.95.

Question 19

Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable.

Accepted Answer

A) True 
 B)False

Question 20

John's Market's total assets are $310,000, current assets $126,000, total liabilities $162,000, and current liabilities $51,000. What is the debt to total assets ratio? (Round your answer to the nearest percentage.)

Accepted Answer

A)  40.65% 
B)  77.78% 
C)  52.26% 
D)  37.50% 
A)  40.65% 
B)  77.78% 
C)  52.26% 
D)  37.50%

Exam 22: Analyzing Financial Statements

The current ratio determines the ability of a company to:

A company has cash of $221,000; short-term investments of $54,000; net receivables of $75,000; and inventory of $103,000. Current liabilities total $83,000. The current ratio is: (Round your answer two decimal places.)

The gross profit rate is an example of this type of ratio.

The income before taxes and interest expense of Barry Builders for the year just ended is $213,000. Their interest expense is $21,000 and their income taxes are $82,500. The number of times interest would be earned is: (Round your answer two decimal places.)

The ratio that indicates the amount of assets that are financed by creditors is:

The liabilities of a company at the end of the year are $530,000 and the total stockholders' equity at the end of the year is $1,080,000. The debt to stockholders' equity ratio is: (Round your answer two decimal places.)

A current ratio of 1.5 times would mean that the business has 1.5 times more assets than liabilities.

In a common-size income statement, advertising expenses are 10%. This means that they are 10% of:

If management wishes to evaluate the amount of assets which were financed by creditors, they could use the:

Coal Company has an income before taxes of $500,700, and an interest expense of $100,400. What is the times interest earned ratio?

Which of the following is considered a debt management ratio?

Ballard Inc. has net income before taxes of $3,280,000, total assets of $4,500,000, and net sales of $6,450,000. What is the return on sales?

An acid test (quick) ratio of 0.75 to 1 would indicate:

To find the percent of increase or decrease of an item in a comparative balance sheet you use the formula: % change = amount of change/base (old year).

If Cash is $2,100 in 20X2 and $4,000 in 20X1, what is the percent of increase or (decrease) from 20X1 to 20X2?

The net sales for James, Inc. were $4,000,000; net income before taxes was $830,000; and gross profit was $1,400,000. The return on sales ratio would be: (Round your answer two decimal places, X.XX%.)

A form of analysis in which each item on a report is shown as a percent of net sales is called a horizontal analysis of the income statement.

A company has $54,000 in cash, $22,000 in accounts receivable, $33,000 in temporary investments and $134,000 in merchandise inventory. The company has $56,000 in current liabilities. The company's acid test (quick) ratio is: (Round your answer two decimal places, X.XX%.)

Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable.

John's Market's total assets are $310,000, current assets $126,000, total liabilities $162,000, and current liabilities $51,000. What is the debt to total assets ratio? (Round your answer to the nearest percentage.)

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

Filters