Question 1

Which of the following statements is not true relating to a capitalized (capital) lease?

Accepted Answer

A)  A capital lease is handled as if the lessee bought the asset. 
B)  The leased asset is in the fixed assets and the related obligation is included in liabilities. 
C)  On the balance sheet, the capitalized asset amount will not usually agree with the capitalized liability amount because the liability is reduced by payments, and the asset is reduced by depreciation taken. 
D)  Usually, a company depreciates capitalized leases faster than payments are made. 
E)  On the balance sheet, the capitalized asset amount will usually be higher than the capitalized liability amount. 
A)  A capital lease is handled as if the lessee bought the asset. 
B)  The leased asset is in the fixed assets and the related obligation is included in liabilities. 
C)  On the balance sheet, the capitalized asset amount will not usually agree with the capitalized liability amount because the liability is reduced by payments, and the asset is reduced by depreciation taken. 
D)  Usually, a company depreciates capitalized leases faster than payments are made. 
E)  On the balance sheet, the capitalized asset amount will usually be higher than the capitalized liability amount.

Question 2

Times interest earned indicates a firm's long-term, debt-paying ability from the balance sheet view.

Accepted Answer

A) True 
 B)False

Question 3

A fixed charge coverage:

Accepted Answer

A)  is a balance sheet indication of debt carrying ability 
B)  is an income statement indication of debt carrying ability 
C)  is a liquidity ratio 
D)  frequently includes research and development 
E)  computation is standard from firm to firm 
A)  is a balance sheet indication of debt carrying ability 
B)  is an income statement indication of debt carrying ability 
C)  is a liquidity ratio 
D)  frequently includes research and development 
E)  computation is standard from firm to firm

Question 4

Which of these items represents a definite commitment to pay out funds in the future?

Accepted Answer

A)  bonds payable 
B)  reserves for rebuilding furnaces 
C)  deferred taxes 
D)  minority shareholders' interests 
E)  redeemable preferred stock 
A)  bonds payable 
B)  reserves for rebuilding furnaces 
C)  deferred taxes 
D)  minority shareholders' interests 
E)  redeemable preferred stock

Question 5

Ingram Dog Kennels had the following financial statistics for 2010:   What is the times interest earned for 2010?

Accepted Answer

A)  11.4 times 
B)  3.3 times 
C)  3.1 times 
D)  3.7 times 
E)  none of the answers are correct 
A)  11.4 times 
B)  3.3 times 
C)  3.1 times 
D)  3.7 times 
E)  none of the answers are correct

Question 6

When analyzing a firm's long-term, debt-paying ability, we only want to determine the firm's ability to pay the principal.

Accepted Answer

A) True 
 B)False

Question 7

Jones Company has long-term debt of $1,000,000, while Smith Company, Jones' competitor, has long-term debt of $200,000.Which of the following statements best represents an analysis of the long-term debt position of these two firms?

Accepted Answer

A)  Smith Company's times interest earned should be lower than Jones. 
B)  Jones obviously has too much debt when compared to its competitor. 
C)  Jones should sell more stock and use less debt. 
D)  Smith has five times better long-term borrowing ability than Jones. 
E)  Not enough information to determine if any of the answers are correct. 
A)  Smith Company's times interest earned should be lower than Jones. 
B)  Jones obviously has too much debt when compared to its competitor. 
C)  Jones should sell more stock and use less debt. 
D)  Smith has five times better long-term borrowing ability than Jones. 
E)  Not enough information to determine if any of the answers are correct.

Question 8

A times interest earned ratio indicates that:

Accepted Answer

A)  preferred stock has no maturity date 
B)  the debt will never become due 
C)  the firm will be able to repay the principal when due 
D)  the principal can be refinanced 
E)  none of the answers are correct 
A)  preferred stock has no maturity date 
B)  the debt will never become due 
C)  the firm will be able to repay the principal when due 
D)  the principal can be refinanced 
E)  none of the answers are correct

Which of the following statements is not true relating to a capitalized (capital) lease?

Times interest earned indicates a firm's long-term, debt-paying ability from the balance sheet view.

A fixed charge coverage:

Which of these items represents a definite commitment to pay out funds in the future?

Ingram Dog Kennels had the following financial statistics for 2010: What is the times interest earned for 2010?

When analyzing a firm's long-term, debt-paying ability, we only want to determine the firm's ability to pay the principal.

Jones Company has long-term debt of $1,000,000, while Smith Company, Jones' competitor, has long-term debt of $200,000.Which of the following statements best represents an analysis of the long-term debt position of these two firms?

A times interest earned ratio indicates that:

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 7: Long-Term Debt-Paying Ability

Which of the following statements is not true relating to a capitalized (capital) lease?

Times interest earned indicates a firm's long-term, debt-paying ability from the balance sheet view.

A fixed charge coverage:

Which of these items represents a definite commitment to pay out funds in the future?

Ingram Dog Kennels had the following financial statistics for 2010: What is the times interest earned for 2010?

When analyzing a firm's long-term, debt-paying ability, we only want to determine the firm's ability to pay the principal.

Jones Company has long-term debt of $1,000,000, while Smith Company, Jones' competitor, has long-term debt of $200,000.Which of the following statements best represents an analysis of the long-term debt position of these two firms?

A times interest earned ratio indicates that:

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters