The following balance sheet information was provided by O'Connor Company: $\begin{array}{lrr} \text { Assets } & \text { Year 2 } &{\text { Year 1 }} \\ \text { Cash } & \$ 4,000 & \$ 2,000 \\ \text { Accounts receivable } & 15,000 & 12,000 \\ \text { Inventory } & \$ 35,000 & \$ 38,000 \end{array}$ Assuming that net credit sales for Year 2 totaled $270,000, what is the company's most recent accounts receivable turnover?

A) 18 times B) 20 times C) 22.5 times D) 7.7 times A) 18 times B) 20 times C) 22.5 times D) 7.7 times

The following balance sheet information is provided for Greene Company for Year 2: $\begin{array}{lr} \text { Assets }\\ \text { Cash } & \$ 5,400 \\ \text { Accounts receivable } & 15,500 \\ \text { Inventory } & 18,000 \\ \text { Prepaid expenses } & 1,600 \\ \text { Plant and equipment, net of depreciation } & 20,200 \\ \text { Land } & \underline{ 19,950 }\\ \text { Total assets } &\underline{ \$ 80,650}\\ \text { Liabilities and Stockholders' Equity }\\ \text { Accounts payable } & \$ 4,500 \\ \text { Salaries payable } & 11,500 \\ \text { Bonds payable (Due in ten years) } & 19,000 \\ \text { Common stock, no par } & 30,000 \\ \text { Retained earnings } &\underline{ 15,650} \\ \text { Total liabilities and stockholders' equity }& \$ 80,650 \end{array}$ What is the company's quick (acid-test) ratio?

A) 0.7 B) 1.4 C) 1.3 D) 3.8 A) 0.7 B) 1.4 C) 1.3 D) 3.8

The following balance sheet information is provided for Patton Company: $\begin{array}{lrr} \text { Assets } & \text { Year 2 } &{\text { Year 1 }} \\ \text { Cash } & \$ 4,000 & \$ 2,000 \\ \text { Accounts receivable } & 15,000 & 12,000 \\ \text { Inventory } & \$ 35,000 & \$ 38,000 \end{array}$ Assuming Year 2 cost of goods sold is $730,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

A) 17.5 days B) 18.25 days C) 19 days D) 20.86 days A) 17.5 days B) 18.25 days C) 19 days D) 20.86 days

Alpha Company provided the following balance sheet for Year 2: $\begin{array}{lr} \text { Assets }\\ \text { Cash } & \$ 4,800 \\ \text { Accounts receivable } & 6,950 \\ \text { Inventory } & 10,750 \\ \text { Prepaid expenses } & 1,800 \\ \text { Plant and equipment, net of depreciation } &30,400 \\ \text { Land } & \underline{ 23,000 }\\ \text { Total assets } &\underline{ \$77,700}\\ \text { Liabilities and Stockholders' Equity }\\ \text { Accounts payable } & \$ 3,100 \\ \text { Salaries payable } & 6,900 \\ \text { Bonds payable (Due in ten years) } & 13,000 \\ \text { Common stock, no par } &17,000 \\ \text { Retained earnings } &\underline{ 37,700} \\ \text { Total liabilities and stockholders' equity }& \$77,700 \end{array}$ What is the company's plant assets to long-term liabilities ratio?

A) 1.31 B) 2.34 C) 2.85 D) None of these answers are correct. A) 1.31 B) 2.34 C) 2.85 D) None of these answers are correct.

The following balance sheet information is provided for Gaynor Company: $\begin{array}{lrr} \text { Assets } & \text { Year 2 } &{\text { Year 1 }} \\ \text { Cash } & \$ 4,000 & \$ 2,000 \\ \text { Accounts receivable } & 15,000 & 12,000 \\ \text { Inventory } & \$ 35,000 & \$ 38,000 \end{array}$ Assuming Year 2 cost of goods sold is $153,300, what is the company's inventory turnover?

A) 4.0 times B) 4.4 times C) 4.2 times D) None of these answers are correct. A) 4.0 times B) 4.4 times C) 4.2 times D) None of these answers are correct.

Exam 9: Financial Statement Analysis

The following information is from the financial records of Newton Company for Year 2: Sales \ 620,000 Interest expense 26,000 Income tax expense 46,000 Net income 104,000 Required: Calculate the number of times interest is earned for Newton in Year 2. (Round your answer to one decimal place.)

(Short Answer)

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Question 121

Financial analysis typically involves some form of comparison, such as changes in the same item over a number of years.

(True/False)

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Question 122

The following balance sheet information was provided by O'Connor Company: Assets Year 2 Year 1 Cash \ 4,000 \ 2,000 Accounts receivable 15,000 12,000 Inventory \ 35,000 \ 38,000 Assuming that net credit sales for Year 2 totaled $270,000, what is the company's most recent accounts receivable turnover?

(Multiple Choice)

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(75)

Question 123

The following balance sheet information is provided for Greene Company for Year 2: Assets Cash \ 5,400 Accounts receivable 15,500 Inventory 18,000 Prepaid expenses 1,600 Plant and equipment, net of depreciation 20,200 Land Total assets Liabilities and Stockholders' Equity Accounts payable \ 4,500 Salaries payable 11,500 Bonds payable (Due in ten years) 19,000 Common stock, no par 30,000 Retained earnings Total liabilities and stockholders' equity \ 80,650 What is the company's quick (acid-test) ratio?

(Multiple Choice)

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Question 124

Select the correct statement regarding vertical analysis.

(Multiple Choice)

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Question 125

The following balance sheet information is provided for Patton Company: Assets Year 2 Year 1 Cash \ 4,000 \ 2,000 Accounts receivable 15,000 12,000 Inventory \ 35,000 \ 38,000 Assuming Year 2 cost of goods sold is $730,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

(Multiple Choice)

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Question 126

Which of the following is not included in the computation of the quick ratio?

(Multiple Choice)

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Question 127

Which of the following statements about financial statement analysis is incorrect?

(Multiple Choice)

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Question 128

Denver Corporation and Cheyenne Company are in different industries. Denver's current ratio is 1.89, while Cheyenne's current ratio is 1.65. Therefore, is it safe to conclude that Denver's liquidity position is better than that of Cheyenne?

(Essay)

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Question 129

The following income statement was prepared by Case Company for Year 2: Sales \1 00,000 Cost of goods sold Gross margin \4 3,500 Selling and administrative expense 26,000 Interest expense Total expenses Income before taxes \1 2,000 Income tax expense Net income Required: Perform vertical analysis for Case Company's Year 2 income statement.

(Essay)

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Question 130

Alpha Company provided the following balance sheet for Year 2: Assets Cash \ 4,800 Accounts receivable 6,950 Inventory 10,750 Prepaid expenses 1,800 Plant and equipment, net of depreciation 30,400 Land Total assets Liabilities and Stockholders' Equity Accounts payable \ 3,100 Salaries payable 6,900 Bonds payable (Due in ten years) 13,000 Common stock, no par 17,000 Retained earnings Total liabilities and stockholders' equity \7 7,700 What is the company's plant assets to long-term liabilities ratio?

(Multiple Choice)

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Question 131

Which of the following statements regarding net margin is incorrect?

(Multiple Choice)

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Question 132

Solvency ratios are used to assess a company's:

(Multiple Choice)

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Question 133

When debt is used to finance the purchase of assets, the term or time span of the debt should always be shorter than the life span of the assets.

(True/False)

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Question 134

In terms of solvency, the higher the number of times interest is earned, the better.

(True/False)

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Question 135

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. -On January 1, Year 2, Gant recorded cost of goods sold of $4,100. As a result of this transaction, Gant's quick ratio will:

(Multiple Choice)

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Question 136

The following balance sheet information is provided for Gaynor Company: Assets Year 2 Year 1 Cash \ 4,000 \ 2,000 Accounts receivable 15,000 12,000 Inventory \ 35,000 \ 38,000 Assuming Year 2 cost of goods sold is $153,300, what is the company's inventory turnover?

(Multiple Choice)

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Question 137

Which type of approach should be used when evaluating corporate results using horizontal analysis?

(Multiple Choice)

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Question 138

Starwood Corporation has current assets of $200,000, total current liabilities of $750,000, net credit sales of $1,300,000, beginning accounts receivable of $65,000, and ending accounts receivable of $69,000. What is Starwood's accounts receivable turnover?

(Multiple Choice)

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Question 139

Which of the following statements regarding the return on equity (ROE) measure is incorrect?

(Multiple Choice)

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Question 140

The following information is from the financial records of Newton Company for Year 2: Sales \ 620,000 Interest expense 26,000 Income tax expense 46,000 Net income 104,000 Required: Calculate the number of times interest is earned for Newton in Year 2. (Round your answer to one decimal place.)

Financial analysis typically involves some form of comparison, such as changes in the same item over a number of years.

Select the correct statement regarding vertical analysis.

Which of the following is not included in the computation of the quick ratio?

Which of the following statements about financial statement analysis is incorrect?

Denver Corporation and Cheyenne Company are in different industries. Denver's current ratio is 1.89, while Cheyenne's current ratio is 1.65. Therefore, is it safe to conclude that Denver's liquidity position is better than that of Cheyenne?

Which of the following statements regarding net margin is incorrect?

Solvency ratios are used to assess a company's:

When debt is used to finance the purchase of assets, the term or time span of the debt should always be shorter than the life span of the assets.

In terms of solvency, the higher the number of times interest is earned, the better.

The following balance sheet information is provided for Gaynor Company: Assets Year 2 Year 1 Cash \ 4,000 \ 2,000 Accounts receivable 15,000 12,000 Inventory \ 35,000 \ 38,000 Assuming Year 2 cost of goods sold is $153,300, what is the company's inventory turnover?

Which type of approach should be used when evaluating corporate results using horizontal analysis?

Starwood Corporation has current assets of $200,000, total current liabilities of $750,000, net credit sales of $1,300,000, beginning accounts receivable of $65,000, and ending accounts receivable of $69,000. What is Starwood's accounts receivable turnover?

Which of the following statements regarding the return on equity (ROE) measure is incorrect?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

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