Question 1

Which of the following transactions will increase a current ratio which is currently 2.5?

Accepted Answer

A) Receiving cash from signing a 6-month note payable. 
B) Accruing an expense. 
C) Using cash to pay an account payable. 
D) Collecting an account receivable. 
A) Receiving cash from signing a 6-month note payable. 
B) Accruing an expense. 
C) Using cash to pay an account payable. 
D) Collecting an account receivable.

Question 2

Finding comparable companies in order to compare performance is often difficult since no two companies have identical products,markets and operating strategies.

Accepted Answer

A) True 
 B)False

Question 3

Wildlife Co.reported net income of $8.3 million,interest expense of $.5 million and they are in a 30% tax rate bracket.Their average total assets are $65.8 million and average stockholders' equity is $48.6 million.What is Wildlife's financial leverage percentage?

Accepted Answer

A) 3.7% 
B) 4.5% 
C) 4.0% 
D) 4.7% 
A) 3.7% 
B) 4.5% 
C) 4.0% 
D) 4.7%

Question 4

The records of Marshall Company include the following: $$\begin{array} { l r } 
\text { Average total assets } & \$ 3,500,000 \
\text { Average total liabilities } & 1,220,000 \
\text { Total revenue } & 4,580,000 \
\text { Total expense (including income tax) } & 4,100,000 \
\text { Interest expense (included in total expenses) } & 90,000 \
\text { Income tax rate } 40 \% &
\end{array}$$ The return on equity is (round to the nearest tenth of a percent)

Accepted Answer

A) 21.1%. 
B) 10.2%. 
C) 16.4%. 
D) 17.1%. 
A) 21.1%. 
B) 10.2%. 
C) 16.4%. 
D) 17.1%.

Question 5

A very high current ratio and low quick ratio may indicate the company is not collecting its accounts receivables in a timely manner.

Accepted Answer

A) True 
 B)False

Question 6

There are several fundamental purposes decision makers consider when they use financial data.Which of the following statements is not one of those fundamental purposes?

Accepted Answer

A) Measurement of the current condition of the business. 
B) Measurement of past performance of the business. 
C) Measurement of the book value of the assets. 
D) Prediction of future potential of the business. 
A) Measurement of the current condition of the business. 
B) Measurement of past performance of the business. 
C) Measurement of the book value of the assets. 
D) Prediction of future potential of the business.

Question 7

Return on equity (ROE)is a function of three ratios:
 net profit margin,return on assets,and financial leverage.

Accepted Answer

A) True 
 B)False

Question 8

The following data were available for Holiday Company:
Sales revenue,$225,000 (including $75,000 cash sales)
Cost of goods sold,$175,000
Average balance in inventory,$20,000
Average balance in accounts receivable,$20,000
Assume 365 days in the year
Calculate each of the following ratios:

Accepted Answer

To calculate the ratios for Holiday Comp

Question 9

During 2010,Home Style's cost of goods sold percentage was 68.2% and selling and store operating costs was 19.3% of sales.During 2009,their cost of goods sold percentage was 68.9% while selling and store operating costs was 19.2% of sales.What effect would the change in these percentages have on 2010's gross margin percentage and profit margin percentage?

Accepted Answer

A) The decrease in the cost of goods sold percentage would increase both the gross margin and profit margin percentages, but the increase in the selling and store operating costs percentage would decrease both the gross margin and profit margin percentages. 
B) The decrease in the cost of goods sold percentage would decrease both the gross margin and profit margin percentages, but the increase in the selling and store operating costs would increase both the gross margin and profit margin percentages. 
C) The decrease in the cost of goods sold percentage would increase both the gross margin and profit margin percentages and the decrease in the selling and store operating costs percentage would decrease the profit margin percentage. 
D) The decrease in the cost of goods sold percentage would decrease both the gross margin and profit margin percentages, but selling and store operating costs would increase the profit margin percentage. 
A) The decrease in the cost of goods sold percentage would increase both the gross margin and profit margin percentages, but the increase in the selling and store operating costs percentage would decrease both the gross margin and profit margin percentages. 
B) The decrease in the cost of goods sold percentage would decrease both the gross margin and profit margin percentages, but the increase in the selling and store operating costs would increase both the gross margin and profit margin percentages. 
C) The decrease in the cost of goods sold percentage would increase both the gross margin and profit margin percentages and the decrease in the selling and store operating costs percentage would decrease the profit margin percentage. 
D) The decrease in the cost of goods sold percentage would decrease both the gross margin and profit margin percentages, but selling and store operating costs would increase the profit margin percentage.

Question 10

The base amount in preparing a common-size income statement is usually which of the following?

Accepted Answer

A) Income from operations 
B) Gross profit 
C) Net income 
D) Net sales 
A) Income from operations 
B) Gross profit 
C) Net income 
D) Net sales

Question 11

The following data were reported for Favre Company:
 $$\begin{array} { l l } 
\text { Net income } & \$ 275,000 \
\text { Total dividends declared and paid on common stock } & \$ 0.60 \text { per share } \
\text { Common stock, par } \$ 10 & \$ 1,750,000 \
\text { Market price } & \$ 20.00 \text { per } \
& \text { share } \
\text { Cash flows from operating activities } & \$ 280,000
\end{array}$$ Calculate each of the following ratios:
A.Dividend yield
B.Price/earnings ratio
C.Quality of income

Accepted Answer

To calculate the ratios requested, we ne

Question 12

Which of the accounting ratios considers the importance of cash flows relating to required interest payments?

Accepted Answer

A) Times interest earned 
B) Debt-to-equity 
C) Cash coverage 
D) Quick 
A) Times interest earned 
B) Debt-to-equity 
C) Cash coverage 
D) Quick

Question 13

Which of the following statements is false?

Accepted Answer

A) When computing the component percentages for the income statement, net income is the base figure. 
B) Time series analysis examines a company's performance over time. 
C) It is often useful to compare a company's performance with that of a competitor. 
D) The North American Industry Classification System assigns industry codes based on business operations. 
A) When computing the component percentages for the income statement, net income is the base figure. 
B) Time series analysis examines a company's performance over time. 
C) It is often useful to compare a company's performance with that of a competitor. 
D) The North American Industry Classification System assigns industry codes based on business operations.

Question 14

Which of the following statements is correct?

Accepted Answer

A) Selling inventory for cost does not affect the net profit margin ratio. 
B) Accruing sales revenue doesn't affect the net profit margin ratio. 
C) The asset turnover ratio increases when fixed assets are sold for a loss. 
D) The net profit margin ratio decreases when common stock is issued. 
A) Selling inventory for cost does not affect the net profit margin ratio. 
B) Accruing sales revenue doesn't affect the net profit margin ratio. 
C) The asset turnover ratio increases when fixed assets are sold for a loss. 
D) The net profit margin ratio decreases when common stock is issued.

Question 15

Which of the following statements is correct?

Accepted Answer

A) When cost of goods sold as a percentage of sales increases the gross margin percentage will increase. 
B) It is possible for cost of goods sold in dollars to increase while cost of goods sold as a percentage of sales decreases. 
C) If gross margin 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 margin 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 margin percentage will increase. 
B) It is possible for cost of goods sold in dollars to increase while cost of goods sold as a percentage of sales decreases. 
C) If gross margin 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 margin percentage increases from one year to the next, then the net income percentage will also increase from one year to the next.

Question 16

Trenton Company has provided the following information:
 Net income,$240,000;
 Preferred shares issued,6,000;
Average common shares issued,24,000;
Common cash dividends declared and paid,$30,000;
 Market price per share,$36
Average treasury shares of common stock,4,000.
What were 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 17

The cash coverage ratio measures a firm's ability to pay its current liabilities with its cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 18

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.
What was Lucas' times interest earned ratio?

Accepted Answer

A) 18.9 
B) 19.4 
C) 28.3 
D) 31.0 
A) 18.9 
B) 19.4 
C) 28.3 
D) 31.0

Question 19

A company with a high amount of inventory will have a much lower fixed asset turnover ratio when compared to its total asset turnover ratio.

Accepted Answer

A) True 
 B)False

Question 20

The records of Washington Company showed the following:
 $\begin{array}{lr}
\text { Average Assets } & \$ 230,000& \text { Revenues } & \$ 100,000  \
\text { Average Liabilities } & 130,000 & \text { Expenses** } & (81,000) \
\text { Average Stockholders } & 100,000  & \text { Interest expense } & (2,000)\
\text { equity* } &\
&&\text { Net income } & (\$ 17,000)
\end{array}$

*10,000 shares outstanding; current market price,$30
**Including income tax; income tax rate,30%
Calculate each of the following ratios:
A.Return on assets
B.Return on equity
C.Financial leverage percentage
D.Is the financial leverage percentage positive or negative?

Accepted Answer

To calculate the financial ratios reques

Which of the following transactions will increase a current ratio which is currently 2.5?

Finding comparable companies in order to compare performance is often difficult since no two companies have identical products,markets and operating strategies.

Wildlife Co.reported net income of $8.3 million,interest expense of $.5 million and they are in a 30% tax rate bracket.Their average total assets are $65.8 million and average stockholders' equity is $48.6 million.What is Wildlife's financial leverage percentage?

A very high current ratio and low quick ratio may indicate the company is not collecting its accounts receivables in a timely manner.

There are several fundamental purposes decision makers consider when they use financial data.Which of the following statements is not one of those fundamental purposes?

Return on equity (ROE)is a function of three ratios: net profit margin,return on assets,and financial leverage.

The following data were available for Holiday Company: Sales revenue,$225,000 (including $75,000 cash sales) Cost of goods sold,$175,000 Average balance in inventory,$20,000 Average balance in accounts receivable,$20,000 Assume 365 days in the year Calculate each of the following ratios:

The base amount in preparing a common-size income statement is usually which of the following?

Which of the accounting ratios considers the importance of cash flows relating to required interest payments?

Which of the following statements is false?

Which of the following statements is correct?

Which of the following statements is correct?

The cash coverage ratio measures a firm's ability to pay its current liabilities with its cash flows from operating activities.

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. What was Lucas' times interest earned ratio?

A company with a high amount of inventory will have a much lower fixed asset turnover ratio when compared to its total asset turnover ratio.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Operating Decisions and the Income Statement

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; Natural Resources; and Intangibles

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

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Exam 14: Analyzing Financial Statements

Which of the following transactions will increase a current ratio which is currently 2.5?

Finding comparable companies in order to compare performance is often difficult since no two companies have identical products,markets and operating strategies.

Wildlife Co.reported net income of $8.3 million,interest expense of $.5 million and they are in a 30% tax rate bracket.Their average total assets are $65.8 million and average stockholders' equity is $48.6 million.What is Wildlife's financial leverage percentage?

A very high current ratio and low quick ratio may indicate the company is not collecting its accounts receivables in a timely manner.

There are several fundamental purposes decision makers consider when they use financial data.Which of the following statements is not one of those fundamental purposes?

Return on equity (ROE)is a function of three ratios: net profit margin,return on assets,and financial leverage.

The following data were available for Holiday Company: Sales revenue,$225,000 (including $75,000 cash sales) Cost of goods sold,$175,000 Average balance in inventory,$20,000 Average balance in accounts receivable,$20,000 Assume 365 days in the year Calculate each of the following ratios:

The base amount in preparing a common-size income statement is usually which of the following?

Which of the accounting ratios considers the importance of cash flows relating to required interest payments?

Which of the following statements is false?

Which of the following statements is correct?

Which of the following statements is correct?

The cash coverage ratio measures a firm's ability to pay its current liabilities with its cash flows from operating activities.

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. What was Lucas' times interest earned ratio?

A company with a high amount of inventory will have a much lower fixed asset turnover ratio when compared to its total asset turnover ratio.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Operating Decisions and the Income Statement

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; Natural Resources; and Intangibles

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Filters