Question 1

The year-end adjusting entry to adjust the unearned revenue account for revenue earned,decreases which of the following ratios?

Accepted Answer

A) Current 
B) Debt-to-equity 
C) Quick 
D) Profit margin 
A) Current 
B) Debt-to-equity 
C) Quick 
D) Profit margin

Question 2

The Apple Pie Company had net income of $47,500,earnings per share of $3.17 and declared dividends per share of $2.00 during 2010.On December 31,2010,the stock had a market price of $18.50 per share.What is Apple Pie's price/earnings ratio?

Accepted Answer

A) 9.25 
B) 8.11 
C) 5.84 
D) 0.17 
A) 9.25 
B) 8.11 
C) 5.84 
D) 0.17

Question 3

Agnes Company reported the following data: $$\begin{array} { l r } 
\text { Quick assets } & \$ 55,000 \
\text { Current assets } & 150,000 \
\text { Total liabilities } & 300,000 \
\text { Average net receivables } & 12,600 \
\text { Beginning inventory } & 38,000 \
\text { Long-term liabilities } & 200,000 \
\text { Net credit sales } & 126,000 \
\text { Cost of goods sold } & 84,000 \
\text { Ending inventory } & 46,000
\end{array}$$ What was the current ratio?

Accepted Answer

A) 0.5 
B) 1.5 
C) 2.5 
D) 0.75 
A) 0.5 
B) 1.5 
C) 2.5 
D) 0.75

Question 4

Lee Company has provided the following information:
 Cash flow from operating activities,$240,000;
 Net income,$204,000;
 Interest expense,$20,000;
 Interest cash payments,$10,000;
 Income tax payments,$140,000;
 Income tax expense,$136,000.
What was Lee's cash coverage ratio?

Accepted Answer

A) 39.0 
B) 20.0 
C) 19.8 
D) 39.6 
A) 39.0 
B) 20.0 
C) 19.8 
D) 39.6

Question 5

Teague Company's working capital was $40,000 and total current liabilities were 1/4 of that amount.What was the current ratio?

Accepted Answer

A) 1 
B) 3 
C) 5 
D) 7 
A) 1 
B) 3 
C) 5 
D) 7

Question 6

Complete the following income statement (both dollar amounts and component percentages): $\begin{array}{ll}
&& \text { Component  }\
& \text { Amount }& \text { Percentage }\
\text { Sales revenue } & \$&\%\
\text { Cost of goods sold } & &40\% \
\text { Gross margin } & \$ 120,000 \
\text { Operating expenses } & \
\text { Interest expense } & &2\%\
\text { Income (before income tax) } & \
\text { Income tax expense (rate 20\%) } & \
\text { Net income }&&6\%
\end{array}$

Accepted Answer

To complete the income statement, we nee

Question 7

Many companies use high levels of debt to finance their assets because of financial leverage benefits provided to investors when return on assets exceeds the after tax cost of interest.

Accepted Answer

A) True 
 B)False

Question 8

MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2011 and 2010.MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2011 and 2010 respectively.The company paid cash dividends per share of $.85 in 2011 and $.63 in 2010.Total stockholders' equity was $13,572 million and $11,896 million in 2011 and 2010 respectively.The common shares outstanding were approximately 1,782,000 during both 2011 and 2010.What was MusicPod's dividend yield ratio for 2011?

Accepted Answer

A) 34.4% 
B) 1.4% 
C) 30.4% 
D) 1.6% 
A) 34.4% 
B) 1.4% 
C) 30.4% 
D) 1.6%

Question 9

Which of the following is false?

Accepted Answer

A) The major difference between the quick and current ratios is inventory. 
B) Current liabilities are the denominator in the cash, quick, and current ratios. 
C) Companies that sell expensive merchandise tend to have high inventory turnover ratios. 
D) Some analysts do not use the cash ratio because it is very sensitive to small events. 
A) The major difference between the quick and current ratios is inventory. 
B) Current liabilities are the denominator in the cash, quick, and current ratios. 
C) Companies that sell expensive merchandise tend to have high inventory turnover ratios. 
D) Some analysts do not use the cash ratio because it is very sensitive to small events.

Question 10

Which of the following is correct?

Accepted Answer

A) The times interest earned ratio is considered a better test of the ability to cover interest charges than the cash coverage ratio. 
B) The debt to equity ratio shows the relative proportion of total assets financed by debt. 
C) The higher the debt-to-equity ratio, the higher the potential return to the stockholders if return on assets (RO
A)  exceeds the after tax cost of interest. 
D) The cash coverage ratio compares the cash generated by a company to its cash obligations for the prior period. 
A) The times interest earned ratio is considered a better test of the ability to cover interest charges than the cash coverage ratio. 
B) The debt to equity ratio shows the relative proportion of total assets financed by debt. 
C) The higher the debt-to-equity ratio, the higher the potential return to the stockholders if return on assets (RO
A)  exceeds the after tax cost of interest. 
D) The cash coverage ratio compares the cash generated by a company to its cash obligations for the prior period.

Question 11

Which of the following transactions will increase the quality of income ratio?

Accepted Answer

A) Paying cash to suppliers. 
B) Accruing sales revenue. 
C) Selling treasury stock for more than its cost. 
D) Collecting an account receivable. 
A) Paying cash to suppliers. 
B) Accruing sales revenue. 
C) Selling treasury stock for more than its cost. 
D) Collecting an account receivable.

Question 12

The profit margin ratio considers the asset base utilized to earn income.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is incorrect?

Accepted Answer

A) If selling and administrative expenses as a percentage of sales increases, then gross margin percentage will decrease. 
B) If the cost of goods sold percentage decreases and other expenses do not change, then profit margin will increase as a percentage of sales. 
C) If sales dollars decrease, a company might still report a higher gross profit percentage if cost of goods sold decreases at a faster rate than the decrease in sales. 
D) It is possible for selling and administrative expense in dollars to decrease, while selling and administrative expenses as a percentage of sales to increase. 
A) If selling and administrative expenses as a percentage of sales increases, then gross margin percentage will decrease. 
B) If the cost of goods sold percentage decreases and other expenses do not change, then profit margin will increase as a percentage of sales. 
C) If sales dollars decrease, a company might still report a higher gross profit percentage if cost of goods sold decreases at a faster rate than the decrease in sales. 
D) It is possible for selling and administrative expense in dollars to decrease, while selling and administrative expenses as a percentage of sales to increase.

Question 14

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' quality of income ratio?

Accepted Answer

A) 0.85 
B) 0.74 
C) 1.18 
D) 0.93 
A) 0.85 
B) 0.74 
C) 1.18 
D) 0.93

Question 15

Which of the following transactions decreases earnings per share?

Accepted Answer

A) Declaring cash dividends payable to the common stockholders. 
B) Purchasing treasury stock. 
C) The accrual of revenue. 
D) Declaring and distributing a 10% common stock dividend. 
A) Declaring cash dividends payable to the common stockholders. 
B) Purchasing treasury stock. 
C) The accrual of revenue. 
D) Declaring and distributing a 10% common stock dividend.

Question 16

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

Accepted Answer

A) True 
 B)False

Question 17

When considering an investment,which of the following is not one of the three critical factors used to evaluate future earning potential of that investment?

Accepted Answer

A) Financial analysts' reports. 
B) Economy wide factors. 
C) Industry factors. 
D) Individual company factors. 
A) Financial analysts' reports. 
B) Economy wide factors. 
C) Industry factors. 
D) Individual company factors.

Question 18

Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing prices?

Accepted Answer

A) Current 
B) Inventory turnover 
C) Profit margin 
D) Debt-to-equity 
A) Current 
B) Inventory turnover 
C) Profit margin 
D) Debt-to-equity

Question 19

Home Depot's operating strategy is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable service-oriented personnel and aggressive advertising.Which of the following is not as critical to achieving its strategy?

Accepted Answer

A) Cost control 
B) Product differentiation 
C) High level of customer service 
D) High sales volume 
A) Cost control 
B) Product differentiation 
C) High level of customer service 
D) High sales volume

Question 20

Cecilia Company reported net income of $1,200,000.Their average total liabilities were $4,300,000 and average total stockholders' equity was $5,200,000.Interest expense was $100,000 and their tax rate was 40%.What was their return on assets ratio?

Accepted Answer

A) 13.7%. 
B) 12.6%. 
C) 11.6%. 
D) 13.3%. 
A) 13.7%. 
B) 12.6%. 
C) 11.6%. 
D) 13.3%.

The year-end adjusting entry to adjust the unearned revenue account for revenue earned,decreases which of the following ratios?

The Apple Pie Company had net income of $47,500,earnings per share of $3.17 and declared dividends per share of $2.00 during 2010.On December 31,2010,the stock had a market price of $18.50 per share.What is Apple Pie's price/earnings ratio?

Lee Company has provided the following information: Cash flow from operating activities,$240,000; Net income,$204,000; Interest expense,$20,000; Interest cash payments,$10,000; Income tax payments,$140,000; Income tax expense,$136,000. What was Lee's cash coverage ratio?

Teague Company's working capital was $40,000 and total current liabilities were 1/4 of that amount.What was the current ratio?

Complete the following income statement (both dollar amounts and component percentages): Component Amount Percentage Sales revenue \&\% Cost of goods sold 40\% Gross margin \ 120,000 Operating expenses Interest expense 2\% Income (before income tax) Income tax expense (rate 20\%) Net income 6\%

Many companies use high levels of debt to finance their assets because of financial leverage benefits provided to investors when return on assets exceeds the after tax cost of interest.

Which of the following is false?

Which of the following is correct?

Which of the following transactions will increase the quality of income ratio?

The profit margin ratio considers the asset base utilized to earn income.

Which of the following statements is incorrect?

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' quality of income ratio?

Which of the following transactions decreases earnings per share?

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

When considering an investment,which of the following is not one of the three critical factors used to evaluate future earning potential of that investment?

Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing prices?

Home Depot's operating strategy is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable service-oriented personnel and aggressive advertising.Which of the following is not as critical to achieving its strategy?

Cecilia Company reported net income of $1,200,000.Their average total liabilities were $4,300,000 and average total stockholders' equity was $5,200,000.Interest expense was $100,000 and their tax rate was 40%.What was their return on assets 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

The year-end adjusting entry to adjust the unearned revenue account for revenue earned,decreases which of the following ratios?

The Apple Pie Company had net income of $47,500,earnings per share of $3.17 and declared dividends per share of $2.00 during 2010.On December 31,2010,the stock had a market price of $18.50 per share.What is Apple Pie's price/earnings ratio?

Lee Company has provided the following information: Cash flow from operating activities,$240,000; Net income,$204,000; Interest expense,$20,000; Interest cash payments,$10,000; Income tax payments,$140,000; Income tax expense,$136,000. What was Lee's cash coverage ratio?

Teague Company's working capital was $40,000 and total current liabilities were 1/4 of that amount.What was the current ratio?

Complete the following income statement (both dollar amounts and component percentages): Component Amount Percentage Sales revenue \&\% Cost of goods sold 40\% Gross margin \ 120,000 Operating expenses Interest expense 2\% Income (before income tax) Income tax expense (rate 20\%) Net income 6\%

Many companies use high levels of debt to finance their assets because of financial leverage benefits provided to investors when return on assets exceeds the after tax cost of interest.

Which of the following is false?

Which of the following is correct?

Which of the following transactions will increase the quality of income ratio?

The profit margin ratio considers the asset base utilized to earn income.

Which of the following statements is incorrect?

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' quality of income ratio?

Which of the following transactions decreases earnings per share?

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

When considering an investment,which of the following is not one of the three critical factors used to evaluate future earning potential of that investment?

Which of the following ratios increases when a company switches from FIFO to LIFO during a period of increasing prices?

Home Depot's operating strategy is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable service-oriented personnel and aggressive advertising.Which of the following is not as critical to achieving its strategy?

Cecilia Company reported net income of $1,200,000.Their average total liabilities were $4,300,000 and average total stockholders' equity was $5,200,000.Interest expense was $100,000 and their tax rate was 40%.What was their return on assets 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