Question 1

Earnings per common share will immediately increase as a result of which of the following?

Accepted Answer

A)  The sale of additional common shares by the company. 
B)  An increase in the dividends paid to common shareholders by the company. 
C)  An increase in the company's net income. 
D)  The issuance of bonds by the company to finance construction of new buildings. 
A)  The sale of additional common shares by the company. 
B)  An increase in the dividends paid to common shareholders by the company. 
C)  An increase in the company's net income. 
D)  The issuance of bonds by the company to finance construction of new buildings.

Question 2

Financial leverage is negative in which of the following situations?

Accepted Answer

A)  When the return on total assets is less than the rate of return on common shareholders' equity. 
B)  When total liabilities are less than shareholders' equity. 
C)  When total liabilities are less than total assets. 
D)  When the return on total assets is less than the rate of return demanded by creditors. 
A)  When the return on total assets is less than the rate of return on common shareholders' equity. 
B)  When total liabilities are less than shareholders' equity. 
C)  When total liabilities are less than total assets. 
D)  When the return on total assets is less than the rate of return demanded by creditors.

Question 3

Arquandt Company's net income last year was $550,000.The company had 150,000 common shares and 50,000 preferred shares outstanding.There was no change in the number of common or preferred shares outstanding during the year.The company declared and paid dividends last year of $1.20 per common share and $1.70 per preferred share.The earnings per common share was closest to which of the following?

Accepted Answer

A)  $2.47. 
B)  $3.10. 
C)  $3.67. 
D)  $4.23. 
A)  $2.47. 
B)  $3.10. 
C)  $3.67. 
D)  $4.23.

Question 4

Financial statements for March Company appear below:

-March Company's working capital (in thousands of dollars)at the end of Year 2 was closest to which of the following?

Accepted Answer

A)  $180. 
B)  $520. 
C)  $580. 
D)  $1,290. 
A)  $180. 
B)  $520. 
C)  $580. 
D)  $1,290.

Question 5

Desktop Co.presently has a current ratio of 1.2 to 1 and an acid-test ratio of 0.8 to 1.What will be effect of prepaying next year's office rent of $50,000?

Accepted Answer

A)  No effect on either the company's current ratio or its acid-test ratio. 
B)  No effect on the company's current ratio but will decrease its acid-test ratio. 
C)  A decrease in both the company's current ratio and its acid-test ratio. 
D)  An increase in both the company's current ratio and its acid-test ratio. 
A)  No effect on either the company's current ratio or its acid-test ratio. 
B)  No effect on the company's current ratio but will decrease its acid-test ratio. 
C)  A decrease in both the company's current ratio and its acid-test ratio. 
D)  An increase in both the company's current ratio and its acid-test ratio.

Question 6

Last year,Jabber Company had a net income of $180,000,income tax expense of $62,000,and interest expense of $20,000.The company's times interest earned was closest to which of the following?

Accepted Answer

A)  4.90 times. 
B)  9.00 times. 
C)  10.00 times. 
D)  13.10 times. 
A)  4.90 times. 
B)  9.00 times. 
C)  10.00 times. 
D)  13.10 times.

Question 7

The following account balances have been provided for the end of the most recent year: $\begin{array} { l r } 
\text { Total Assets } & \$ 150,000 \
\text { Total Shareholders" Equity } & \$ 120,000 \
\text { Total Common Shares } & \$ 50,000 ( 5,000 \text { shares) } \
\text { Total Preferred Shares } & \$ 10,000 ( 1,000 \text { shares) }
\end{array}$ What is the book value per common share?

Accepted Answer

A)  $20. 
B)  $22. 
C)  $25. 
D)  $28. 
A)  $20. 
B)  $22. 
C)  $25. 
D)  $28.

Question 8

Last year,Dunn Company purchased $1,920,000 of inventory.The cost of good sold was $1,800,000,and the ending inventory was $360,000.What was the inventory turnover?

Accepted Answer

A)  5.0 times. 
B)  5.3 times. 
C)  6.0 times. 
D)  6.4 times. 
A)  5.0 times. 
B)  5.3 times. 
C)  6.0 times. 
D)  6.4 times.

Question 9

Lisa Inc.'s balance sheet appears below:
 
The company's sales for the year were $300,000, its cost of goods sold was $220,000, and its net income was $35,000. All sales were on credit. Dividends paid on preferred shares for the year were $5,000.
-Lisa Inc.'s acid-test (quick)ratio at December 31,Year 2,was closest to which of the following?

Accepted Answer

A)  0.6 to 1. 
B)  1.1 to 1. 
C)  1.8 to 1. 
D)  2.0 to 1. 
A)  0.6 to 1. 
B)  1.1 to 1. 
C)  1.8 to 1. 
D)  2.0 to 1.

Question 10

Financial statements for Oratz Company appear below:

Total dividends during Year 2 were $139,000, of which $6,000 were preferred dividends. The market price of a common share on December 31, Year 2 was $260.
-Oratz Company's current ratio at the end of Year 2 was closest to which of the following?

Accepted Answer

A)  0.51 to 1. 
B)  0.57 to 1. 
C)  1.23 to 1. 
D)  1.26 to 1. 
A)  0.51 to 1. 
B)  0.57 to 1. 
C)  1.23 to 1. 
D)  1.26 to 1.

Question 11

Perlman Company had 100,000 common shares and 20,000 preferred shares at the end of the year just completed.Preferred shareholders received total dividends of $140,000.Common shareholders received total dividends of $210,000.If the dividend payout ratio for the year was 70%,what was the net income for the year?

Accepted Answer

A)  $147,000. 
B)  $287,000. 
C)  $300,000. 
D)  $440,000. 
A)  $147,000. 
B)  $287,000. 
C)  $300,000. 
D)  $440,000.

Question 12

The following data have been taken from your company's financial records for the current year:

$\begin{array}{lccc}
\text { Earnings per Share }& \$ 10 \
\text {  Dividend per Share }&\$ 6 \
\text {  Market Price per Share }&\$ 90 \
\text {  Book Value per Share }&\$ 70 \
\end{array}$
 What is the price-earnings ratio?

Accepted Answer

A)  1.67 to 1. 
B)  7.00 to 1. 
C)  9.00 to 1. 
D)  15.00 to 1. 
A)  1.67 to 1. 
B)  7.00 to 1. 
C)  9.00 to 1. 
D)  15.00 to 1.

Question 13

The following financial data have been taken from the records of CPZ Enterprises.
 
-What will happen to the ratios below if CPZ Enterprises uses cash to pay 50% of its accounts payable? $\begin{array}{l}

\begin{array}{lll}
&\text { Current Ratio }& \text { Acid-Test Ratio }\
\text { A) } & \text { Increase } & \text { Increase } \
\text { B) } & \text { Decrease } & \text { Decrease } \
\text { C) } & \text { Increase } & \text { Decrease } \
\text { D) } & \text { Decrease } & \text { Increase }
\end{array}
\end{array}$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 14

Crabtree Company's net income last year was $50,000.The company paid dividends on preferred shares of $20,000,and its average common shareholders' equity was $440,000.The company's return on common shareholders' equity for the year was closest to which of the following?

Accepted Answer

A)  4.5%. 
B)  6.8%. 
C)  11.4%. 
D)  15.9%. 
A)  4.5%. 
B)  6.8%. 
C)  11.4%. 
D)  15.9%.

Question 15

Shelzo Inc.,a manufacturer of construction equipment is considering the purchase of one of its suppliers,Raritron Industries.The purchase has been given preliminary approval by Shelzo's board of directors,and several discussions have taken place between the management of both companies.Raritron has submitted financial data for the past several years.Shelzo's controller has analyzed Raritron's financial statements and prepared the following ratio analysis comparing Raritron's performance with the industry averages.

Accepted Answer

Required: Using the information provided

Question 16

Financial statements for Larned Company appear below:

Total dividends during Year 2 were $263,000, of which $12,000 were for preferred shares. The market price of a common share on December 31, Year 2 was $160.
-Larned Company's return on total assets for Year 2 was closest to which of the following?

Accepted Answer

A)  15.8%. 
B)  17.2%. 
C)  17.8%. 
D)  18.6%. 
A)  15.8%. 
B)  17.2%. 
C)  17.8%. 
D)  18.6%.

Question 17

Financial statements for Oratz Company appear below:

Total dividends during Year 2 were $139,000, of which $6,000 were preferred dividends. The market price of a common share on December 31, Year 2 was $260.
-Oratz Company's dividend yield ratio on December 31,Year 2 was closest to which of the following?

Accepted Answer

A)  0.5%. 
B)  5.2%. 
C)  5.5%. 
D)  5.7%. 
A)  0.5%. 
B)  5.2%. 
C)  5.5%. 
D)  5.7%.

Question 18

Brawer Company's net income last year was $55,000,and its interest expense was $20,000.Total assets at the beginning of the year were $660,000,and total assets at the end of the year were $620,000.The company's income tax rate was 30%.The company's return on total assets for the year was closest to which of the following?

Accepted Answer

A)  8.6%. 
B)  9.5%. 
C)  10.8%. 
D)  11.7%. 
A)  8.6%. 
B)  9.5%. 
C)  10.8%. 
D)  11.7%.

Question 19

Lisa Inc.'s balance sheet appears below:
 
The company's sales for the year were $300,000, its cost of goods sold was $220,000, and its net income was $35,000. All sales were on credit. Dividends paid on preferred shares for the year were $5,000.
-Lisa Inc.'s return on common shareholders' equity for Year 2 was closest to which of the following?

Accepted Answer

A)  7.8%. 
B)  10.6%. 
C)  10.9%. 
D)  12.4%. 
A)  7.8%. 
B)  10.6%. 
C)  10.9%. 
D)  12.4%.

Question 20

Financial statements for March Company appear below:

-March Company's average sale period (turnover in days)for Year 2 was closest to which of the following?

Accepted Answer

A)  34.0 days. 
B)  35.1 days. 
C)  48.9 days. 
D)  50.5 days. 
A)  34.0 days. 
B)  35.1 days. 
C)  48.9 days. 
D)  50.5 days.

Earnings per common share will immediately increase as a result of which of the following?

Financial leverage is negative in which of the following situations?

Financial statements for March Company appear below: -March Company's working capital (in thousands of dollars)at the end of Year 2 was closest to which of the following?

Desktop Co.presently has a current ratio of 1.2 to 1 and an acid-test ratio of 0.8 to 1.What will be effect of prepaying next year's office rent of $50,000?

Last year,Jabber Company had a net income of $180,000,income tax expense of $62,000,and interest expense of $20,000.The company's times interest earned was closest to which of the following?

The following account balances have been provided for the end of the most recent year: Total Assets \ 150,000 Total Shareholders" Equity \ 120,000 Total Common Shares \ 50,000(5,000 shares) Total Preferred Shares \ 10,000(1,000 shares) What is the book value per common share?

Last year,Dunn Company purchased $1,920,000 of inventory.The cost of good sold was $1,800,000,and the ending inventory was $360,000.What was the inventory turnover?

Financial statements for Oratz Company appear below: Total dividends during Year 2 were $139,000, of which $6,000 were preferred dividends. The market price of a common share on December 31, Year 2 was $260. -Oratz Company's current ratio at the end of Year 2 was closest to which of the following?

The following data have been taken from your company's financial records for the current year: Earnings per Share \ 10 Dividend per Share \ 6 Market Price per Share \ 90 Book Value per Share \ 70 What is the price-earnings ratio?

Crabtree Company's net income last year was $50,000.The company paid dividends on preferred shares of $20,000,and its average common shareholders' equity was $440,000.The company's return on common shareholders' equity for the year was closest to which of the following?

Financial statements for March Company appear below: -March Company's average sale period (turnover in days)for Year 2 was closest to which of the following?

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: A Tool to Aid Decision Making

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Filters

Exam 14: Financial Statement Analysis

Earnings per common share will immediately increase as a result of which of the following?

Financial leverage is negative in which of the following situations?

Financial statements for March Company appear below: -March Company's working capital (in thousands of dollars)at the end of Year 2 was closest to which of the following?

Desktop Co.presently has a current ratio of 1.2 to 1 and an acid-test ratio of 0.8 to 1.What will be effect of prepaying next year's office rent of $50,000?

Last year,Jabber Company had a net income of $180,000,income tax expense of $62,000,and interest expense of $20,000.The company's times interest earned was closest to which of the following?

The following account balances have been provided for the end of the most recent year: Total Assets \ 150,000 Total Shareholders" Equity \ 120,000 Total Common Shares \ 50,000(5,000 shares) Total Preferred Shares \ 10,000(1,000 shares) What is the book value per common share?

Last year,Dunn Company purchased $1,920,000 of inventory.The cost of good sold was $1,800,000,and the ending inventory was $360,000.What was the inventory turnover?

Financial statements for Oratz Company appear below: Total dividends during Year 2 were $139,000, of which $6,000 were preferred dividends. The market price of a common share on December 31, Year 2 was $260. -Oratz Company's current ratio at the end of Year 2 was closest to which of the following?

The following data have been taken from your company's financial records for the current year: Earnings per Share \ 10 Dividend per Share \ 6 Market Price per Share \ 90 Book Value per Share \ 70 What is the price-earnings ratio?

The following financial data have been taken from the records of CPZ Enterprises. -What will happen to the ratios below if CPZ Enterprises uses cash to pay 50% of its accounts payable? Current Ratio Acid-Test Ratio A) Increase Increase B) Decrease Decrease C) Increase Decrease D) Decrease Increase

Crabtree Company's net income last year was $50,000.The company paid dividends on preferred shares of $20,000,and its average common shareholders' equity was $440,000.The company's return on common shareholders' equity for the year was closest to which of the following?

Financial statements for March Company appear below: -March Company's average sale period (turnover in days)for Year 2 was closest to which of the following?

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: A Tool to Aid Decision Making

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Filters