Information concerningthe common shares of Morris Company as of the end of the company's fiscal year is presented below: \[\begin{array} { | l | r | } \hline \text { Nurnber of Shares Outstanding } & 460,000 \\ \hline \text { Par Values per Share } & \$ 5.00 \\ \hline \text { Dividend per Share } & \$ 6.00 \\ \hline \text { Market Price per Share } & \$ 54.00 \\ \hline \text { Earrings per Share } & \$ 18.00 \\ \hline \end{array}\] The dividend yield ratio is closest to which of the following?

A) 11.1%. B) 33.3%. C) 50.0%. D) 120.0%. A) 11.1%. B) 33.3%. C) 50.0%. D) 120.0%.

$\begin{array}{l} \text { The Dawson Corporation projects the following for the upcoming year: }\\\\ \begin{array} { | l | r | } \hline \text { Earnings before Interest and Taxes } & \text { \$35 million } \\ \hline \text { Interest Expense } & \text { \$5 million } \\ \hline \text { Preferred Shares Dividends } & \$ 4 \text { million } \\ \hline \text { Common Shares Dividend Payout Ratio } & 30 \% \\ \hline \begin{array} { l } \text { Average Number of Common Shares } \\ \text { Outstanding } \end{array} & 2 \text { million } \\ \hline \text { Effective Corporate Income Tax Rate } & 40 \% \\ \hline \end{array} \end{array}$ -If Dawson Corporation's common shares have a price-earnings ratio of eight,what would be the market price per share,rounded to the nearest dollar?

A) $56. B) $68. C) $72. D) $125. A) $56. B) $68. C) $72. D) $125.

Which of the following accounts would be included in the calculation of the acid-test ratio? $\begin{array}{|l|l|l|l|} \hline & \begin{array}{l} \text { Accounts } \\ \text { Receivable } \end{array} & \begin{array}{l} \text { Prepaid } \\ \text { Expense } \end{array} & \text { Inventory } \\ \hline \text { A) } & \text { Yes } & \text { Yes } & \text { No } \\ \hline \text { B) } & \text { No } & \text { Yes } & \text { Yes } \\ \hline \text { C) } & \text { No } & \text { No } & \text { Yes } \\ \hline \text { D) } & \text { Yes } & \text { No } & \text { No } \\ \hline \end{array}$

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

Exam 14: Financial Statement Analysis

Erack Company has $15,000 in cash,$4,000 in marketablesecurities,$38,000 in current receivables,$18,000 in inventories,and $40,000 in current liabilities.The company's acid-test (quick)ratio is closest to which of the following?

(Multiple Choice)

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Question 41

Financial statements for Marcell Company appear below: $Financial statements for Marcell Company appear below: \begin{array}{|l|r|} \hline &\begin{array}{r} \text { Marcell Company } \\ \text { Income Statement }\\\text { For the Year Ended December 31, Year } \\ 2 \\ \text { (dollars in thousands) } \\ \end{array} \\\hline \text { Sales (All on Account) } & \$ 2550 \\ \hline \text { Costs of Goods Sold } & \$ 1780 \\ \hline \text { Gross Margin } & \$ 770 \\ \hline \text { Operating Expenses } & \$ 300 \\ \hline \text { Net Operating Income } & \$ 470 \\ \hline \text { Interest Expense } & \$ 50 \\ \hline \text { Net Income before Taxes } & \$ 420 \\ \hline \text { Income Taxes (30\%) } & \$ 126 \\ \hline \text { Net Income } & \$ 294 \\ \hline \end{array} -Marcell Company's acid-test (quick)ratio at the end of Year 2 was closest to which of the following?$ Marcell Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2550 Costs of Goods Sold \ 1780 Gross Margin \ 770 Operating Expenses \ 300 Net Operating Income \ 470 Interest Expense \ 50 Net Income before Taxes \ 420 Income Taxes (30\%) \ 126 Net Income \ 294 -Marcell Company's acid-test (quick)ratio at the end of Year 2 was closest to which of the following?

(Multiple Choice)

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Question 42

Arget Company's net income last year was $600,000.The company had 150,000 common shares and 60,000 preferred shares.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 $1.10 per common share and $0.60 per preferred share.The earnings per common share was closest to which of the following?

(Multiple Choice)

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Question 43

Financial statements for Larosa Company appear below: $Financial statements for Larosa Company appear below: \begin{array}{|l|r|}\hline & \begin{array}{r} \text { Larned Company } \\ \text { Income Statement }\\\text { For the Year Ended December 31, Year 2 }\\\text { (dollars in thousands) } \end{array} \\ \\hline \text { Sales (All on Account) } & \$ 1870 \\ \hline \text { Costs of Goods Sold } & \$ 1300 \\ \hline \text { Gross Margin } & \$ 570 \\ \hline \text { Operating Expenses } & \$ 220 \\ \hline \text { Net Operating Income } & \$ 350 \\ \hline \text { Interest Expense } & \$ 40 \\ \hline \text { Net Income before Taxes } & \$ 310 \\ \hline \text { Income Taxes }(30 \%) & \$ 93 \\ \hline \text { Net Income } & \$ 217 \\ \hline \end{array} Total dividends during Year 2 were \$ 47,000 , of which \$ 10,000 were preferred dividends. The market price of a common share on December 31 , Year 2 was \$ 70 . -Larosa Company's book value per share at the end of Year 2 was closest to which of the following?$ Larned Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) hline Sales (All on Account) \ 1870 Costs of Goods Sold \ 1300 Gross Margin \ 570 Operating Expenses \ 220 Net Operating Income \ 350 Interest Expense \ 40 Net Income before Taxes \ 310 Income Taxes (30\%) \ 93 Net Income \ 217 Total dividends during Year 2 were $\$ 47,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31 , Year 2 was $\$ 70$ . -Larosa Company's book value per share at the end of Year 2 was closest to which of the following?

(Multiple Choice)

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Question 44

Information concerningthe common shares of Morris Company as of the end of the company's fiscal year is presented below: Nurnber of Shares Outstanding 460,000 Par Values per Share \ 5.00 Dividend per Share \ 6.00 Market Price per Share \ 54.00 Earrings per Share \ 18.00 The dividend yield ratio is closest to which of the following?

(Multiple Choice)

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Question 45

Fracus Company had $100,000 in sales on account last year.The beginning accounts receivablebalance was $14,000,and the ending accounts receivable balance was $16,000.The company's accounts receivable turnover was closest to which of the following?

(Multiple Choice)

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Question 46

The Dawson Corporation projects the following for the upcoming year: Earnings before Interest and Taxes \3 5 million Interest Expense \5 million Preferred Shares Dividends \ 4 million Common Shares Dividend Payout Ratio 30\% Average Number of Common Shares Outstanding 2 million Effective Corporate Income Tax Rate 40\% -If Dawson Corporation's common shares have a price-earnings ratio of eight,what would be the market price per share,rounded to the nearest dollar?

(Multiple Choice)

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Question 47

If the market value of a common share is greater than its book value,the common share is probably overpriced.

(True/False)

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Question 48

Financial statements for Rarity Company appear below: $Financial statements for Rarity Company appear below: \begin{array}{|l|r|}\hline &\begin{array}{r} \text { Rarity Company } \\ \text { Income Statement } \\ \text { For the Year Ended December 31, Year 2} \\ \text { (dollars in thousands) } \end{array}\\ \hline \text { Sales (All on Account) } & \$ 1100 \\ \hline \text { Costs of Goods Sold } & \$ 770 \\ \hline \text { Gross Margin } & \$ 330 \\ \hline \text { Operating Expenses } & \$ 130 \\ \hline \text { Net Operating Income } & \$ 200 \\ \hline \text { Interest Expense } & \$ 50 \\ \hline \text { Net Income before Taxes } & \$ 150 \\ \hline \text { Income Taxes (30\%) } & \$ 45 \\ \hline \text { Net Income } & \$ 105 \\ \hline \end{array} Required: Calculate the following for Year 2: a)Current ratio. b)Acid-test (quick)ratio. c)Average collection period (age of receivables). d)Inventory turnover. e)Times interest earned. f)Debt-to-equity ratio.$ Rarity Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 1100 Costs of Goods Sold \ 770 Gross Margin \ 330 Operating Expenses \ 130 Net Operating Income \ 200 Interest Expense \ 50 Net Income before Taxes \ 150 Income Taxes (30\%) \ 45 Net Income \ 105 Required: Calculate the following for Year 2: a)Current ratio. b)Acid-test (quick)ratio. c)Average collection period (age of receivables). d)Inventory turnover. e)Times interest earned. f)Debt-to-equity ratio.

(Essay)

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Question 49

Financial statements for Qualle Company appear below: $Financial statements for Qualle Company appear below: \begin{array}{|l|r|}\hline&\begin{array}{r} \text { Qualle Company } \\ \text { Income Statement }\\\text { For the Year Ended December 31, Year 2} \\ \text { (dollars in thousands) } \end{array} \\ \hline \text { Sales (All on Account) } & \$ 2300 \\ \hline \text { Costs of Goods Sold } & \$ 1610 \\ \hline \text { Gross Margin } & \$ 690 \\ \hline \text { Operating Expenses } & \$ 270 \\ \hline \text { Net Operating Income } & \$ 420 \\ \hline \text { Interest Expense } & \$ 50 \\ \hline \text { Net Income before Taxes } & \$ 370 \\ \hline \text { Income Taxes (30\%) } & \$ 111 \\ \hline \text { Net Income } & \$ 259\\\hline \end{array} Total dividends paid during Year 2 were $149,000,of which $10,000 were preferred dividends.The market price of a common share on December 31,Year 2 was $280. Required: Calculate the following for Year 2: a)Earnings per share. b)Price-earnings ratio. c)Dividend yield ratio. d)Return on total assets. e)Return on common shareholders' equity. f)Book value per share.$ Qualle Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2300 Costs of Goods Sold \ 1610 Gross Margin \ 690 Operating Expenses \ 270 Net Operating Income \ 420 Interest Expense \ 50 Net Income before Taxes \ 370 Income Taxes (30\%) \ 111 Net Income \ 259 Total dividends paid during Year 2 were $149,000,of which $10,000 were preferred dividends.The market price of a common share on December 31,Year 2 was $280. Required: Calculate the following for Year 2: a)Earnings per share. b)Price-earnings ratio. c)Dividend yield ratio. d)Return on total assets. e)Return on common shareholders' equity. f)Book value per share.

(Essay)

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Question 50

Which of the following accounts would be included in the calculation of the acid-test ratio? Accounts Receivable Prepaid Expense Inventory A) Yes Yes No B) No Yes Yes C) No No Yes D) Yes No No

(Multiple Choice)

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Question 51

If the assets in which funds are invested have a rate of return lower than the fixed rate of return paid to the supplier of the funds,then financial leverage is positive.

(True/False)

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Question 52

Financial statements for Narlock Company appear below: $Financial statements for Narlock Company appear below: \begin{array}{|l|r|} \hline&\text {Larned Company } \\ &\text { Income Statement } \\ &\text { For the Year Ended December 31, Year } \\ &2\\ &\text { (dollars in thousands) }\\ \hline\text { Sales (All on Account) } & \$ 2250 \\ \hline \text { Costs of Goods Sold } & \$ 1570 \\ \hline \text { Gross Margin } & \$ 680 \\ \hline \text { Operating Expenses } & \$ 270 \\ \hline \text { Net Operating Income } & \$ 410 \\ \hline \text { Interest Expense } & \$ 50 \\ \hline \text { Net Income before Taxes } & \$ 360 \\ \hline \text { Income Taxes (30\%) } & \$ 108 \\ \hline \text { Net Income } & \$ 252 \\ \hline \end{array} -Narlock Company's times interest earned for Year 2 was closest to which of the following?$ Larned Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2250 Costs of Goods Sold \ 1570 Gross Margin \ 680 Operating Expenses \ 270 Net Operating Income \ 410 Interest Expense \ 50 Net Income before Taxes \ 360 Income Taxes (30\%) \ 108 Net Income \ 252 -Narlock Company's times interest earned for Year 2 was closest to which of the following?

(Multiple Choice)

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Question 53

Financial statements for Sarosa Company appear below: $Financial statements for Sarosa Company appear below: \begin{array}{|l|r|}\hline &\begin{array}{r} \text { Sarosa Company } \\ \text { Income Statement } \\ \text { For the Year Ended December 31, Year 2} \\ \text { (dollars in thousands) } \end{array}\\ \hline \text { Sales (All on Account) } & \$ 1870 \\ \hline \text { Costs of Goods Sold } & \$ 1300 \\ \hline \text { Gross Margin } & \$ 570 \\ \hline \text { Operating Expenses } & \$ 220 \\ \hline \text { Net Operating Income } & \$ 350 \\ \hline \text { Interest Expense } & \$ 40 \\ \hline \text { Net Income before Taxes } & \$ 310 \\ \hline \text { Income Taxes (30\%) } & \$ 93 \\ \hline \text { Net Income } & \$ 217\\\hline \end{array} Required: a)Calculate Sarosa Company's return on total assets for Year 2. b)Calculate Sarosa Company's return on common shareholders' equity for Year 2. c)Financial leverage was positive for Year 2.Why? d)Assume all current liabilities are interest free and that the interest expense of $40 is for the bonds payable. (i)Calculate the dollar amount of the financial leverage (in $1,000) (ii)Allocate the dollar amount of the financial leverage to the following sources of financing:Preferred Shares,Bonds Payable,and Current Liabilities (rounded to the nearest $1,000)$ Sarosa Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 1870 Costs of Goods Sold \ 1300 Gross Margin \ 570 Operating Expenses \ 220 Net Operating Income \ 350 Interest Expense \ 40 Net Income before Taxes \ 310 Income Taxes (30\%) \ 93 Net Income \ 217 Required: a)Calculate Sarosa Company's return on total assets for Year 2. b)Calculate Sarosa Company's return on common shareholders' equity for Year 2. c)Financial leverage was positive for Year 2.Why? d)Assume all current liabilities are interest free and that the interest expense of $40 is for the bonds payable. (i)Calculate the dollar amount of the financial leverage (in $1,000) (ii)Allocate the dollar amount of the financial leverage to the following sources of financing:Preferred Shares,Bonds Payable,and Current Liabilities (rounded to the nearest $1,000)

(Essay)

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Question 54

Grave Company had $150,000 in sales on account last year.The beginning accounts receivablebalance was $14,000,and the ending accounts receivable balance was $10,000.The company's average collection period (age of receivables)was closest to which of the following?

(Multiple Choice)

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Question 55

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 inventory turnover for Year 2 was closest to which of the following?

(Multiple Choice)

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Question 56

Which of the following is NOT a potential source of financial leverage?

(Multiple Choice)

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Question 57

Last year,Jackson Company had a net income of $160,000,income tax expense of $66,000,and interest expense of $20,000.The company's times interest earned was closest to which of the following?

(Multiple Choice)

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Question 58

Harker Company,a retailer,had cost of goods sold of $160,000 last year.The beginning inventory balance was $26,000,and the ending inventory balance was $20,000.The company's inventory turnover was closest to which of the following?

(Multiple Choice)

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Question 59

Financial statements for Marcell Company appear below: $Financial statements for Marcell Company appear below: \begin{array}{|l|r|} \hline &\begin{array}{r} \text { Marcell Company } \\ \text { Income Statement }\\\text { For the Year Ended December 31, Year } \\ 2 \\ \text { (dollars in thousands) } \\ \end{array} \\\hline \text { Sales (All on Account) } & \$ 2550 \\ \hline \text { Costs of Goods Sold } & \$ 1780 \\ \hline \text { Gross Margin } & \$ 770 \\ \hline \text { Operating Expenses } & \$ 300 \\ \hline \text { Net Operating Income } & \$ 470 \\ \hline \text { Interest Expense } & \$ 50 \\ \hline \text { Net Income before Taxes } & \$ 420 \\ \hline \text { Income Taxes (30\%) } & \$ 126 \\ \hline \text { Net Income } & \$ 294 \\ \hline \end{array} -Marcell Company's inventory turnover for Year 2 was closest to which of the following?$ Marcell Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2550 Costs of Goods Sold \ 1780 Gross Margin \ 770 Operating Expenses \ 300 Net Operating Income \ 470 Interest Expense \ 50 Net Income before Taxes \ 420 Income Taxes (30\%) \ 126 Net Income \ 294 -Marcell Company's inventory turnover for Year 2 was closest to which of the following?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 203

Erack Company has $15,000 in cash,$4,000 in marketablesecurities,$38,000 in current receivables,$18,000 in inventories,and $40,000 in current liabilities.The company's acid-test (quick)ratio is closest to which of the following?

Fracus Company had $100,000 in sales on account last year.The beginning accounts receivablebalance was $14,000,and the ending accounts receivable balance was $16,000.The company's accounts receivable turnover was closest to which of the following?

If the market value of a common share is greater than its book value,the common share is probably overpriced.

Which of the following accounts would be included in the calculation of the acid-test ratio? Accounts Receivable Prepaid Expense Inventory A) Yes Yes No B) No Yes Yes C) No No Yes D) Yes No No

If the assets in which funds are invested have a rate of return lower than the fixed rate of return paid to the supplier of the funds,then financial leverage is positive.

Grave Company had $150,000 in sales on account last year.The beginning accounts receivablebalance was $14,000,and the ending accounts receivable balance was $10,000.The company's average collection period (age of receivables)was closest to which of the following?

Which of the following is NOT a potential source of financial leverage?

Last year,Jackson Company had a net income of $160,000,income tax expense of $66,000,and interest expense of $20,000.The company's times interest earned was closest to which of the following?

Harker Company,a retailer,had cost of goods sold of $160,000 last year.The beginning inventory balance was $26,000,and the ending inventory balance was $20,000.The company's inventory turnover was closest to which of the following?

Managerial Accounting and the Business Environment

Cost Terms,concepts,and Classifications

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: A Tool to Aid Decision Making

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

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