Question 1

Profitability ratios measure:

Accepted Answer

A) a company's ability to earn profits. 
B) a company's ability to meet short-term obligations. 
C) how well a company is using debt versus equity. 
D) how effectively a company is using its assets. 
A) a company's ability to earn profits. 
B) a company's ability to meet short-term obligations. 
C) how well a company is using debt versus equity. 
D) how effectively a company is using its assets.

Question 2

In a comparative balance sheet,the ending Cash for 2012 was $315,000 and is $270,000 for 2013.The net increase or decrease from 2012 to 2013 is:

Accepted Answer

A) 86.0%. 
B) 14.3%. 
C) 26.4%. 
D) 16.7%. 
A) 86.0%. 
B) 14.3%. 
C) 26.4%. 
D) 16.7%.

Question 3

The liabilities of a company at the end of the year are $500,000 and the total stockholders' equity at the end of the year is $1,500,000.The debt to stockholders' equity ratio is:

Accepted Answer

A) 0.50 to 1. 
B) 0.33 to 1. 
C) 0.67 to 1. 
D) 3.00 to 1. 
A) 0.50 to 1. 
B) 0.33 to 1. 
C) 0.67 to 1. 
D) 3.00 to 1.

Question 4

Accounts receivable turnover is calculated by dividing gross sales by the average gross amount of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 5

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & & \text { Asset } & & \
& \text { Liquidity } & \text { Management } & \text { Debt } & \text { Profitability } \
\hline \text { Acid test ratio } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 6

Common-size statements are used to compare companies of different sizes.

Accepted Answer

A) True 
 B)False

Question 7

A form of analysis in which each item on a report is shown as a percent of net sales is called a vertical analysis of the income statement.

Accepted Answer

A) True 
 B)False

Question 8

The inventory turnover ratio calculates:

Accepted Answer

A) how many times the inventory turns over in one period. 
B) number of times inventory is purchased in one period. 
C) the dollar amount of change in inventory in one period. 
D) None of these answers are correct. 
A) how many times the inventory turns over in one period. 
B) number of times inventory is purchased in one period. 
C) the dollar amount of change in inventory in one period. 
D) None of these answers are correct.

Question 9

If management wishes to evaluate the amount of assets which were financed by creditors,they could use the:

Accepted Answer

A) debt to total assets. 
B) rate of return on common stockholders' equity. 
C) debt to total liabilities. 
D) times interest earned. 
A) debt to total assets. 
B) rate of return on common stockholders' equity. 
C) debt to total liabilities. 
D) times interest earned.

Question 10

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Liquidity } & \begin{array} { c } 
\text { Asset } \
\text { Management }
\end{array} & \text { Debt } & \text { Profitability } \
\hline \text { Average collection period } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 11

If current assets were $100,000 in 20x7 and $88,000 in 20x8,what was the amount of increase or decrease? (round to nearest percent):

Accepted Answer

A) The percentage increase is 13.64%. 
B) The percentage decrease is 12%. 
C) The percentage decrease is 13.64%. 
D) The percentage increase is 12%. 
A) The percentage increase is 13.64%. 
B) The percentage decrease is 12%. 
C) The percentage decrease is 13.64%. 
D) The percentage increase is 12%.

Question 12

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Liquidity } & \begin{array} { c } 
\text { Asset } \
\text { Management }
\end{array} & \text { Debt } & \text { Profitability } \
\hline \text { Rate of return on common } & & & & \
\text { stockholders' equity } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 13

A low debt to total assets ratio reduces a creditor's risk if liquidation occurs.

Accepted Answer

A) True 
 B)False

Question 14

A company has cash of $215,000; short-term investments of $35,000; net receivables of $75,000; and inventory of $150,000.Current liabilities total $90,000.The current ratio is:

Accepted Answer

A) 5.28:1. 
B) 4.44:1. 
C) 3.61:1. 
D) 4.89:1. 
A) 5.28:1. 
B) 4.44:1. 
C) 3.61:1. 
D) 4.89:1.

Question 15

What is George's gross profit rate if net sales are $100,000,operating expenses are $25,000,and cost of goods sold is $40,000?

Accepted Answer

A) 40.00% 
B) 25.0% 
C) 35.0% 
D) 60.0% 
A) 40.00% 
B) 25.0% 
C) 35.0% 
D) 60.0%

Question 16

Topiary's Unlimited has a cost of goods sold of $1,600,000.The beginning merchandise inventory was $195,000 and its ending merchandise inventory is $205,000.Topiary's merchandise inventory turnover ratio is:

Accepted Answer

A) 8.21 times. 
B) 7.80 times. 
C) 8.00 times. 
D) None of the above are correct. 
A) 8.21 times. 
B) 7.80 times. 
C) 8.00 times. 
D) None of the above are correct.

Question 17

Carla's Fashions has an average collection period of 30 days.You could infer that Carla's Fashions:

Accepted Answer

A) bills her customers monthly. 
B) bills her customers quarterly. 
C) has an accounts receivable turnover of approximately 12. 
D) Both A and C can be inferred. 
A) bills her customers monthly. 
B) bills her customers quarterly. 
C) has an accounts receivable turnover of approximately 12. 
D) Both A and C can be inferred.

Question 18

Debt management ratios measure:

Accepted Answer

A) how effectively a company is using its cash. 
B) how well a company is using debt versus equity position. 
C) a company's ability to earn profit. 
D) a company's ability to meet payable obligations. 
A) how effectively a company is using its cash. 
B) how well a company is using debt versus equity position. 
C) a company's ability to earn profit. 
D) a company's ability to meet payable obligations.

Question 19

Saxon Corporation's beginning inventory was $30,000.The cost of goods sold was $350,000 for the year,with an ending inventory of $40,000.Inventory turnover for the year is:

Accepted Answer

A) 20 times. 
B) 10 times. 
C) 11.67 times. 
D) 8.75 times. 
A) 20 times. 
B) 10 times. 
C) 11.67 times. 
D) 8.75 times.

Question 20

If the return on sales is 11% and the total assets turnover is 1.8,the rate of return on total assets would be 19.8%.

Accepted Answer

A) True 
 B)False

Exam 22: Analyzing Financial Statements

Profitability ratios measure:

In a comparative balance sheet,the ending Cash for 2012 was $315,000 and is $270,000 for 2013.The net increase or decrease from 2012 to 2013 is:

The liabilities of a company at the end of the year are $500,000 and the total stockholders' equity at the end of the year is $1,500,000.The debt to stockholders' equity ratio is:

Accounts receivable turnover is calculated by dividing gross sales by the average gross amount of accounts receivable.

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability. - Asset Liquidity Management Debt Profitability Acid test ratio

Common-size statements are used to compare companies of different sizes.

A form of analysis in which each item on a report is shown as a percent of net sales is called a vertical analysis of the income statement.

The inventory turnover ratio calculates:

If management wishes to evaluate the amount of assets which were financed by creditors,they could use the:

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability. - Liquidity Asset Management Debt Profitability Average collection period

If current assets were $100,000 in 20x7 and $88,000 in 20x8,what was the amount of increase or decrease? (round to nearest percent):

A low debt to total assets ratio reduces a creditor's risk if liquidation occurs.

A company has cash of $215,000; short-term investments of $35,000; net receivables of $75,000; and inventory of $150,000.Current liabilities total $90,000.The current ratio is:

What is George's gross profit rate if net sales are $100,000,operating expenses are $25,000,and cost of goods sold is $40,000?

Topiary's Unlimited has a cost of goods sold of $1,600,000.The beginning merchandise inventory was $195,000 and its ending merchandise inventory is $205,000.Topiary's merchandise inventory turnover ratio is:

Carla's Fashions has an average collection period of 30 days.You could infer that Carla's Fashions:

Debt management ratios measure:

Saxon Corporation's beginning inventory was $30,000.The cost of goods sold was $350,000 for the year,with an ending inventory of $40,000.Inventory turnover for the year is:

If the return on sales is 11% and the total assets turnover is 1.8,the rate of return on total assets would be 19.8%.

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes: The Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property, plant, equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, dividends, treasury Stocks, and Retained Earnings

Corporations and Bonds Payable

Statement of Cash Flows

The Voucher System

Departmental Accounting

Manufacturing Accounting

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