Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

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 high debt-to-equity ratio means that there is a lot of debt financing relative to equity financing.If the ROA exceeds the after-tax cost of financing, the excess represents a return to stockholders, which increases the return on their investment. 
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 high debt-to-equity ratio means that there is a lot of debt financing relative to equity financing.If the ROA exceeds the after-tax cost of financing, the excess represents a return to stockholders, which increases the return on their investment. C

Question 3

At the end of 2016, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000.
Required:
Calculate the net profit margin ratio.

Accepted Answer

Net profit margin = 5% = Net income ÷ Net sales = $70,000 ÷ ($1,525,000 - $125,000) = 5%.

Question 4

Complete the following income statement for the dollar amounts and the component percentages:

Accepted Answer

The answer of Complete the following income statement for the...

Question 5

Compete Corporation reported a quick ratio of 1.75, current assets of $50,000, and a current ratio of 2.
Required:
A.Calculate the total amount of quick assets.
B.What is another name for the quick ratio?
C.Describe what type of assets are considered quick assets and give some examples.
D.How does the quick ratio compare to the current ratio?

Accepted Answer

A. Current ratio = 2 = current assets di

Question 6

MNF Corporation gathered the following data at the end of the accounting period, December 31, 2016:   Required:
Part 1: Calculate each of the following ratios:
 Part 1: Calculate each of the following ratios:
 A. Net profit margin
 B. Return on equity
 C. Earnings per share
 D. Dividend yield ratio
 E. Price/earnings ratio
 F. Return on assets
 G. Financial leverage percentage
 
 Part 2: Interpret the financial leverage percentage.

Accepted Answer

Part 1:
A. Net profit margin $60,000 ÷ $

Question 7

The return on assets ratio is influenced significantly by a company's relative debt and equity financing of its assets.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?

Accepted Answer

A) Mylan's current ratio remained the same. 
B) Mylan's return on equity ratio remained the same. 
C) Mylan's debt-to-equity ratio remained the same. 
D) Mylan's earnings per share remained the same. 
A) Mylan's current ratio remained the same. 
B) Mylan's return on equity ratio remained the same. 
C) Mylan's debt-to-equity ratio remained the same. 
D) Mylan's earnings per share remained the same.

Question 9

Longhorn Company reported the following data at year-end:   Required:
Calculate each of the following ratios. Round your answers to two decimal places. 
A.Debt-to-equity ratio
B.Current ratio

Accepted Answer

A. ($350,000 - $200,

Question 10

The journal entry to record depreciation expense decreases which of the following ratios?

Accepted Answer

A) Debt-to-equity. 
B) Earnings per share. 
C) Fixed asset turnover. 
D) Earnings quality. 
A) Debt-to-equity. 
B) Earnings per share. 
C) Fixed asset turnover. 
D) Earnings quality.

Question 11

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
Lee's earnings quality ratio is closest to:

Accepted Answer

A) 1.18 
B) 0.85 
C) 1.76 
D) 0.74 
A) 1.18 
B) 0.85 
C) 1.76 
D) 0.74

Question 12

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' earnings quality 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 13

Which of the following ratios is not part of the DuPont model?

Accepted Answer

A) Total asset turnover. 
B) Debt-to-equity. 
C) Net profit margin. 
D) Return on equity. 
A) Total asset turnover. 
B) Debt-to-equity. 
C) Net profit margin. 
D) Return on equity.

Question 14

Carolina Company computed the following ratios for a two-year period:   Required: 
A.Comment on the trend of each of the ratios from 2015 to 2016.State concerns or possible implications brought to light by each ratio.
B.State an overall opinion of the company's near future with suggestions for improvement.

Accepted Answer

Requirement A:
1. The current ratio has

Question 15

Agnes Company reported the following data:   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 16

Potaw Company reported the following data at the end of 2016:   The average number of days to collect receivables during 2016 is closest to:

Accepted Answer

A) 16.2. 
B) 14.3. 
C) 36.5. 
D) 21.9. 
A) 16.2. 
B) 14.3. 
C) 36.5. 
D) 21.9.

Question 17

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 18

The operating cycle includes the number of days it takes to:

Accepted Answer

A) Purchase goods, sell goods, pay cash to suppliers. 
B) Purchase goods, pay cash, collect cash from customers. 
C) Borrow money, collect cash from customers, repay cash borrowed. 
D) Pay cash for goods, sell goods, collect cash from customers. 
A) Purchase goods, sell goods, pay cash to suppliers. 
B) Purchase goods, pay cash, collect cash from customers. 
C) Borrow money, collect cash from customers, repay cash borrowed. 
D) Pay cash for goods, sell goods, collect cash from customers.

Question 19

Component percentages are used to express items on financial statements as a percentage of a single base amount.

Accepted Answer

A) True 
 B)False

Question 20

The records of Washington Company showed the following:
Average Assets
$230,000
Revenues
$100,000
Average Liabilities
130,000
Operating Expenses**
(81,000)
Average Stockholders' equity*
100,000
Interest expense
(2,000)
Net income
$17,000
*10,000 shares outstanding; current market price, $30
**Including income tax; income tax rate is 30%
Required:
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

A. Return on assets = [$17,000 + ($2,000

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

Which of the following is correct?

At the end of 2016, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000. Required: Calculate the net profit margin ratio.

Complete the following income statement for the dollar amounts and the component percentages:

The return on assets ratio is influenced significantly by a company's relative debt and equity financing of its assets.

Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?

Longhorn Company reported the following data at year-end: Required: Calculate each of the following ratios. Round your answers to two decimal places. A.Debt-to-equity ratio B.Current ratio

The journal entry to record depreciation expense decreases which of the following ratios?

Which of the following ratios is not part of the DuPont model?

Agnes Company reported the following data: What was the current ratio?

Potaw Company reported the following data at the end of 2016: The average number of days to collect receivables during 2016 is closest to:

Which of the following statements is false?

The operating cycle includes the number of days it takes to:

Component percentages are used to express items on financial statements as a percentage of a single base amount.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

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; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

PPA: Reporting and Interpreting Investments in Other Corporations

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Exam 13: Analyzing Financial Statements

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

Which of the following is correct?

At the end of 2016, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000. Required: Calculate the net profit margin ratio.

Complete the following income statement for the dollar amounts and the component percentages:

The return on assets ratio is influenced significantly by a company's relative debt and equity financing of its assets.

Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?

Longhorn Company reported the following data at year-end: Required: Calculate each of the following ratios. Round your answers to two decimal places. A.Debt-to-equity ratio B.Current ratio

The journal entry to record depreciation expense decreases which of the following ratios?

Which of the following ratios is not part of the DuPont model?

Agnes Company reported the following data: What was the current ratio?

Potaw Company reported the following data at the end of 2016: The average number of days to collect receivables during 2016 is closest to:

Which of the following statements is false?

The operating cycle includes the number of days it takes to:

Component percentages are used to express items on financial statements as a percentage of a single base amount.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

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; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

PPA: Reporting and Interpreting Investments in Other Corporations

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