Question 1

Which of the following transactions decreases the earnings quality ratio?

Accepted Answer

A) The accrual of interest expense. 
B) Collecting cash on an account receivable. 
C) Selling inventory on account for a profit. 
D) Making a payment of principal on a loan. 
A) The accrual of interest expense. 
B) Collecting cash on an account receivable. 
C) Selling inventory on account for a profit. 
D) Making a payment of principal on a loan.

Question 2

Bailey Corporation reported the following information for 2016:   What is Bailey's debt-to-equity ratio?

Accepted Answer

A) 2 
B) 1.25 
C) 1.0 
D) 3.0 
A) 2 
B) 1.25 
C) 1.0 
D) 3.0

Question 3

The price/earnings ratio is affected by the amount of risk that investors are willing to take.

Accepted Answer

A) True 
 B)False

Question 4

The debt-to-equity ratio is a risk measure used by both investors and lenders.

Accepted Answer

A) True 
 B)False

Question 5

The following data were available for Holiday Company:
Sales revenue, $225,000 (including $75,000 cash sales)
Cost of goods sold, $175,000
Average balance in inventory, $20,000
Average balance in accounts receivable, $20,000
Assume 365 days in the year
Required:
Calculate each of the following ratios. Round your answers to two decimal places.
A.Inventory turnover ratio
B.Average days to sell inventory
C.Receivable turnover ratio
D.Average days to collect receivables

Accepted Answer

A. Inventory turnover ratio = $175,000 ÷

Question 6

Finding comparable companies in order to compare performance is important because ratios in isolation are difficult to evaluate.

Accepted Answer

A) True 
 B)False

Question 7

The records of Everyday Electronics Corporation for a particular period include the following:   The return on equity ratio is closest to:

Accepted Answer

A) 13.2% 
B) 23.8% 
C) 24.0% 
D) 8.4% 
A) 13.2% 
B) 23.8% 
C) 24.0% 
D) 8.4%

Question 8

The following data were reported by Universe Company at year-end:   Required:
Calculate each of the following ratios: 
A.Debt-to-equity
B.Current ratio
C.Quick ratio
D.Which of the above ratios, if any, are liquidity ratios?
E.Which of the above ratios, if any, are profitability ratios?

Accepted Answer

A. Debt-to-equity = ($75,000 + $75,000)

Question 9

Earnings per share (EPS) is affected by treasury stock transactions.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is incorrect about fundamental business strategies?

Accepted Answer

A) A company implementing a cost differentiation strategy is attempting to increase operating efficiency of assets and improve the total asset turnover ratio. 
B) A company implementing a product differentiation strategy is attempting to improve its net profit margin through charging higher prices. 
C) A company will be more profitable because it will attract a higher volume of customers and sales revenue when it follows a product differentiation strategy versus a cost differentiation strategy. 
D) Financial leverage is how a company finances its assets and can affect total profitability return to stockholders. 
A) A company implementing a cost differentiation strategy is attempting to increase operating efficiency of assets and improve the total asset turnover ratio. 
B) A company implementing a product differentiation strategy is attempting to improve its net profit margin through charging higher prices. 
C) A company will be more profitable because it will attract a higher volume of customers and sales revenue when it follows a product differentiation strategy versus a cost differentiation strategy. 
D) Financial leverage is how a company finances its assets and can affect total profitability return to stockholders.

Question 11

Agnes Company reported the following data:   What was the inventory turnover ratio?

Accepted Answer

A) 2.2 
B) 1.8 
C) 2.0 
D) 3.0 
A) 2.2 
B) 1.8 
C) 2.0 
D) 3.0

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following transactions decreases earnings per share?

Accepted Answer

A) Collection of an account receivable. 
B) Selling treasury stock for an amount less than its cost. 
C) A decrease in the market value per share. 
D) Paying cash in advance for rent. 
A) Collection of an account receivable. 
B) Selling treasury stock for an amount less than its cost. 
C) A decrease in the market value per share. 
D) Paying cash in advance for rent.

Question 14

The cash payment of a previously declared dividend increases which of the following ratios?

Accepted Answer

A) Debt-to-equity. 
B) Earnings per share. 
C) Price/earnings ratio. 
D) Total asset turnover. 
A) Debt-to-equity. 
B) Earnings per share. 
C) Price/earnings ratio. 
D) Total asset turnover.

Question 15

Agnes Company reported the following data:   What was the average number of days to sell inventory?

Accepted Answer

A) 165.9 
B) 202.7 
C) 182.5 
D) 121.7 
A) 165.9 
B) 202.7 
C) 182.5 
D) 121.7

Question 16

MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2017 and 2016. MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2017 and 2016 respectively. The company paid cash dividends per share of $0.85 in 2017 and $0.63 in 2016. Total stockholders' equity was $13,572 million and $11,896 million in 2017 and 2016 respectively. The common shares outstanding were approximately 1,782,000 in both 2017 and 2016. MusicPod's price/earnings ratio for 2017 is closest to:

Accepted Answer

A) 21.5 
B) 62.4 
C) 20.0 
D) 2.9 
A) 21.5 
B) 62.4 
C) 20.0 
D) 2.9

Question 17

When comparing a fixed asset turnover ratio to a total asset turnover ratio, a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Accepted Answer

A) True 
 B)False

Question 18

Packers Corporation reported the following data for the year ended December 31, 2016:
Calculate each of the following ratios:
Calculate each of the following ratios:
 A. Net profit margin
 B. Return on assets
 C. Return on equity
 D. Earnings per share
 E. Price/earnings ratio
 F. Debt-to-equity ratio
 G. Financial leverage percentage
 H. Fixed asset turnover ratio

Accepted Answer

A. Net profit margin = $25,000 ÷ $400,00

Question 19

Which of the following is false?

Accepted Answer

A) The cash ratio is the least stringent but most reliable test of liquidity. 
B) A company with a high level of inventory will have a quick ratio significantly lower than its current ratio. 
C) A current ratio that is too high could indicate funds tied up in inventory and other working capital assets. 
D) Analysts consider a current ratio of 2 to be financially conservative. 
A) The cash ratio is the least stringent but most reliable test of liquidity. 
B) A company with a high level of inventory will have a quick ratio significantly lower than its current ratio. 
C) A current ratio that is too high could indicate funds tied up in inventory and other working capital assets. 
D) Analysts consider a current ratio of 2 to be financially conservative.

Question 20

The following data were shown in the records of Victoria Company at the end of 2016:   Required:
Calculate each of the following ratios. Round your answers to one decimal place.
 A. Quick ratio
 B. Current ratio
 C. Receivable turnover ratio
 D. Inventory turnover ratio
 E. Average days to collect receivables
 F. Average days to sell inventory

Accepted Answer

A. Quick ratio = $180,000 ÷ $50,000 = 3.

Which of the following transactions decreases the earnings quality ratio?

Bailey Corporation reported the following information for 2016: What is Bailey's debt-to-equity ratio?

The price/earnings ratio is affected by the amount of risk that investors are willing to take.

The debt-to-equity ratio is a risk measure used by both investors and lenders.

Finding comparable companies in order to compare performance is important because ratios in isolation are difficult to evaluate.

The records of Everyday Electronics Corporation for a particular period include the following: The return on equity ratio is closest to:

The following data were reported by Universe Company at year-end: Required: Calculate each of the following ratios: A.Debt-to-equity B.Current ratio C.Quick ratio D.Which of the above ratios, if any, are liquidity ratios? E.Which of the above ratios, if any, are profitability ratios?

Earnings per share (EPS) is affected by treasury stock transactions.

Which of the following statements is incorrect about fundamental business strategies?

Agnes Company reported the following data: What was the inventory turnover ratio?

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

Which of the following transactions decreases earnings per share?

The cash payment of a previously declared dividend increases which of the following ratios?

Agnes Company reported the following data: What was the average number of days to sell inventory?

When comparing a fixed asset turnover ratio to a total asset turnover ratio, a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Which of the following is false?

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

Which of the following transactions decreases the earnings quality ratio?

Bailey Corporation reported the following information for 2016: What is Bailey's debt-to-equity ratio?

The price/earnings ratio is affected by the amount of risk that investors are willing to take.

The debt-to-equity ratio is a risk measure used by both investors and lenders.

Finding comparable companies in order to compare performance is important because ratios in isolation are difficult to evaluate.

The records of Everyday Electronics Corporation for a particular period include the following: The return on equity ratio is closest to:

The following data were reported by Universe Company at year-end: Required: Calculate each of the following ratios: A.Debt-to-equity B.Current ratio C.Quick ratio D.Which of the above ratios, if any, are liquidity ratios? E.Which of the above ratios, if any, are profitability ratios?

Earnings per share (EPS) is affected by treasury stock transactions.

Which of the following statements is incorrect about fundamental business strategies?

Agnes Company reported the following data: What was the inventory turnover ratio?

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

Which of the following transactions decreases earnings per share?

The cash payment of a previously declared dividend increases which of the following ratios?

Agnes Company reported the following data: What was the average number of days to sell inventory?

When comparing a fixed asset turnover ratio to a total asset turnover ratio, a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Which of the following is false?

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

Filters