Question 1

Chuck Company has a beginning Accounts Receivable balance of $65,000 and an ending balance of $60,000. Net credit sales are $250,000. The company's accounts receivable turnover ratio is:

Accepted Answer

A) 3.846. 
B) 4.167. 
C) 4.000. 
D) None of the above.

Question 2

The ratio that indicates how much profit is generated from each sales dollar to cover general and selling expenses is:

Accepted Answer

A) gross profit rate. 
B) return on sales. 
C) rate of return on total assets. 
D) rate of return on common stockholders' equity.

Question 3

If current assets were $90,000, merchandise inventory was $60,000, and current liabilities were $15,000, the acid test ratio is:

Accepted Answer

A) 6:1. 
B) 4:1. 
C) 2:1. 
D) 1:2.

Question 4

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.
-

Accepted Answer

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

Question 5

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

Question 6

The income before taxes and interest expense of Barry Builders for the year just ended is $230,000. Their interest expense is $20,000 and their income taxes are $80,500. The number of times interest would be earned is:

Accepted Answer

A) 22.0. 
B) 10.5. 
C) 11.5. 
D) 0.5.

Question 7

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.
-

Accepted Answer

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

Question 8

An acid test (quick)ratio of 0.75 to 1 would indicate:

Accepted Answer

A) a ratio that would not allow a company to pay off all current liabilities with quick assets. 
B) for every $1 of short-term debt there is $0.75 of quick assets to meet short-term obligations. 
C) for every $1 of current assets there is $0.75 of short-term debt. 
D) Both A and B are correct.

Question 9

The acid test ratio is usually higher than the current ratio.

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

For trend analysis to work correctly, the accountant uses the:

Accepted Answer

A) beginning percentage. 
B) base year. 
C) common-size statement. 
D) horizontal analysis.

Question 12

The net income for the year ended was $300,000. Equity for common stockholders' at the end of the year was $1,600,000 and $1,400,000 at the beginning of the year. The return on common stockholders' equity would be:

Accepted Answer

A) 87.50%. 
B) 21.43%. 
C) 20.00%. 
D) 18.75%.

Question 13

The ratio that measures the productivity of total assets used is the:

Accepted Answer

A) rate of return on total assets. 
B) return on sales. 
C) Inventory turnover. 
D) rate of return on common stockholders' equity.

Question 14

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.
-

Accepted Answer

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

Question 15

If the average collection period is 35 days, this means:

Accepted Answer

A) from the date of purchase to the date of payment is 35 days. 
B) from the date of sale to the date of receipt of payment is 35 days. 
C) from the date of discount to the date of receipt of payment is 35 days. 
D) None of these answers are correct.

Question 16

A company has $56,000 in cash, $12,000 in accounts receivable, $25,000 in temporary investments and $100,000 in merchandise inventory. The company has $60,000 in current liabilities. The company's acid test (quick)ratio is:

Accepted Answer

A) 3.217. 
B) 1.550. 
C) 1.133. 
D) 0.933.

Question 17

A statement comparing data from two or more consecutive periods is called a:

Accepted Answer

A) comparative balance sheet. 
B) comparative income statement. 
C) common-size statement. 
D) both A and B.

Question 18

The acid test ratio is the best test to determine the ability to pay short-term debt.

Accepted Answer

A) True 
 B)False

Question 19

Rick's Cars had a beginning account receivables balance of $325,000. The ending account receivables balance was $300,000. Net credit sales for the company were $4,200,000. The accounts receivable turnover for Rick's Cars is:

Accepted Answer

A) 12.92. 
B) 14. 
C) 13.44. 
D) None of the above are correct.

Question 20

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.

Exam 22: Analyzing Financial Statements

Chuck Company has a beginning Accounts Receivable balance of $65,000 and an ending balance of $60,000. Net credit sales are $250,000. The company's accounts receivable turnover ratio is:

The ratio that indicates how much profit is generated from each sales dollar to cover general and selling expenses is:

If current assets were $90,000, merchandise inventory was $60,000, and current liabilities were $15,000, the acid test ratio is:

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. -

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%.

The income before taxes and interest expense of Barry Builders for the year just ended is $230,000. Their interest expense is $20,000 and their income taxes are $80,500. The number of times interest would be earned is:

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. -

An acid test (quick) ratio of 0.75 to 1 would indicate:

The acid test ratio is usually higher than the current ratio.

Profitability ratios measure:

For trend analysis to work correctly, the accountant uses the:

The net income for the year ended was $300,000. Equity for common stockholders' at the end of the year was $1,600,000 and $1,400,000 at the beginning of the year. The return on common stockholders' equity would be:

The ratio that measures the productivity of total assets used is 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. -

If the average collection period is 35 days, this means:

A company has $56,000 in cash, $12,000 in accounts receivable, $25,000 in temporary investments and $100,000 in merchandise inventory. The company has $60,000 in current liabilities. The company's acid test (quick) ratio is:

A statement comparing data from two or more consecutive periods is called a:

The acid test ratio is the best test to determine the ability to pay short-term debt.

Rick's Cars had a beginning account receivables balance of $325,000. The ending account receivables balance was $300,000. Net credit sales for the company were $4,200,000. The accounts receivable turnover for Rick's Cars is:

Debt management ratios measure: