Question 1

Which of the following is not a source of financial leverage?

Accepted Answer

A) Bonds payable. 
B) Accounts payable. 
C) Taxes payable. 
D) Prepaid rent.

Question 2

Garrott Corporation's total assets were $1,505,000 at the end of Year 2 and $1,520,000 at the end of Year 1.Its total stockholders' equity was $1,197,000 at the end of Year 2 and $1,180,000 at the end of Year 1.  The company's net profit margin percentage for Year 2 is closest to:

Accepted Answer

A) 1.9% 
B) 2.7% 
C) 3.3% 
D) 38.1%

Question 3

Sabino Corporation's total common stock was $500,000 at the end of both Year 2 and Year 1.The par value of common stock is $5 per share.The company's total stockholders' equity at the end of Year 2 amounted to $1,125,000 and at the end of Year 1 to $1,090,000.The company's total liabilities and stockholders' equity at the end of Year 2 amounted to $1,581,000 and at the end of Year 1 to $1,540,000.The company's retained earnings at the end of Year 2 amounted to $545,000 and at the end of Year 1 to $510,000.The company's net income in Year 2 was $39,000.The company's book value per share at the end of Year 2 is closest to:

Accepted Answer

A) $0.39 per share 
B) $15.81 per share 
C) $11.25 per share 
D) $5.45 per share

Question 4

Steinkraus Corporation has provided the following data:  Required:
Compute the accounts receivable turnover for this year.Show your work!

Accepted Answer

The answer of Steinkraus Corporation has provided the following data:...

Question 5

Younis Corporation's income statement appears below:  The company's net profit margin percentage is closest to:

Accepted Answer

A) 37.1% 
B) 3.5% 
C) 2.4% 
D) 1.7%

Question 6

Sapien Corporation has provided the following data for the most recent year:  The company's gross margin percentage is closest to:

Accepted Answer

A) 52.3% 
B) 1691.2% 
C) 5.9% 
D) 34.3%

Question 7

Excerpts from Sydner Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The acid-test ratio at the end of Year 2 is closest to:

Accepted Answer

A) 1.67 
B) 1.00 
C) 0.97 
D) 1.25

Question 8

Fongeallaz Corporation's income statement for Year 2 appears below:  The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:

Accepted Answer

A) 64.40% 
B) 8.93% 
C) 6.75% 
D) 4.72%

Question 9

Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of Year 1 was $120,000.Cost of goods sold amounted to $710,000 in Year 2.The company's inventory turnover for Year 2 is closest to:

Accepted Answer

A) 5.92 
B) 1.05 
C) 6.07 
D) 6.23

Question 10

Acquiring land by taking out a long-term mortgage will not affect the current ratio.

Accepted Answer

A) True 
 B)False

Question 11

Excerpts from Sydner Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The current ratio at the end of Year 2 is closest to:

Accepted Answer

A) 1.67 
B) 0.32 
C) 0.80 
D) 0.41

Question 12

Mahoe Corporation has provided the following financial data:   Dividends on common stock during Year 2 totaled $500.The market price of common stock at the end of Year 2 was $8.06 per share. The company's equity multiplier at the end of Year 2 is closest to:

Accepted Answer

A) 0.28 
B) 1.28 
C) 3.53 
D) 0.78

Question 13

Purchasing inventory on credit increases the book value per share of a retailer.

Accepted Answer

A) True 
 B)False

Question 14

If a company's return on assets is substantially lower than its cost of borrowing,then the common stockholders would normally want the company to have a relatively high debt/equity ratio.

Accepted Answer

A) True 
 B)False

Question 15

Mayfield Corporation has provided the following financial data:  The company's working capital is:

Accepted Answer

A) $671,000 
B) $665,000 
C) $418,000 
D) $983,000

Question 16

Data from Keniston Corporation's most recent balance sheet and income statement appear below:  The average collection period for this year is closest to:

Accepted Answer

A) 39.1 days 
B) 45.1 days 
C) 54.3 days 
D) 57.5 days

Question 17

Macmillan Corporation has provided the following financial data:   Dividends on common stock during Year 2 totaled $7,200.The market price of common stock at the end of Year 2 was $3.69 per share. The company's working capital at the end of Year 2 is:

Accepted Answer

A) $732,000 
B) $831,000 
C) $289,000 
D) $590,000

Question 18

Data from Dalpiaz Corporation's most recent balance sheet and income statement appear below:  Required:
Compute the average collection period for this year:

Accepted Answer

The answer of Data from Dalpiaz Corporation's most recent balance...

Question 19

Stimac Corporation has total cash of $210,000,no marketable securities,total current receivables of $281,000,total inventory of $151,000,total prepaid expenses of $53,000,total current assets of $695,000,total current liabilities of $261,000,total stockholders' equity of $1,014,000,total assets of $1,415,000,and total liabilities of $401,000.The company's acid-test (quick)ratio is closest to:

Accepted Answer

A) 2.08 
B) 1.73 
C) 2.66 
D) 1.88

Question 20

Wittels Corporation has provided the following data:  In Year 2,the company's net operating income was $42,571,its net income before taxes was $21,571,and its net income was $15,100.The company's equity multiplier is closest to:

Accepted Answer

A) 1.14 
B) 0.53 
C) 0.88 
D) 1.87

Exam 14: Capital Budgeting Decisions

Which of the following is not a source of financial leverage?

Garrott Corporation's total assets were $1,505,000 at the end of Year 2 and $1,520,000 at the end of Year 1.Its total stockholders' equity was $1,197,000 at the end of Year 2 and $1,180,000 at the end of Year 1. The company's net profit margin percentage for Year 2 is closest to:

Steinkraus Corporation has provided the following data: Required: Compute the accounts receivable turnover for this year.Show your work!

Younis Corporation's income statement appears below: The company's net profit margin percentage is closest to:

Sapien Corporation has provided the following data for the most recent year: The company's gross margin percentage is closest to:

Excerpts from Sydner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The acid-test ratio at the end of Year 2 is closest to:

Fongeallaz Corporation's income statement for Year 2 appears below: The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:

Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of Year 1 was $120,000.Cost of goods sold amounted to $710,000 in Year 2.The company's inventory turnover for Year 2 is closest to:

Acquiring land by taking out a long-term mortgage will not affect the current ratio.

Excerpts from Sydner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The current ratio at the end of Year 2 is closest to:

Mahoe Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $500.The market price of common stock at the end of Year 2 was $8.06 per share. The company's equity multiplier at the end of Year 2 is closest to:

Purchasing inventory on credit increases the book value per share of a retailer.

If a company's return on assets is substantially lower than its cost of borrowing,then the common stockholders would normally want the company to have a relatively high debt/equity ratio.

Mayfield Corporation has provided the following financial data: The company's working capital is:

Data from Keniston Corporation's most recent balance sheet and income statement appear below: The average collection period for this year is closest to:

Macmillan Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $7,200.The market price of common stock at the end of Year 2 was $3.69 per share. The company's working capital at the end of Year 2 is:

Data from Dalpiaz Corporation's most recent balance sheet and income statement appear below: Required: Compute the average collection period for this year:

Wittels Corporation has provided the following data: In Year 2,the company's net operating income was $42,571,its net income before taxes was $21,571,and its net income was $15,100.The company's equity multiplier is closest to: