Question 1

The ratio that indicates the amount of assets that are financed by creditors is:

Accepted Answer

The debts to total assets ratio indicates the amount of assets that are financed by creditors, as it compares the total debts of a company to its total assets.

Question 2

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

Accepted Answer

The answer of The ratio that indicates how much profit...

Question 3

Ballard Inc. has net income before taxes of $3,280,000, total assets of $4,500,000, and net sales of $6,450,000. What is the return on sales?

Accepted Answer

Return on sales = Net income before taxes / Net sales= $3,280,000 / $6,450,000= 50.85%

Question 4

Compute the gross profit rate when sales are $600,000; net sales are $460,000 and gross profits are $120,000. (Round your answer to the nearest whole percent.)

Accepted Answer

Gross profit rate = Gross profit / Net sales= 120,000 / 460,000= 0.2608695652173913= 26.08695652173913%= 26% (rounded to the nearest whole percent)

Question 5

Which of the following ratios helps evaluate how well a company is earning profit for the common stockholders?

Accepted Answer

The rate of return on common stockholders' equity ratio specifically measures the profitability for common shareholders by showing how much profit a company generates with the money shareholders have invested. This is directly related to the earnings available to common stockholders.

Question 6

Relationship of two quantities or numbers, one divided by the other describes:

Accepted Answer

A ratio is defined as the relationship between two numbers or quantities, indicating how many times the first number contains the second or vice versa. This is typically represented by one number divided by the other.

Question 7

Net sales for Aaron Company are $679,000 and total assets are $422,000. What is the asset turnover ratio?

Accepted Answer

The asset turnover ratio is calculated by dividing net sales by total assets. So, $679,000 / $422,000 = 1.61 times.

Question 8

Saxon Corporation's beginning inventory was $15,000. The cost of goods sold was $410,000 for the year, with an ending inventory of $23,000. Inventory turnover for the year is: (Round your answer two decimal places.)

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventoryAverage inventory = (Beginning inventory + Ending inventory) / 2= ($15,000 + $23,000) / 2= $19,000Inventory turnover = $410,000 / $19,000= 21.58 times

Question 9

Debt to total assets is an example of what type of ratio?

Accepted Answer

Debt to total assets is a measure of a company's financial leverage, indicating the proportion of a company's assets that are financed through debt. It falls under the category of debt management ratios, which assess a firm's ability to manage its debt levels.

Question 10

The risk of creditors in relation to the risk taken by stockholders is measured by:

Accepted Answer

The debt to stockholders' equity ratio measures the proportion of a company's financing that comes from creditors and investors. A higher ratio indicates that creditors are taking on more risk compared to stockholders, as it means the company is using more debt relative to equity.

Question 11

Noble Company's accounts receivable turnover was 24.6 in Year 1 and 18.2 in Year 2. This change in accounts receivable turnover indicates:

Accepted Answer

A decrease in accounts receivable turnover (from 24.6 to 18.2) indicates that the company's customers are taking longer to pay their debts, hence paying slower. This ratio measures how quickly a company collects outstanding receivables, so a lower number suggests slower collection.

Question 12

Ballard Screens has net sales in the amount of $470,000, a cash amount of $246,000, and accounts receivables of $47,000. What is the asset turnover ratio? (Round your answer to two decimal places.)

Accepted Answer

The asset turnover ratio is calculated by dividing net sales by total assets. Here, total assets = cash + accounts receivables = $246,000 + $47,000 = $293,000. Thus, asset turnover ratio = $470,000 / $293,000 = 1.6041, rounded to 1.60 times.

Question 13

The current ratio and quick ratio are example of this type of ratio.

Accepted Answer

The current ratio and quick ratio are examples of liquidity ratios, which measure a company's ability to meet its short-term obligations with its short-term assets.

Question 14

Interest expense was $20,000, income tax expense $26,000, and net income after taxes is $44,000. The number of times interest was earned is: (Round your answer two decimal places.)

Accepted Answer

The number of times interest was earned, also known as the interest coverage ratio, is calculated by adding net income after taxes back to interest expense and income tax expense, then dividing by the interest expense. Calculation: ($44,000 + $20,000 + $26,000) / $20,000 = 4.50 times.

Question 15

Maynard Co. has income before taxes of $568,700 and an interest expense of $76,000. What is the times interest earned ratio? (Round your answer to two decimal places.)

Accepted Answer

The answer of Maynard Co. has income before taxes of...

Question 16

Which of the following ratios measures the earnings of a company on each sales dollar?

Accepted Answer

Return on sales (ROS) measures the earnings a company generates from its sales, indicating how efficiently a company is at generating profits from its sales.

Question 17

Asset management ratios measure:

Accepted Answer

Asset management ratios, also known as turnover ratios or efficiency ratios, specifically measure how effectively a company is using its assets to generate sales or revenue.

Question 18

The gross profit rate is an example of this type of ratio.

Accepted Answer

The gross profit rate, which is calculated by dividing gross profit by net sales, is an example of a profitability ratio. It measures how efficiently a company uses its resources to generate profit.

Question 19

Accounts receivable on January 1 was $38,000 and, at the end of the year it was $53,000. Net credit sales were $168,000. Accounts receivable turnover is: (Round your answer two decimal places.)

Accepted Answer

The accounts receivable turnover is calculated as Net Credit Sales / Average Accounts Receivable. Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2 = ($38,000 + $53,000) / 2 = $45,500. Therefore, Accounts Receivable Turnover = $168,000 / $45,500 = 3.69 times.

Question 20

The lower the times interest earned ratio, the more likely:

Accepted Answer

The times interest earned ratio measures a company's ability to meet its interest payments. A lower ratio indicates that the company has less earnings relative to its interest obligations, increasing the risk of defaulting on payments.

Quiz 22: Analyzing Financial Statements