Question 1

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures.   What is the profit margin for this corporation? Round your answer to one decimal place.
A)22.5 percent
B)30.0 percent
C)40.0 percent
D)53.3 percent

Accepted Answer

The answer of Following are the financial statements for Flynn...

Question 2

Days' payable is a measure of
A)liquidity.
B)volatility.
C)long-term solvency.
D)profitability.

Accepted Answer

Days' payable is a measure of liquidity, which indicates the number of days a company takes to pay its suppliers. It helps in assessing how efficiently a company is managing its short-term resources to meet its obligations.

Question 3

Which of the following describes the return on assets ratio?
A)Average total assets divided by sales
B)Net sales divided by net income
C)Net income divided by average total assets
D)Average total assets divided by net income

Accepted Answer

Return on assets (ROA) ratio is calculated by dividing net income of a company for a certain period by the average total assets during that same period. ROA indicates how efficiently a company uses its assets to generate profit.

Question 4

A quick ratio that is about equal to the current ratio indicates that
A)inventories represent a large portion of current assets.
B)the company has a low inventory turnover.
C)inventories represent a small portion of current assets.
D)the company has a high inventory turnover.

Accepted Answer

A quick ratio that is about equal to the current ratio indicates that inventories represent a small portion of current assets. This is because the quick ratio excludes inventory from current assets, and if the quick ratio is similar to the current ratio, it means that the exclusion of inventory has not significantly affected the ratio. This suggests that the company is not heavily reliant on inventory to meet its current obligations.

Question 5

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures.   What is the return on assets for this corporation? Round your answer to one decimal place.
A)37.5 percent
B)26.7 percent
C)20.0 percent
D)15.0 percent

Accepted Answer

The answer of Following are the financial statements for Flynn...

Question 6

Which of the following best describes the payables turnover?
A)Cost of goods sold/Average accounts payable
B)Cost of goods sold +/-Change in inventory/Average accounts payable
C)Average accounts payable/Cost of goods sold
D)Average accounts payable/Cost of goods sold +/- Change in inventory

Accepted Answer

The answer of Which of the following best describes the...

Question 7

A company with a current ratio of 2.4 times will see that ratio decrease when the company
A)pays a large current liability.
B)declares a 10 percent stock dividend on its common stock.
C)borrows cash by issuing a short-term note payable.
D)converts a short-term liability to a long-term liability.

Accepted Answer

Borrowing cash by issuing a short-term note payable increases current liabilities without a corresponding increase in current assets, thus decreasing the current ratio.

Question 8

The number of days' spayable uncollected is determined by dividing
A)the number of days in a year by the payables turnover.
B)the number of days in a year by average accounts payable.
C)cost of goods sold by average accounts payable.
D)inventory by average accounts payable.

Accepted Answer

The number of days' payable uncollected is determined by dividing the number of days in a year by the payables turnover. This metric helps businesses understand how long, on average, they take to pay their suppliers.

Question 9

During the year,Dempsey Corporation's current ratio increased while its quick ratio decreased.Which of the following could help explain this situation?
A)A decrease in accounts receivable during the year
B)An increase in accounts payable during the year
C)The sale of short-term investments during the year
D)An increase in inventory levels during the year

Accepted Answer

A current ratio is a measure of a company's ability to pay its current liabilities with its current assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates a better ability to pay off short-term obligations.

A quick ratio is a more stringent measure that excludes inventory from current assets. It is calculated by subtracting inventory from current assets and then dividing by current liabilities. A higher quick ratio indicates a better ability to pay off short-term obligations without relying on inventory.

If a company's current ratio increases but its quick ratio decreases, it suggests that inventory levels have increased significantly. In this case, the best choice is D – an increase in inventory levels during the year. An increase in inventory levels would cause the denominator in the quick ratio calculation to be larger, reducing the ratio. However, the increase in inventory would also increase the numerator in the current ratio calculation, causing that ratio to increase.

Choices A and C would increase the quick ratio, as would any other factors that reduce both inventory and accounts receivable. Choice B would have no effect on either ratio, as an increase in accounts payable would increase current liabilities and current assets by an equal amount.

Question 10

Which of the following describes the profit margin ratio?
A)Average total assets divided by net income
B)Net income plus income tax expense divided by average total assets
C)Average total assets divided by net revenue
D)Net income divided by net revenue

Accepted Answer

The profit margin ratio is a measure of a company's profitability and is calculated by dividing net income by net revenue (also known as total sales). Option D is the only choice that matches this definition.

Question 11

Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before this transaction,the entry to record the payment of a previously declared and recorded cash dividend will
A)increase the current ratio and the quick ratio.
B)decrease the current ratio and the quick ratio.
C)increase the current ratio but have no effect on the quick ratio.
D)have no effect on the current ratio or the quick ratio.

Accepted Answer

The answer of Assuming that the current ratio was 1.6...

Question 12

Days' inventory on hand is used to analyze
A)cash flow adequacy.
B)operating asset management.
C)profitability.
D)long-term solvency.

Accepted Answer

Days' inventory on hand is a ratio that measures how many days it takes a company to sell its inventory. It is used to analyze operating asset management, which is how efficiently a company is using its assets to generate revenue. It can help a company identify areas where it can improve inventory management in order to increase profitability and cash flow.

Question 13

How would the collection of an account receivable affect the current ratio and the quick ratio,respectively?
A)No effect on current ratio; increase in quick ratio
B)Increase in current ratio; increase in quick ratio
C)No effect on current ratio; no effect on quick ratio
D)Decrease in current ratio; decrease in quick ratio

Accepted Answer

The answer of How would the collection of an account...

Question 14

Holiday Corporation provided these figures for the year ended December 31,20x5: Cost of goods sold,$516,117; change in inventory,$67,483 decrease; average accounts payable,$58,209.
What is the company's payables turnover? Round your answer to one decimal place.
A)8.3 times
B)7.7 times
C)10.1 times
D)7.2 times

Accepted Answer

Payables turnover = Cost of goods sold / Average accounts payable

Payables turnover = $516,117 / $58,209

Payables turnover = 8.86

Rounding to one decimal place, the payables turnover is 7.7 times. Therefore, the best choice is B.

Question 15

A change from FIFO to LIFO in a period of rising prices will
A)decrease both the current ratio and the inventory turnover ratio.
B)increase both the current ratio and the inventory turnover ratio.
C)increase the current ratio and decrease the inventory turnover ratio.
D)decrease the current ratio and increase the inventory turnover ratio.

Accepted Answer

In a period of rising prices, switching from FIFO (First In, First Out) to LIFO (Last In, First Out) accounting for inventory will generally result in lower ending inventory values on the balance sheet because the cost of goods sold (COGS) will be higher with LIFO (as it assumes the latest, and thus more expensive, inventory items are sold first). This leads to a decrease in the current ratio (current assets/current liabilities) because inventory is a component of current assets. Meanwhile, the inventory turnover ratio (COGS/average inventory) will increase because the denominator (average inventory) decreases while COGS increases, indicating a faster turnover of inventory.

Question 16

Which of the following describes the interest coverage ratio?
A)Income before income taxes plus interest expense divided by interest expense
B)Income after income taxes plus interest expense divided by interest expense
C)Income after income taxes divided by interest expense
D)Income before income taxes minus interest expense divided by interest expense

Accepted Answer

The interest coverage ratio is calculated as income before income taxes plus interest expense divided by interest expense. This measures a company's ability to make interest payments on its debt.

Question 17

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures.   What is the inventory turnover for this corporation? Round your answer to one decimal place.
A)1.2 times
B)1.6 times
C)2.4 times
D)4.0 times

Accepted Answer

The answer of Following are the financial statements for Flynn...

Question 18

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures.   What is the current ratio for this corporation? Round your answer to two decimal places.
A)0.66 times
B)1.50 times
C)1.70 times
D)2.00 times

Accepted Answer

The answer of Following are the financial statements for Flynn...

Question 19

What is the effect of the payment of an account payable on the current ratio and the quick ratio,respectively? (Assume the current ratio was 2.3 times and the quick ratio was 2.1 times before this transaction.)
A)Decrease in current ratio; no effect on quick ratio
B)Increase in current ratio; increase in quick ratio
C)No effect on current ratio; no effect on quick ratio
D)Decrease in current ratio; decrease in quick ratio

Accepted Answer

The answer of What is the effect of the payment...

Question 20

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures.   What is the receivable turnover for this corporation? Round your answer to one decimal place.
A)4.0 times
B)3.0 times
C)2.4 times
D)0.9 times

Accepted Answer

The answer of Following are the financial statements for Flynn...

Quiz 16: Financial Statement Analysis

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures. What is the profit margin for this corporation? Round your answer to one decimal place.

Days' payable is a measure of

Which of the following describes the return on assets ratio?

A quick ratio that is about equal to the current ratio indicates that

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures. What is the return on assets for this corporation? Round your answer to one decimal place.

Which of the following best describes the payables turnover?

A company with a current ratio of 2.4 times will see that ratio decrease when the company

The number of days' spayable uncollected is determined by dividing

During the year,Dempsey Corporation's current ratio increased while its quick ratio decreased.Which of the following could help explain this situation?

Which of the following describes the profit margin ratio?

Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before this transaction,the entry to record the payment of a previously declared and recorded cash dividend will

Days' inventory on hand is used to analyze

How would the collection of an account receivable affect the current ratio and the quick ratio,respectively?

Holiday Corporation provided these figures for the year ended December 31,20x5: Cost of goods sold,$516,117; change in inventory,$67,483 decrease; average accounts payable,$58,209. What is the company's payables turnover? Round your answer to one decimal place.

A change from FIFO to LIFO in a period of rising prices will

Which of the following describes the interest coverage ratio?

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures. What is the inventory turnover for this corporation? Round your answer to one decimal place.

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures. What is the current ratio for this corporation? Round your answer to two decimal places.

What is the effect of the payment of an account payable on the current ratio and the quick ratio,respectively? (Assume the current ratio was 2.3 times and the quick ratio was 2.1 times before this transaction.)

Following are the financial statements for Flynn Corporation for the year ended December 31,20x5.Assume that all balance sheet amounts represent both average and ending figures. What is the receivable turnover for this corporation? Round your answer to one decimal place.