Question 1

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below:
  
-Refer to the Sculley Corporation information above.Sculley's current ratio as of December 31,2014,is

Accepted Answer

Current Ratio = Current Assets / Current Liabilities
Current Ratio as of December 31, 2014 = 16,170 / 5,570 = 2.91 to 1. Therefore, the best choice is C.

Question 2

A measure of profitability analysis is

Accepted Answer

The dividend payout ratio is a measure of profitability analysis as it indicates the proportion of earnings a company pays to its shareholders in the form of dividends, reflecting its ability to generate profits and return value to shareholders.

Question 3

From the standpoint of the stockholders of a company,the ratio that measures the overall performance of a company would be calculated using which of the following?

Accepted Answer

The ratio that measures the overall performance of a company as viewed by the stockholders is the return on equity (ROE). This ratio is calculated by dividing net income by average stockholders' equity. Therefore, choice C, which uses average stockholders' equity and net income, is the best option.

Question 4

An entity changed from the FIFO to the LIFO cost flow assumption for inventories.Assuming that inventory and sales remain constant over time,and that prices are rising,how would the current ratio be changed as a result of converting from FIFO to LIFO?

Accepted Answer

When a company changes from FIFO to LIFO, the cost of goods sold increases and the value of ending inventory decreases, resulting in a lower current ratio. This is because under LIFO, the cost of the more recently acquired inventory is matched with sales, resulting in a higher cost of goods sold and lower ending inventory value. Lower inventory value means a lower current asset balance, resulting in a lower current ratio.

Question 5

How would the quick ratio be affected by a prepayment of $30,000 for fire and liability insurance?

Accepted Answer

The quick ratio would decrease because prepaying for insurance reduces cash or cash equivalents, which are part of the quick assets, without affecting current liabilities.

Question 6

During the year,The Core Company purchased $1,700,000 of inventory.The cost of goods sold for the year was $1,600,000 and the ending inventory at December 31 was $330,000.What was the inventory turnover for the year?

Accepted Answer

The answer of During the year,The Core Company purchased $1,700,000...

Question 7

Hermine Company wrote off an $700 uncollectible account receivable against the allowance for doubtful accounts with a balance of $2,000.The current ratio after the write-off of the uncollectible account

Accepted Answer

The current ratio, which compares current assets to current liabilities, remains unchanged by the write-off of an uncollectible account when using the allowance method. This is because the write-off reduces both accounts receivable and the allowance for doubtful accounts by equal amounts, leaving total current assets unchanged.

Question 8

Which of the following ratios does NOT measure liquidity?

Accepted Answer

Net cash flow to current liabilities measures a company's ability to meet its short-term debt obligations using its cash flow from operations, which is unrelated to liquidity. The other options measure liquidity, with the current ratio and quick ratio specifically measuring a company's ability to pay off its short-term liabilities using its current assets. Working capital to total assets measures the ability to fund operations using its total assets.

Question 9

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below:
  
-Refer to the Sculley Corporation information above.Sculley's account receivable turnover for 2014 is

Accepted Answer

The answer of Selected information from the 2014 and 2013...

Question 10

The calculation of the return on total assets ratio would use all of the following except

Accepted Answer

The return on total assets ratio is calculated using net income, total assets, or average total assets, and net sales, but it does not use average stockholders' equity, which is more relevant for calculating return on equity (ROE).

Question 11

The book value per share of common stock measures

Accepted Answer

The answer of The book value per share of common...

Question 12

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below:
  
-Refer to the Sculley Corporation information above.Sculley's quick (acid test)ratio as December 31,2014,is

Accepted Answer

Quick (acid test) ratio = (Cash + Marketable securities + Accounts receivable) / Current liabilities= (200 + 100 + 500) / 350= 800 / 350= 1.44 to 1

Question 13

An entity sells an equal dollar amount of convertible preferred stock and long-term notes payable.Prior to these transactions,total debt was less than total equity.How did the sale of the convertible preferred stock and the long-term notes payable affect the company's debt to total assets ratio?

Accepted Answer

The sale of long-term notes payable increases the company's total debt, while the sale of convertible preferred stock increases equity. Since the question specifies an equal dollar amount for both, the increase in total assets (due to both debt and equity increasing by the same amount) does not proportionally affect the ratio as much as the increase in debt does. Therefore, the debt to total assets ratio increases because the numerator (total debt) increases while the denominator (total assets) also increases, but the impact on the ratio is more significant due to the increase in debt.

Question 14

Which of the following ratios does NOT measure efficiency or activity of an entity?

Accepted Answer

Times interest earned ratio measures a company's ability to meet its debt obligations based on its current income, not its efficiency or activity.

Question 15

Which of the following ratios does NOT measure liquidity?

Accepted Answer

Debt to equity ratio does not measure liquidity, but rather financial leverage. The other ratios listed all measure a company's ability to meet short-term obligations with its current assets.

Question 16

What is the effect of the collection of accounts receivable on the current ratio and net working capital,respectively? Current Ratio Net Working Capital

Accepted Answer

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

Question 17

Which of the following is an appropriate computation for return on investment?

Accepted Answer

Return on investment (ROI) is measured as the net income earned on an investment relative to the amount of capital invested. Therefore, the appropriate computation for ROI is net income divided by total assets. Option B is the only one that calculates ROI in this manner. Option A calculates asset turnover, option C calculates profit margin, and option D calculates return on equity, which are all different financial ratios.

Question 18

Which of the following is true regarding the debt to equity ratio?

Accepted Answer

The debt to equity ratio measures the proportion of financing provided by debt versus equity and therefore measures the capital structure of the entity. It does not measure liquidity, productivity, or management's ability to employ resources.

Question 19

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below:
  
-Refer to the Sculley Corporation information above.Sculley's merchandise inventory turnover for 2014 is

Accepted Answer

Merchandise inventory turnover = Cost of goods sold / Average merchandise inventory
For 2014: Merchandise inventory turnover = 719,250 / ((109,500 + 116,000)/2) = 6.63. Therefore, the answer is C.

Question 20

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below:
  
-Refer to the Sculley Corporation information above.Sculley's turnover of assets and number of times interest earned for 2014 are respectively Asset Turnover Times Interest Earned

Accepted Answer

The answer of Selected information from the 2014 and 2013...

Quiz 23: Analysis of Financial Statements

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below: -Refer to the Sculley Corporation information above.Sculley's current ratio as of December 31,2014,is

A measure of profitability analysis is

From the standpoint of the stockholders of a company,the ratio that measures the overall performance of a company would be calculated using which of the following?

An entity changed from the FIFO to the LIFO cost flow assumption for inventories.Assuming that inventory and sales remain constant over time,and that prices are rising,how would the current ratio be changed as a result of converting from FIFO to LIFO?

How would the quick ratio be affected by a prepayment of $30,000 for fire and liability insurance?

During the year,The Core Company purchased $1,700,000 of inventory.The cost of goods sold for the year was $1,600,000 and the ending inventory at December 31 was $330,000.What was the inventory turnover for the year?

Hermine Company wrote off an $700 uncollectible account receivable against the allowance for doubtful accounts with a balance of $2,000.The current ratio after the write-off of the uncollectible account

Which of the following ratios does NOT measure liquidity?

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below: -Refer to the Sculley Corporation information above.Sculley's account receivable turnover for 2014 is

The calculation of the return on total assets ratio would use all of the following except

The book value per share of common stock measures

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below: -Refer to the Sculley Corporation information above.Sculley's quick (acid test) ratio as December 31,2014,is

An entity sells an equal dollar amount of convertible preferred stock and long-term notes payable.Prior to these transactions,total debt was less than total equity.How did the sale of the convertible preferred stock and the long-term notes payable affect the company's debt to total assets ratio?

Which of the following ratios does NOT measure efficiency or activity of an entity?

Which of the following ratios does NOT measure liquidity?

What is the effect of the collection of accounts receivable on the current ratio and net working capital,respectively? Current Ratio Net Working Capital

Which of the following is an appropriate computation for return on investment?

Which of the following is true regarding the debt to equity ratio?

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below: -Refer to the Sculley Corporation information above.Sculley's merchandise inventory turnover for 2014 is

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below: -Refer to the Sculley Corporation information above.Sculley's turnover of assets and number of times interest earned for 2014 are respectively Asset Turnover Times Interest Earned