Question 1

Cottle Company has total assets of $180,000 and total liabilities of $54,000.The company's debt-to-equity ratio is closest to
A).32.
B)2.3.
C).30.
D).43.

Accepted Answer

The answer of Cottle Company has total assets of $180,000...

Question 2

Figure 16-1. Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2011.The weighted average number of shares outstanding in 2011 was 50,000 shares.Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange.
Refer to Figure 16-1.Starbuck's dividend payout ratio for 2011 is
A)$5 per share.
B)0.25.
C)0.20.
D)0.125.

Accepted Answer

Dividend Payout Ratio = Dividends Paid / Net Income

Dividends Paid = $50,000
Net Income = $250,000

Dividend Payout Ratio = $50,000 / $250,000 = 0.2 or 20%

Question 3

A company has an average inventory on hand of $100,000 and the days in inventory are 73 days.What is the cost of goods sold?
A)$500,000
B)$7,300,000
C)$1,000,000
D)$3,650,000

Accepted Answer

Supporting calculations:
365 / 73 = 5
5 × $100,000 = $500,000

Question 4

Opis Company has total assets of $475,000 and total liabilities of $130,000.The company's debt-to-equity ratio is closest to
A).32.
B).21.
C).38.
D).27.

Accepted Answer

Debt-to-equity ratio = total liabilities/total equity
Total equity = total assets - total liabilities
Total equity = $475,000 - $130,000
Total equity = $345,000
Debt-to-equity ratio = $130,000/$345,000
Debt-to-equity ratio = 0.3768
Closest answer choice: C) 38.

Question 5

Presented below are selected data from the financial statements of Korn Corp.for 2012 and 2011.  The price-earnings ratio for 2012 is
A)1.09.
B)5.46.
C)6.0.
D)11.0.

Accepted Answer

The answer of Presented below are selected data from the...

Question 6

The following information pertains to Barkley Company.:  The inventory turnover ratio for the year was
A)10.
B)5.
C)4.
D)3.6.

Accepted Answer

Inventory turnover ratio = Cost of goods sold / Average inventory
We do not have the cost of goods sold, but we are given that the company had a gross profit margin of 40%. This means that cost of goods sold was 60% of sales. Therefore, we can estimate the cost of goods sold as:
Cost of goods sold = 60% x $400,000 = $240,000
We are also given that the average inventory for the year was $60,000.
Inventory turnover ratio = $240,000 / $60,000 = 4

Question 7

The current assets of Caitlin Company are $360,000.The current liabilities are $240,000.The current ratio is
A)1.25.
B)1.50.
C).67.
D)cannot be determined from the information provided.

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. So, the current ratio for Caitlin Company is:

Current ratio = Current assets ÷ Current liabilities
= $360,000 ÷ $240,000
= 1.5

Therefore, the best choice is B, which corresponds to a current ratio of 1.50.

Question 8

Goslier Company's net income last year was $130,000.The company paid preferred dividends of $42,000 and its average common stockholders' equity was $610,000.The company's return on common stockholders' equity for the year was closest to
A)15.8%.
B)28.1%.
C)21.3%.
D)14.4%.

Accepted Answer

The return on common stockholders' equity is calculated by subtracting preferred dividends from net income and then dividing by average common stockholders' equity. So, ($130,000 - $42,000) / $610,000 = $88,000 / $610,000 = 0.144 or 14.4%.

Question 9

Figure 16-1. Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2011.The weighted average number of shares outstanding in 2011 was 50,000 shares.Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange.
Refer to Figure 16-1.Starbuck's price-earnings ratio is
A)2.
B)5.
C)10.
D)8.

Accepted Answer

The answer of Figure 16-1. Starbuck Corporation had net income...

Question 10

Presented below are selected data from the financial statements of Russell Corp.for 2012 and 2011.  Earnings per share is reported on the 2012 income statement as
A)$ .44.
B)$ .55.
C)$ .84.
D)$ .95.

Accepted Answer

The earnings per share can be calculated by dividing the net income available to common shareholders by the weighted average number of common shares outstanding. From the information provided in the financial statements, we can see that the net income available to common shareholders for 2012 was $61,214,000 and the weighted average number of common shares outstanding was 72,909,000. Dividing the net income by the weighted average number of common shares, we get an earnings per share of $0.84. Therefore, the correct answer is (C) $0.84.

Question 11

Which one of the following would be considered a leverage ratio?
A)accounts receivable turnover
B)return on total assets
C)quick ratio
D)debt ratio

Accepted Answer

Debt ratio measures the amount of debt a company has in relation to its assets and is therefore a leverage ratio. Accounts receivable turnover, return on total assets, and quick ratio are all liquidity ratios.

Question 12

If a company has an acid-test ratio of 1.2,what respective effects will the borrowing of cash by short-term debt and the collection of accounts receivable have on the ratio? Short-term Collection of
Borrowing Receivable
A)Increase No effect
B)Increase Increase
C)Decrease No effect
D)Decrease Decrease

Accepted Answer

If a company has an acid-test ratio of 1.2, it means that for every $1 of current liabilities, the company has $1.20 of current assets that can be converted to cash quickly. Borrowing cash by short-term debt will increase the current liabilities, which will decrease the acid-test ratio. On the other hand, collecting accounts receivable will increase the cash available in the current assets, but it will not affect the current liabilities. Therefore, the collection of accounts receivable will have no effect on the acid-test ratio. As a result, the best choice is C - Decrease (due to the borrowing of cash by short-term debt), No effect (due to the collection of accounts receivable).

Question 13

Last year Fuller Company had a net income of $410,000,income tax expense of $50,000,and interest expense of $34,000.The company's times-interest-earned ratio was closest to
A)12.06.
B)9.88.
C)14.53.
D)13.53.

Accepted Answer

The answer of Last year Fuller Company had a net...

Question 14

Grant Company reported the following on its income statement:  An analysis of the income statement revealed that interest expense was $60,000.Grant Company's times-interest-earned ratio was
A)8.
B)7.
C)6.
D)5.

Accepted Answer

The answer of Grant Company reported the following on its...

Question 15

A company has a receivables turnover of 15 times.The average net receivables during the period are $430,000.What is the amount of net credit sales for the period?
A)$430,000
B)$6,450,000
C)$6,000,000
D)$500,000

Accepted Answer

Receivables Turnover = Net Credit Sales / Average Net Receivables
15 = Net Credit Sales / $430,000
Net Credit Sales = 15 x $430,000
Net Credit Sales = $6,450,000

Question 16

Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year.The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000,respectively.The accounts receivables turnover was
A)7.4 times.
B)8.7 times.
C)6.2 times.
D)8 times.

Accepted Answer

The answer of Parr Hardware Store had net credit sales...

Question 17

Last year Neil Company had a net income of $170,000,income tax expense of $37,000,and interest expense of $24,000.The company's times-interest-earned ratio was closest to
A)8.63.
B)7.08.
C)9.63.
D)6.24.

Accepted Answer

First, we need to calculate the times-interest-earned ratio using the formula:

Times-Interest-Earned Ratio = (Net Income + Interest Expense + Income Tax Expense) / Interest Expense

Plugging in the given values, we get:

Times-Interest-Earned Ratio = (170,000 + 24,000 + 37,000) / 24,000
= 231,000 / 24,000
= 9.625

Rounding to two decimal places, we get a times-interest-earned ratio of 9.63. Therefore, the closest answer choice is C (9.63).

Question 18

A liquidity ratio measures the
A)income or operating success of an enterprise over a period of time.
B)ability of the enterprise to survive over a long period of time.
C)short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash.
D)number of times interest is earned.

Accepted Answer

A liquidity ratio measures the short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash.

Question 19

Holt Company reported the following on its income statement:  An analysis of the income statement revealed that interest expense was $52,500.Holt Company's times-interest-earned ratio was
A)9.
B)8.
C)7.
D)6.

Accepted Answer

The answer of Holt Company reported the following on its...

Question 20

Presented below are selected data from the financial statements of DeBruce Corp.for 2012 and 2011.  The dividend payout ratio for 2012 is
A)0.382.
B)0.05.
C)0.28.
D)0.50.

Accepted Answer

The answer of Presented below are selected data from the...

Quiz 16: Financial Statement Analysis

Cottle Company has total assets of $180,000 and total liabilities of $54,000.The company's debt-to-equity ratio is closest to

A company has an average inventory on hand of $100,000 and the days in inventory are 73 days.What is the cost of goods sold?

Opis Company has total assets of $475,000 and total liabilities of $130,000.The company's debt-to-equity ratio is closest to

Presented below are selected data from the financial statements of Korn Corp.for 2012 and 2011. The price-earnings ratio for 2012 is

The following information pertains to Barkley Company.: The inventory turnover ratio for the year was

The current assets of Caitlin Company are $360,000.The current liabilities are $240,000.The current ratio is

Goslier Company's net income last year was $130,000.The company paid preferred dividends of $42,000 and its average common stockholders' equity was $610,000.The company's return on common stockholders' equity for the year was closest to

Presented below are selected data from the financial statements of Russell Corp.for 2012 and 2011. Earnings per share is reported on the 2012 income statement as

Which one of the following would be considered a leverage ratio?

If a company has an acid-test ratio of 1.2,what respective effects will the borrowing of cash by short-term debt and the collection of accounts receivable have on the ratio? Short-term Collection of Borrowing Receivable

Last year Fuller Company had a net income of $410,000,income tax expense of $50,000,and interest expense of $34,000.The company's times-interest-earned ratio was closest to

Grant Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $60,000.Grant Company's times-interest-earned ratio was

A company has a receivables turnover of 15 times.The average net receivables during the period are $430,000.What is the amount of net credit sales for the period?

Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year.The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000,respectively.The accounts receivables turnover was

Last year Neil Company had a net income of $170,000,income tax expense of $37,000,and interest expense of $24,000.The company's times-interest-earned ratio was closest to

A liquidity ratio measures the

Holt Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $52,500.Holt Company's times-interest-earned ratio was

Presented below are selected data from the financial statements of DeBruce Corp.for 2012 and 2011. The dividend payout ratio for 2012 is