Question 1

Becky's Bovine Specials has a net income of $345,operating income of $305,sales of $678,and total assets of $245.Which of the following is the net profit margin for her business?
A) 0.361
B) 0.450
C) 0.508
D) 0.884

Accepted Answer

The answer of Becky's Bovine Specials has a net income...

Question 2

Which of the following ratios shows effective management and the firm's effectiveness in generating profits from the available assets?
A) Times interest earned
B) Net profit margin
C) Return on assets
D) Return on equity

Accepted Answer

Return on assets (ROA) measures how effectively a company uses its assets to generate profits, indicating management efficiency.

Question 3

Which of the following ratios shows how far operating income can decline before the firm will have difficulties servicing its debt obligation?
A) Fixed asset turnover
B) Total asset turnover
C) Debt ratio
D) Times interest earned ratio

Accepted Answer

The Times Interest Earned (TIE) ratio measures a company's ability to meet its debt obligations based on its current operating income. It indicates how many times the operating income can cover the interest expenses, thus showing how far operating income can decline before the firm struggles to service its debt.

Question 4

Ally's Allied Apples has net profit after taxes of $30,total assets of $989,sales of $979,owner's equity of $990,and interest expense of $56.Which of the following is the return on equity for this business?
A) 0.030
B) 0.057
C) 0.989
D) 1.87

Accepted Answer

Return on Equity (ROE) is calculated as Net Income divided by Shareholder's Equity. Here, ROE = $30 / $990 = 0.030.

Question 5

Larry's Lab has sales of $35,750,net fixed assets of $14,500,current assets of $12,300,and cost of goods sold of $30,000.Which of the following is the fixed asset turnover ratio for the business?
A) 1.18 times
B) 1.19 times
C) 2.47 times
D) 2.91 times

Accepted Answer

Fixed Asset Turnover = Sales / Net Fixed Assets
= $35,750 / $14,500
= 2.47 times

Question 6

Each business day,12 small businesses in the United States declare bankruptcy primarily for which of the following?
A) Lack of sales
B) Inexperienced management
C) Poor cash-flow management
D) Increasing expenses

Accepted Answer

Poor cash-flow management is a common reason for small businesses declaring bankruptcy, as it directly affects their ability to meet financial obligations.

Question 7

Which of the following ratios measures the extent to which a firm uses debt as a source of financing and its ability to service that debt?
A) Liquidity ratios
B) Activity ratios
C) Leverage ratios
D) Profitability ratios

Accepted Answer

Leverage ratios measure the extent to which a firm uses debt in its capital structure and its ability to meet financial obligations.

Question 8

Tracking and forecasting ____ is often more critical to the survival of a business than is profit.
A) Sales
B) Revenues
C) Expenses
D) Cash flows

Accepted Answer

Cash flows are crucial for a business's survival because they ensure that the company can meet its immediate financial obligations, such as paying suppliers and employees, regardless of profitability.

Question 9

Which of the following ratios measures the return the firm earned on its owner's investment in the firm?
A) Times interest earned
B) Net profit margin
C) Return on assets
D) Return on equity

Accepted Answer

Return on equity (ROE) measures the return a firm earns on its owner's investment by comparing net income to shareholders' equity.

Question 10

Shelli's Ski Super has sales of $670,net fixed assets of $210,total assets of $305,and current assets of $25.Which of the following is the total asset turnover ratio for the business?
A) 0.46 times
B) 2.2 times
C) 3.19 times
D) 26.8 times

Accepted Answer

The total asset turnover ratio is calculated by dividing sales by total assets. In this case, it is $670 / $305 = 2.2 times.

Question 11

Which of the following ratios is widely used as an indication of management efficiency and measures the percentage of each sales dollar that remains as profit after all expenses have been paid.
A) Times interest earned
B) Net profit margin
C) Return on assets
D) Return on equity

Accepted Answer

Net profit margin measures the percentage of each sales dollar that remains as profit after all expenses have been paid, making it an indicator of management efficiency.

Question 12

High average collection periods usually indicate
A) Sales that are increasing
B) Accounts receivable that are all being collected
C) Many uncollected accounts receivable
D) Overly restrictive credit policies

Accepted Answer

A high average collection period indicates that it takes longer for a company to collect its accounts receivable, suggesting that there are many uncollected accounts.

Question 13

Sandi's Silver Service has operating income of $545,sales of $750,expenses of $245,and interest expense of $198.Which of the following is the times interest earned ratio for the business?
A) 2.22
B) 2.75
C) 4.49
D) 72.6

Accepted Answer

The answer of Sandi's Silver Service has operating income of...

Question 14

Kim's Kar Kare Service has total debt of $690,total assets of $1,260,interest expense of $140,and sales of $400.Which of the following is the debt ratio for the business?
A) 11.1 percent
B) 31.7 percent
C) 54.8 percent
D) 58 percent

Accepted Answer

Debt Ratio = Total Debt / Total Assets
Debt Ratio = $690 / $1,260
Debt Ratio = 0.548 or 54.8%

Question 15

A low fixed asset turnover ratio often indicates that
A) The firm is efficiently using its current assets.
B) The firm is efficiently using its total assets.
C) The firm is keeping expenses low.
D) Marketing efforts are ineffective.

Accepted Answer

A low fixed asset turnover ratio suggests that the firm is not generating sufficient sales relative to its fixed assets, which could imply ineffective marketing efforts leading to lower sales.

Question 16

Which of the following ratios measures how efficiently the firm uses all of its assets to generate sales?
A) Fixed asset turnover
B) Total asset turnover
C) Debt ratio
D) Times interest earned ratio

Accepted Answer

Total asset turnover measures how efficiently the firm uses all of its assets to generate sales.

Question 17

Sally's Shoe Service has accounts receivables of $35,335,average sales per day of $500,000,and a cost of goods sold of $45,000.What is her average collection period?
A) 7.0 days
B) 7.8 days
C) 14.15 days
D) 25.79 days

Accepted Answer

The answer of Sally's Shoe Service has accounts receivables of...

Question 18

Which of the following ratios measures how efficiently the firm is using its assets to generate sales?
A) Current ratio
B) Total asset turnover ratio
C) Fixed asset turnover
D) Debt ratio

Accepted Answer

The answer of Which of the following ratios measures how...

Question 19

Which of the following ratios measures the proportion of a firm's total assets that have been acquired with borrowed funds?
A) Fixed asset turnover
B) Total asset turnover
C) Debt ratio
D) Times interest earned ratio

Accepted Answer

The debt ratio measures the proportion of a firm's total assets that have been financed with borrowed funds, indicating the level of financial leverage.

Question 20

Danny's Dog Delivery has total assets of $975,sales of $989,net profit after taxes of $56,and operating income of $576.Which of the following is the return on assets ratio for this business?
A) 0.057
B) 0.591
C) 0.986
D) 1.01

Accepted Answer

The return on assets (ROA) ratio is calculated by dividing net profit after taxes by total assets. For Danny's Dog Delivery, this is $56 / $975 = 0.057 or 5.7%.

Quiz 8: Accounting Records and Financial Statements

Becky's Bovine Specials has a net income of $345,operating income of $305,sales of $678,and total assets of $245.Which of the following is the net profit margin for her business?

Which of the following ratios shows effective management and the firm's effectiveness in generating profits from the available assets?

Which of the following ratios shows how far operating income can decline before the firm will have difficulties servicing its debt obligation?

Ally's Allied Apples has net profit after taxes of $30,total assets of $989,sales of $979,owner's equity of $990,and interest expense of $56.Which of the following is the return on equity for this business?

Larry's Lab has sales of $35,750,net fixed assets of $14,500,current assets of $12,300,and cost of goods sold of $30,000.Which of the following is the fixed asset turnover ratio for the business?

Each business day,12 small businesses in the United States declare bankruptcy primarily for which of the following?

Which of the following ratios measures the extent to which a firm uses debt as a source of financing and its ability to service that debt?

Tracking and forecasting ____ is often more critical to the survival of a business than is profit.

Which of the following ratios measures the return the firm earned on its owner's investment in the firm?

Shelli's Ski Super has sales of $670,net fixed assets of $210,total assets of $305,and current assets of $25.Which of the following is the total asset turnover ratio for the business?

Which of the following ratios is widely used as an indication of management efficiency and measures the percentage of each sales dollar that remains as profit after all expenses have been paid.

High average collection periods usually indicate

Sandi's Silver Service has operating income of $545,sales of $750,expenses of $245,and interest expense of $198.Which of the following is the times interest earned ratio for the business?

Kim's Kar Kare Service has total debt of $690,total assets of $1,260,interest expense of $140,and sales of $400.Which of the following is the debt ratio for the business?

A low fixed asset turnover ratio often indicates that

Which of the following ratios measures how efficiently the firm uses all of its assets to generate sales?

Sally's Shoe Service has accounts receivables of $35,335,average sales per day of $500,000,and a cost of goods sold of $45,000.What is her average collection period?

Which of the following ratios measures how efficiently the firm is using its assets to generate sales?

Which of the following ratios measures the proportion of a firm's total assets that have been acquired with borrowed funds?

Danny's Dog Delivery has total assets of $975,sales of $989,net profit after taxes of $56,and operating income of $576.Which of the following is the return on assets ratio for this business?