Question 1

Acme Incorporated has a debt ratio of .42,noncurrent liabilities of $20,000 and total assets of $70,000.What is Acme's level of current liabilities?

Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Given a debt ratio of .42 and total assets of $70,000, Acme's total liabilities are .42 * $70,000 = $29,400. Noncurrent liabilities are $20,000, so current liabilities are total liabilities minus noncurrent liabilities: $29,400 - $20,000 = $9,400.

Question 2

Apollo Corp.reported the following balance sheet:

Apollo Corp.'s debt ratio is

Accepted Answer

The answer of Apollo Corp.reported the following balance sheet:

Apollo Corp.'s...

Question 3

Please refer to Table 4-5 for the following questions.
Table 4-5
Yen Inc.
Balance Sheet
  
Yen Inc.
Income Statement
For the year ended December 31, 2010
 
-Based on the information contained in Tables 4-5,what was Yen's operating profit margin for 2010?

Accepted Answer

Operating profit margin is calculated as Operating Profit divided by Revenue, expressed as a percentage. If Table 4-5 shows Yen's Operating Profit for 2010 and its Revenue for the same year, you would calculate the margin by dividing the Operating Profit by the Revenue and then multiplying by 100 to get a percentage. The correct answer, 14.29%, suggests that this was the result of such a calculation based on the data provided in Tables 4-5.

Question 4

Which of the following ratios would be the poorest indicator of how rapidly the firm's credit accounts are being collected?

Accepted Answer

The times interest earned ratio measures a firm's ability to meet its interest payments on debt obligations. It is not directly related to the collection of credit accounts, so it would be the poorest indicator in this case. The average collection period, accounts receivable turnover ratio, and cash conversion cycle all provide insights into how rapidly credit accounts are being collected.

Question 5

Apollo Corp.reported the following balance sheet:

Apollo has sales of $600,000 and net income of $50,000.Apollo's return on equity is

Accepted Answer

Return on equity (ROE) = (Net income ÷ Shareholders' equity) x 100%
First, we need to calculate the shareholders' equity:
Shareholders' equity = Total assets - Total liabilities
Shareholders' equity = $700,000 - $400,000
Shareholders' equity = $300,000
Now, we can calculate the ROE:
ROE = ($50,000 ÷ $300,000) x 100%
ROE = 16.67%
The correct answer is not among the choices listed. However, the closest answer is C) 38.17%, which is obviously incorrect.

Question 6

Septon Inc.has an average collection period of 74 days.What is the accounts receivable turnover ratio for Septon Inc.?

Accepted Answer

The accounts receivable turnover ratio is calculated as 365 days divided by the average collection period. Therefore, 365 / 74 = 4.93.

Question 7

Standard Inc.has an annual interest expense of $40,000.If Standard's times-interest-earned ratio is 3.0,what is Standard's Earnings Before Taxes (EBT)?

Accepted Answer

To calculate the EBT, we need to use the formula:

EBT = Earnings Before Interest and Taxes (EBIT) - Interest Expense

We are given the interest expense as $40,000 and the times-interest-earned ratio as 3.0.

The times-interest-earned ratio is calculated as:

Times-Interest-Earned Ratio = EBIT / Interest Expense

Substituting the given values, we get:

3.0 = EBIT / 40,000

EBIT = 3.0 * 40,000 = $120,000

Now we can calculate the EBT:

EBT = EBIT - Interest Expense = $120,000 - $40,000 = $80,000

Therefore, the correct answer is B.

Question 8

Please refer to Table 4-4 for the following questions.
Table 4-4
Wes Donnell, Inc.
Balance Sheet
 
-In addition to the information contained in Table 4-4,you know that the current ratio for 2010 is 4 and that the corporation paid $11,600 in dividends in 2010.What is Wes Donnell's cash balance for 2010?

Accepted Answer

To calculate Wes Donnell's cash balance for 2010, we need to use the formula:
Cash = Current Assets - Non-Cash Current Assets
From the balance sheet, we can see that the current assets for 2010 are $76,000, and the non-cash current assets are $44,000. So,
Cash = $76,000 - $44,000 = $32,000
Next, we need to adjust for the dividend payment of $11,600. This reduces the cash balance to:
Cash = $32,000 - $11,600 = $20,400
Finally, we need to divide this by the current ratio of 4 to get the cash balance alone:
Cash = $20,400/4 = $5,100
So, the closest option to the calculated cash balance is C) $4,000.

Question 9

WRJ has a debt ratio of .4,current liabilities of $18,000,and total assets of $120,000.What is the level of WRJ's total liabilities?

Accepted Answer

We can use the formula:

Debt Ratio = Total Liabilities / Total Assets

0.4 = Total Liabilities / $120,000

Total Liabilities = 0.4 x $120,000 = $48,000

Therefore, the level of WRJ's total liabilities is $48,000.

Question 10

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

Accepted Answer

Accounts receivable turnover ratio is calculated as total credit sales divided by average accounts receivable. 
We can use this formula to find the average credit sales:
4.5 = Credit Sales / $100,000
Credit Sales = $450,000
To find the average daily credit sales, divide the total credit sales by the number of days in the year:
$450,000 / 365 = $1,232.88 
Therefore, the answer is B, $1,232.88.

Question 11

Please refer to Table 4-5 for the following questions.
Table 4-5
Yen Inc.
Balance Sheet
  
Yen Inc.
Income Statement
For the year ended December 31, 2010
 
-Based on the information contained in Tables 4-5,what was Yen's return on common equity for 2010?

Accepted Answer

The answer of Please refer to Table 4-5 for the...

Question 12

Which of the following does NOT provide an indication of liquidity?

Accepted Answer

Debt ratio provides an indication of solvency, not liquidity. Quick ratio, inventory turnover, and average collection period are all liquidity ratios.

Question 13

An inventory turnover ratio of 7.2 compared to an industry average of 5.1 is likely to indicate that

Accepted Answer

An inventory turnover ratio of 7.2 indicates that the firm is selling its products faster than the industry average, which means that products are in inventory for fewer days before they are sold. This can be attributed to efficient inventory management and/or high demand for the firm's products. Therefore, option D is the correct answer. Options A and B may or may not be true, while option C is unlikely to be true given the high turnover ratio.

Question 14

High Inc.has an accounts receivable turnover ratio of 7.3.Low Company has an accounts receivable turnover ratio of 5.Assuming that High and Low have the same sales level,which of the following statements is correct?

Accepted Answer

The accounts receivable turnover ratio is calculated by dividing net credit sales by the average accounts receivable balance. Since the sales level is the same for both companies, the difference in their accounts receivable turnover ratios indicates a difference in their average collection periods. A higher turnover ratio indicates a shorter average collection period, so High's average collection period is less than Low's. The information provided does not allow us to determine the average accounts receivable balance for either company.

Question 15

Please refer to Table 4-5 for the following questions.
Table 4-5
Yen Inc.
Balance Sheet
  
Yen Inc.
Income Statement
For the year ended December 31, 2010
 
-Based on the information contained in Tables 4-5,what was Yen's quick ratio at the end of 2010?

Accepted Answer

Yen's quick ratio at the end of 2010 is calculated as (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities = (100 + 200 + 300) / 470 = 600 / 470 = 2.10.

Question 16

Please refer to Table 4-4 for the following questions.
Table 4-4
Wes Donnell, Inc.
Balance Sheet
 
-In addition to the information contained in Table 4-4,you know that the current ratio for 2010 is 4 and that the corporation paid $11,600 in dividends in 2010.What is Wes Donnell's total asset balance for 2010?

Accepted Answer

The current ratio is calculated as Current Assets / Current Liabilities. Given the current ratio is 4, and from Table 4-4 (not provided, but assuming typical financial analysis approach), if we know the current liabilities, we can calculate the current assets. However, without the specific values from Table 4-4, we directly cannot calculate the total assets. The payment of dividends does not directly affect the calculation of total assets from the given information. However, the correct answer is inferred based on the information that would typically be used to calculate total assets, considering the current ratio and any dividends paid would not directly allow us to calculate total assets without additional information such as current liabilities or equity. The choice is based on an understanding of financial ratios and their implications on financial statements.

Question 17

John Box Inc.has an annual interest expense of $30,000 and pays income tax equal to 40 percent of taxable income (EBT).John Box's times-interest-earned ratio is 4.2.What is John Box's net income?

Accepted Answer

The answer of John Box Inc.has an annual interest expense...

Question 18

Apollo Corp.reported the following balance sheet:

Apollo Corp.'s current ratio is

Accepted Answer

The answer of Apollo Corp.reported the following balance sheet:

Apollo Corp.'s...

Question 19

Please refer to Table 4-5 for the following questions.
Table 4-5
Yen Inc.
Balance Sheet
  
Yen Inc.
Income Statement
For the year ended December 31, 2010
 
-Based on the information contained in Tables 4-5,what was the total amount of Yen's common stock dividend for 2010?

Accepted Answer

The total amount of Yen's common stock dividend for 2010 can be calculated from the given data in Tables 4-5, which is not directly provided here. However, the correct answer is identified as $9,000, indicating that the necessary information to calculate or find this value is contained within those tables.

Question 20

WPM,Inc.has current assets of $8,000,000,current liabilities of $4,000,000,inventory of $1,320,000,and sales of $12,000,000.What is the acid test ratio?

Accepted Answer

The acid test ratio, also known as the quick ratio, measures a company's ability to pay off its current liabilities with its most liquid assets. It excludes inventory, as inventory may take time to sell and convert into cash.

The formula for the acid test ratio is:

(Assets - Inventory) / Current Liabilities

Plugging in the values given:

($8,000,000 - $1,320,000) / $4,000,000 = 1.67

Therefore, the acid test ratio for WPM, Inc. is 1.67.

Option B is the best choice as it is the correct answer based on the given information and calculation.

Quiz 4: Evaluating a Firms Financial Performance

Acme Incorporated has a debt ratio of .42,noncurrent liabilities of $20,000 and total assets of $70,000.What is Acme's level of current liabilities?

Apollo Corp.reported the following balance sheet: Apollo Corp.'s debt ratio is

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's operating profit margin for 2010?

Which of the following ratios would be the poorest indicator of how rapidly the firm's credit accounts are being collected?

Apollo Corp.reported the following balance sheet: Apollo has sales of $600,000 and net income of $50,000.Apollo's return on equity is

Septon Inc.has an average collection period of 74 days.What is the accounts receivable turnover ratio for Septon Inc.?

Standard Inc.has an annual interest expense of $40,000.If Standard's times-interest-earned ratio is 3.0,what is Standard's Earnings Before Taxes (EBT) ?

WRJ has a debt ratio of .4,current liabilities of $18,000,and total assets of $120,000.What is the level of WRJ's total liabilities?

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's return on common equity for 2010?

Which of the following does NOT provide an indication of liquidity?

An inventory turnover ratio of 7.2 compared to an industry average of 5.1 is likely to indicate that

High Inc.has an accounts receivable turnover ratio of 7.3.Low Company has an accounts receivable turnover ratio of 5.Assuming that High and Low have the same sales level,which of the following statements is correct?

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's quick ratio at the end of 2010?

John Box Inc.has an annual interest expense of $30,000 and pays income tax equal to 40 percent of taxable income (EBT) .John Box's times-interest-earned ratio is 4.2.What is John Box's net income?

Apollo Corp.reported the following balance sheet: Apollo Corp.'s current ratio is

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was the total amount of Yen's common stock dividend for 2010?

WPM,Inc.has current assets of $8,000,000,current liabilities of $4,000,000,inventory of $1,320,000,and sales of $12,000,000.What is the acid test ratio?