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) 0.32.
B) 2.3.
C) 0.30.
D) 0.43.

Accepted Answer

.43 = 54,000 / 126,000
 
Assets -Liabilities = Equity
$180,000 - $54,000 = $126,000

Question 2

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 3

Lost Shoe Company, a retailer, had cost of goods sold of $220,000 last year. The beginning inventory balance was $30,000 and the ending inventory balance was $21,000. The company's inventory turnover ratio was closest to
A) 10.48.
B) 7.33.
C) 4.31.
D) 8.63.

Accepted Answer

The inventory turnover ratio is calculated as Cost of Goods Sold divided by Average Inventory. Average Inventory is calculated as (Beginning Inventory + Ending Inventory) / 2. So, Average Inventory = ($30,000 + $21,000) / 2 = $25,500. Inventory Turnover Ratio = $220,000 / $25,500 = 8.63.

Question 4

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

The acid-test ratio measures a company's ability to pay its current liabilities with its most liquid assets, excluding inventory. An acid-test ratio of 1.2 indicates that the company has $1.20 of liquid assets to cover every $1 of current liabilities.

If the company borrows cash by short-term debt, it will increase its current liabilities, which will decrease the acid-test ratio. On the other hand, if the company collects accounts receivable, it will increase its current assets, which will have no effect on the acid-test ratio since accounts receivable are already part of the current assets used in the calculation.

Therefore, the best choice is C) Decrease No effect, as borrowing cash will decrease the acid-test ratio while collecting accounts receivable will have no effect.

Question 5

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 is a leverage ratio which measures the proportion of a company's debt to its total assets. It indicates the extent to which a company's operations are funded by debt.

Question 6

Presented below are selected data from the financial statements of Russell Corp. for 2014 and 2013. $\begin{array}{lrr}&2014&2013\
\text { Net income } & \$ 100,000 & \$ 123,000 \
\text { Cash dividends paid on preferred stock } & \$ 12,000 & \$ 15,000 \
\text { Cash dividends paid on common stock } & \$ 42,000 & \$ 38,000 \
\text { Weighted average number of common shares outstanding } & \$ 105,000 & \$ 95,000
\end{array}$ Earnings per share is reported on the 2014 income statement as
A) $ 0.44.
B) $ 0.55.
C) $ 0.84.
D) $ 0.95.

Accepted Answer

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

Question 7

Jackson Company, a retailer, had cost of goods sold of $140,000 last year. The beginning inventory balance was $8,000 and the ending inventory balance was $11,000. The company's inventory turnover ratio was closest to
A) 12.73.
B) 14.73.
C) 7.37.
D) 17.50.

Accepted Answer

The answer of Jackson Company, a retailer, had cost of...

Question 8

Lisa's Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was $13,000 and the ending inventory balance was $18,000. The company's average inventory turnover in days was closest to
A) 36.50 days.
B) 26.36 days.
C) 31.43 days.
D) 62.86 days.

Accepted Answer

First, we need to calculate the inventory turnover ratio, which is COGS divided by average inventory.

COGS = $180,000 
Average inventory = (beginning inventory + ending inventory) / 2
= ($13,000 + $18,000) / 2 
= $15,500

Inventory turnover ratio = COGS / Average inventory 
= $180,000 / $15,500 
= 11.61

Next, we need to convert this to average inventory turnover in days.

Average inventory turnover in days = 365 days / inventory turnover ratio 
= 365 days / 11.61 
= 31.43 days (rounded to two decimal places)

Therefore, the closest answer is C) 31.43 days.

Question 9

Mike's Sportswear Company, a retailer, had cost of goods sold of $420,000 last year. The beginning inventory balance was $31,000 and the ending inventory balance was $28,000. The company's average inventory turnover in days was closest to
A) 25.64 days.
B) 51.27 days.
C) 26.94 days.
D) 24.33 days.

Accepted Answer

Average inventory turnover in days = (Cost of goods sold / Average inventory) * 365 daysAverage inventory = (Beginning inventory + Ending inventory) / 2Average inventory = ($31,000 + $28,000) / 2 = $29,500Average inventory turnover in days = ($420,000 / $29,500) * 365 days = 25.64 days

Question 10

Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2013. The weighted average number of shares outstanding in 2013 was 50,000 shares. Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange.
-Refer to Starbuck's dividend payout ratio for 2013 is
A) $5 per share.
B) 0.25.
C) 0.20.
D) 0.125.

Accepted Answer

Dividend payout ratio is the amount of dividends paid to common stockholders as a percentage of net income.

Dividend payout ratio = Dividends paid to common stockholders / Net income

Dividend payout ratio = $50,000 / $250,000 = 0.20

Therefore, the answer is option C.

Question 11

The following information pertains to Barkley Company.: $\begin{array}{lr}
\text { Merchandise purchased } & \$ 1,800,000 \
\text { Cost of goods sold } & \$ 2,000,000 \
\text { Inventory at the end of the year } & \$ 400,000
\end{array}$ 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 inventoryAverage inventory = (Beginning inventory + Ending inventory) / 2= (0 + 400,000) / 2= 200,000Inventory turnover ratio = 2,000,000 / 200,000= 10

Question 12

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 times-interest-earned ratio is calculated as (Net Income + Income Tax Expense + Interest Expense) / Interest Expense. For Fuller Company, this is ($410,000 + $50,000 + $34,000) / $34,000 = 14.53.

Question 13

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

The receivables turnover ratio is calculated by dividing the net credit sales by the average net receivables. Given a receivables turnover of 15 times and average net receivables of $430,000, the net credit sales can be calculated as follows: $430,000 * 15 = $6,450,000.

Question 14

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

The cost of goods sold (COGS) can be calculated using the formula: COGS = Average Inventory / (Days in Inventory / 365). Plugging in the given values: COGS = $100,000 / (73 / 365) = $500,000.

Question 15

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) 0.32.
B) 0.21.
C) 0.38.
D) 0.27.

Accepted Answer

Debt-to-equity ratio = Total Liabilities / Total Equity
Total Assets = Total Liabilities + Total Equity

Using the above formulas:
Total Equity = Total Assets - Total Liabilities
Total Equity = $475,000 - $130,000
Total Equity = $345,000

Debt-to-equity ratio = Total Liabilities / Total Equity
Debt-to-equity ratio = $130,000 / $345,000
Debt-to-equity ratio = 0.3768

The closest answer is C) 0.38.

Question 16

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. It indicates how easily the enterprise can convert its assets into cash to pay its short-term debts. It does not measure income or operating success over a period of time, the ability of the enterprise to survive over a long period of time, or the number of times interest is earned.

Question 17

Presented below are selected data from the financial statements of DeBruce Corp. for 2014 and 2013. $\begin{array}{lrr}&2014&2013\
\text { Net income } & \$ 110,000 & \$ 123,000 \
\text { Cash dividends paid on common stock } & \$ 42,000 & \$ 38,000 \
\text { Market price per share of common stock at the end of the year } & \$ 16.00 & \$ 13.00 \
\text { Earnings per share } & \$ 0.84 & \$ 0.74 \
\text { Shares of common stock outstanding } & 140,000 & 100,000
\end{array}$ The dividend payout ratio for 2014 is
A) 0.382.
B) 0.05.
C) 0.28.
D) 0.50.

Accepted Answer

The dividend payout ratio is calculated as dividends paid divided by net income. For 2014, this is \$42,000 / \$110,000 = 0.382 or 38.2%.

Question 18

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

The times-interest-earned ratio is calculated by dividing earnings before interest and taxes (EBIT) by interest expense. To find EBIT, we would add interest expense and income tax expense to net income:

EBIT = Net Income + Interest Expense + Income Tax Expense 
EBIT = $170,000 + $24,000 + $37,000 
EBIT = $231,000

Now we can calculate the times-interest-earned ratio:

Times-Interest-Earned Ratio = EBIT / Interest Expense 
Times-Interest-Earned Ratio = $231,000 / $24,000 
Times-Interest-Earned Ratio = 9.625

The closest choice is C: 9.63.

Question 19

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) 0.67.
D) cannot be determined from the information provided.

Accepted Answer

Current ratio is calculated by dividing current assets by current liabilities. Therefore, Current Ratio = Current Assets/Current Liabilities = $360,000/$240,000 = 1.5. Hence, the answer is B.

Question 20

Presented below are selected data from the financial statements of Korn Corp. for 2014 and 2013. $\begin{array}{lrr}&2014&2013\
\text { Net income } & \$ 100,000 & \$ 123,000 \
\text { Weighted average number of common shares outstanding } & 105,000 & 95,000 \
\text { Market price per share of common stock at the end of the year } & \$ 12.00 & \$ 10.00 \
\text { Earnings per share } & \$ 2.00 & \$ 1.83
\end{array}$ The price-earnings ratio for 2014 is
A) 1.09.
B) 5.46.
C) 6.0.
D) 11.0.

Accepted Answer

The price-earnings (P/E) ratio is calculated by dividing the market price per share by the earnings per share (EPS). For 2014, the market price per share is $12.00 and the EPS is $2.00, so the P/E ratio is $12.00 / $2.00 = 6.0.

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

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

Lost Shoe Company, a retailer, had cost of goods sold of $220,000 last year. The beginning inventory balance was $30,000 and the ending inventory balance was $21,000. The company's inventory turnover ratio was closest to

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

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

Jackson Company, a retailer, had cost of goods sold of $140,000 last year. The beginning inventory balance was $8,000 and the ending inventory balance was $11,000. The company's inventory turnover ratio was closest to

Lisa's Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was $13,000 and the ending inventory balance was $18,000. The company's average inventory turnover in days was closest to

Mike's Sportswear Company, a retailer, had cost of goods sold of $420,000 last year. The beginning inventory balance was $31,000 and the ending inventory balance was $28,000. The company's average inventory turnover in days was closest to

The following information pertains to Barkley Company.: $\begin{array}{lr}\text { Merchandise purchased } & \$ 1,800,000 \\\text { Cost of goods sold } & \$ 2,000,000 \\\text { Inventory at the end of the year } & \$ 400,000\end{array}$ The inventory turnover ratio for the year was

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 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 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

A liquidity ratio measures the

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

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