Question 1

Current assets minus current liabilities is equal to:
A)Profit margin
B)Financial leverage
C)Current ratio
D)Working capital
E)Quick assets

Accepted Answer

Working capital represents the amount of funds a company has available to continue its operations. It is calculated by subtracting current liabilities from current assets. So, the correct answer is option D - Working Capital.

Question 2

Net sales divided by average accounts receivable is equal to the:
A)Days' sales uncollected
B)Average accounts receivable ratio
C)Current ratio
D)Profit margin
E)Accounts receivable turnover ratio

Accepted Answer

Net sales divided by average accounts receivable is equal to the accounts receivable turnover ratio, which measures how many times the company collects its average accounts receivable during a period of time.

Question 3

Net sales divided by average total assets is equal to the:
A)Profit margin
B)Total asset turnover
C)Current ratio
D)Sales return ratio
E)Return on total assets

Accepted Answer

Net sales divided by average total assets is the formula for total asset turnover. This ratio measures how efficiently a company is using its assets to generate revenue.

Question 4

A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is equal to the:
A)Acid-test ratio
B)Merchandise turnover
C)Price earnings ratio
D)Accounts receivable turnover
E)Profit margin ratio

Accepted Answer

The profit margin ratio is calculated by dividing net income by net sales, which gives the percentage of profit earned for every dollar of sales. This is a useful measure of efficiency and profitability, as it indicates how much profit the company is making on each sale.

Question 5

A company had a profit margin of 5%.If net income equaled $83,000 and average total assets equaled $45,000, how much were net sales?
A)$4,150
B)$2,250
C)$1,660,000
D)$6,400
E)$128,000

Accepted Answer

Profit margin = Net income / Net sales
5% = 83,000 / Net sales
Net sales = 83,000 / 0.05
Net sales = $1,660,000

Question 6

A company had a market price of $83.12 per share, dividends per share of $5.40, and earnings per share of $4.87.Its price-earnings ratio is equal to:
A).056
B).065
C)8.09
D)15.39
E)17.07

Accepted Answer

Price-earnings ratio = Market price per share ÷ Earnings per share
Price-earnings ratio = $83.12 ÷ $4.87
Price-earnings ratio = 17.07

Question 7

A company had a profit margin of 12%.If net income equaled $450,000 and average total assets equaled $600,500, how much were sales?
A)$1,050,500
B)$126,060
C)$72,060
D)$54,000
E)$3,750,000

Accepted Answer

Profit Margin = Net Income / Sales
Substituting the given values: 12% = $450,000 / Sales
Therefore, Sales = $450,000 / 0.12 = $3,750,000
Hence, the answer is E.

Question 8

A company had a market price of $8.22 per share, earnings per share of $1.01, and dividends per share of $0.32.Its price-earnings ratio is equal to:
A)8.14
B)25.69
C)6.18
D).039
E).123

Accepted Answer

$8.22/$1.01 = 8.14

Question 9

A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40.Its price-earnings ratio is equal to:
A)3.1
B)30.0
C)93.8
D)32.0
E)3.3

Accepted Answer

Price-earnings ratio (P/E ratio) is calculated by dividing the market price per share by the earnings per share. 
P/E ratio = Market price per share / Earnings per share

In this case, 
Market price per share = $37.50 
Earnings per share = $1.25

Therefore, 
P/E ratio = $37.50 / $1.25 = 30.0

So, the answer is B) 30.0

Question 10

The average number of times a company's inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance, is equal to the:
A)Accounts receivable turnover
B)Inventory turnover
C)Days' sales uncollected
D)Current ratio
E)Price earnings ratio

Accepted Answer

The average number of times a company's inventory is sold during an accounting period is the inventory turnover ratio, which is calculated by dividing cost of goods sold by average inventory balance.

Question 11

One of several ratios that reflects solvency includes the:
A)Acid-test ratio
B)Current ratio
C)Times interest earned ratio
D)Total asset turnover
E)Days' sales in inventory

Accepted Answer

The times interest earned ratio measures a company's ability to meet its interest payments on outstanding debt. This ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense. A higher ratio indicates that the company has more earnings available to cover its interest obligations, indicating greater solvency. The other ratios listed (acid-test ratio, current ratio, total asset turnover, and days' sales in inventory) do not directly measure a company's ability to meet its debt obligations.

Question 12

Quick assets divided by current liabilities is equal to the:
A)Acid-test ratio
B)Current ratio
C)Working capital ratio
D)Current liability turnover ratio
E)Quick asset turnover ratio

Accepted Answer

Quick assets divided by current liabilities is known as the acid-test ratio, also known as the quick ratio. The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets.

Question 13

Annual cash dividends per share divided by market price per share is equal to the:
A)Price-earnings ratio
B)Price-dividends ratio
C)Profit margin
D)Dividend yield ratio
E)Earnings per share

Accepted Answer

Dividend yield ratio is calculated by dividing the annual cash dividends per share by the market price per share. Therefore, D is the correct answer. A) Price-earnings ratio is calculated by dividing market price per share by earnings per share. B) Price-dividends ratio is not a commonly used financial ratio. C) Profit margin is calculated as net income divided by revenue. E) Earnings per share is calculated by dividing net income by the number of shares outstanding.

Question 14

Net income divided by average total assets is equal to the:
A)Profit margin
B)Total asset turnover
C)Return on total assets
D)Days' income in assets
E)Current ratio

Accepted Answer

Net income divided by average total assets is equal to return on total assets (ROA). This ratio measures the company's ability to generate profit from its assets.

Question 15

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the:
A)Inventory turnover ratio
B)Profit margin
C)Days' sales in inventory
D)Current ratio
E)Total asset turnover

Accepted Answer

Dividing ending inventory by cost of goods sold gives the number of times inventory was sold and restocked during the period. Multiplying the result by 365 gives the number of days it takes to sell and restock inventory, which is known as the days' sales in inventory ratio.

Question 16

Dividing accounts receivable by net sales and multiplying the result by 365 is equal to the:
A)Profit margin
B)Days' sales uncollected
C)Accounts receivable turnover ratio
D)Average accounts receivable ratio
E)Current ratio

Accepted Answer

Dividing accounts receivable by net sales gives the accounts receivable turnover ratio, and multiplying it by 365 gives the days' sales uncollected, which is the average number of days it takes for a company to collect payment from its customers. Therefore, the correct answer is B) Days' sales uncollected.

Question 17

Oakley Corporation has the following comparative income statements.Which of the following statements is false with regard to this comparative data? $\begin{array}{c}
\text { OAKLEY CORPORATION } \
\text { Comparative Income Statements } \
\text {For Years Ended December 31, 2014 and 2013  } \
\begin{array}{|l|r|r|}
\hline &   { 2014 } &   { 2013 } \
\hline \text { Sales  }  & \$ 360,000 & \$ 267,500 \
\hline \text { Cost of goods sold } & 237,600 & 140,170 \
\hline \text { Gross profit } & 122,400 & 127,330 \
\hline \text { Operating expenses } & \underline{75,600} & \underline{51,895} \
\hline \text { Net income } \quad \quad \quad& \underline{46,800} &\underline{ \$ 75,435} \
\hline
\end{array}

\end{array}$

A)The common-size sales percent for 2014 equals 100%.
B)The common-size net income percent for 2013 equals 28.04%.
C)The common-size gross profit percent for 2014 equals (3.87)%.
D)The common-size cost of goods sold for 2013 equals 52.4%.
E)The common-size operating expenses for 2014 equals.

Accepted Answer

Common-size percentages are calculated by dividing each item by sales (total revenue). 
A) Common-size sales percent for 2014 = 100% is true because it is the base year for comparison.
B) Common-size net income percent for 2013 = 28.04% is true because it is calculated by dividing net income of 2013 by sales of 2013: $75,435/$267,500 ≈ 28.04%.
C) Common-size gross profit percent for 2014 = (3.87)% is false because it is calculated by dividing the difference between gross profit of 2014 and 2013 by sales of 2014: ($122,400-$127,330)/$360,000 ≈ (1.38)%. The correct answer is -34% because the gross profit of 2014 is lower than the gross profit of 2013, so the common-size gross profit percent should be negative, indicating the decrease.
D) Common-size cost of goods sold for 2013 = 52.4% is true because it is calculated by dividing the cost of goods sold of 2013 by sales of 2013: $140,170/$267,500 ≈ 52.4%.
E) Common-size operating expenses for 2014 cannot be calculated with the given information because we need to know the operating expenses of 2014 as a percentage of sales.

Question 18

Net income divided by net sales is equal to the:
A)Return on total assets
B)Profit margin
C)Current ratio
D)Total asset turnover
E)Days' sales in inventory

Accepted Answer

The formula for profit margin is net income divided by net sales. Therefore, net income divided by net sales is equal to the profit margin.

Question 19

Current assets divided by current liabilities is equal to the:
A)Current ratio
B)Quick ratio
C)Debt ratio
D)Liquidity ratio
E)Solvency ratio

Accepted Answer

The calculation of current ratio is current assets divided by current liabilities, which measures the liquidity of a company to meet its short-term obligations.

Question 20

A company had a profit margin of 8%.If net income equaled $40,000 and average total assets equaled $332,500, how much were net sales?
A)$3,200
B)$500,000
C)$26,600
D)$4,156,250
E)$372,500

Accepted Answer

The answer of A company had a profit margin of...

Quiz 13: Analyzing Financial Statements

Current assets minus current liabilities is equal to:

Net sales divided by average accounts receivable is equal to the:

Net sales divided by average total assets is equal to the:

A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is equal to the:

A company had a profit margin of 5%.If net income equaled $83,000 and average total assets equaled $45,000, how much were net sales?

A company had a market price of $83.12 per share, dividends per share of $5.40, and earnings per share of $4.87.Its price-earnings ratio is equal to:

A company had a profit margin of 12%.If net income equaled $450,000 and average total assets equaled $600,500, how much were sales?

A company had a market price of $8.22 per share, earnings per share of $1.01, and dividends per share of $0.32.Its price-earnings ratio is equal to:

A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40.Its price-earnings ratio is equal to:

The average number of times a company's inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance, is equal to the:

One of several ratios that reflects solvency includes the:

Quick assets divided by current liabilities is equal to the:

Annual cash dividends per share divided by market price per share is equal to the:

Net income divided by average total assets is equal to the:

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the:

Dividing accounts receivable by net sales and multiplying the result by 365 is equal to the:

Net income divided by net sales is equal to the:

Current assets divided by current liabilities is equal to the:

A company had a profit margin of 8%.If net income equaled $40,000 and average total assets equaled $332,500, how much were net sales?