Question 1

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 2

Refer to the information from the financial statements of Topaz Corp.for Year 2 and Year 1. Earnings per share is reported on the Year 2 income statement as:

A) $ 0.32.
B) $ 0.40.
C) $1.50.
D) $1.80.

Accepted Answer

Earnings per Share (EPS) = (Net Income - Preferred Dividends) / Average Common Shares
EPS = ($200,000 - $20,000) / 120,000 = $1.50

Question 3

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

Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market value per share by the earnings per share (EPS). First, calculate the EPS: EPS = Net Income / Weighted Average Shares Outstanding = $250,000 / 50,000 = $5 per share. Then, calculate the P/E ratio: P/E Ratio = Market Value per Share / EPS = $40 / $5 = 8.

Question 4

Presented below are selected data from the financial statements of Korn Corp.for Year 2 and Year 1. The price-earnings ratio for Year 2 is

A) 1.09.
B) 5.46.
C) 6.0.
D) 11.0.

Accepted Answer

Price-earnings ratio (P/E ratio) = Market price per share / Earnings per share
For Year 2:
P/E ratio = 27.00 / 4.50 = 6.0
Therefore, the best choice is C, with a P/E ratio of 6.0.

Question 5

The debt ratio of a company is an example of a _____.
A) turnover ratio
B) liquidity ratio
C) profitability ratio
D) leverage ratio

Accepted Answer

The debt ratio is a leverage ratio that measures the extent to which a company is using debt to finance its operations. It is calculated by dividing the total liabilities of a company by its total assets. A higher debt ratio indicates that a company is using more debt to finance its operations, which can increase its financial risk.

Question 6

Opal Company has total assets of $600,000 and total liabilities of $200,000.The company's debt-to-equity ratio is closest to:
A) 0.35.
B) 0.15.
C) 0.50.
D) 0.20.

Accepted Answer

Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity*
= $200,000 / $400,000
= 0.50
 *Total stockholders' equity = Total Assets- Total Liabilities
= $600,000 - $200,000
= $400,000

Question 7

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

4 = $2,000,000 / $500,000
 
Calculate Beginning Inventory = X + $1,800,000 - $2,000,000 = $400,000; X = $600,000
Average Inventory ($600,000 + $400,000) / 2 = $500,000

Question 8

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

Accepted Answer

The dividend payout ratio is calculated as dividends paid divided by net income. For Starbuck Corporation, this is $50,000 / $250,000 = 0.20.

Question 9

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 10

Refer to the information from the financial statements of DeBruce Corp.for Year 2 and Year 1. The dividend payout ratio for Year 2 is:

A) 0.382.
B) 0.05.
C) 0.28.
D) 0.50.

Accepted Answer

The answer of Refer to the information from the financial...

Question 11

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 12

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 ability of an enterprise to pay its short-term obligations and to meet unexpected needs for cash. It focuses on the availability of cash and other assets that can quickly be converted into cash to meet the enterprise's short-term financial obligations.

Question 13

Citrine Company reported the following on its income statement: 
An analysis of the income statement revealed that interest expense was $50,000.Citrine Company's times-interest-earned ratio was:

A) 11.
B) 5.
C) 18.
D) 9.

Accepted Answer

Times-Interest-Earned Ratio = (Income Before Taxes + Interest Expense) / Interest Expense
= ($500,000 + $50,000)  / $50,000
= 11

Question 14

Last year, Nickel Company had a net income of $150,000, income tax expense of $30,000, and interest expense of $20,000.The company's times-interest-earned ratio was closest to:
A) 33 times.
B) 17 times.
C) 10 times.
D) 22 times.

Accepted Answer

Times-Interest-Earned Ratio = (Income Before Taxes + Interest Expense) / Interest Expense
=  (Net income + Income tax expense + Interest expense) / Interest expense
= ($150,000 + $30,000 + $20,000) / $20,000
= 10 times

Question 15

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

The current ratio is calculated by dividing current assets by current liabilities. Therefore, $360,000 / $240,000 = 1.5, which corresponds to choice B.

Question 16

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 17

Last year, Copper Company had a net income of $500,000, income tax expense of $60,000, and interest expense of $40,000.The company's times-interest-earned ratio was closest to:
A) 10 times.
B) 22 times.
C) 15 times.
D) 30 times.

Accepted Answer

Times-Interest-Earned Ratio = (Income Before Taxes + Interest Expense) / Interest Expense 
= (Net income + Tax expense + Interest expense) / Interest expense 
= ($500,000 + $60,000 + $40,000) / $40,000
= 15 times

Question 18

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 amount of net credit sales is calculated by multiplying the receivables turnover ratio by the average net receivables. Therefore, $430,000 * 15 = $6,450,000.

Question 19

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 20

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...

Quiz 15: Financial Statement Analysis

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

Refer to the information from the financial statements of Topaz Corp.for Year 2 and Year 1. Earnings per share is reported on the Year 2 income statement as:

Presented below are selected data from the financial statements of Korn Corp.for Year 2 and Year 1. The price-earnings ratio for Year 2 is

The debt ratio of a company is an example of a _____.

Opal Company has total assets of $600,000 and total liabilities of $200,000.The company's debt-to-equity ratio is closest to:

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

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

Refer to the information from the financial statements of DeBruce Corp.for Year 2 and Year 1. The dividend payout ratio for Year 2 is:

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 liquidity ratio measures the

Citrine Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $50,000.Citrine Company's times-interest-earned ratio was:

Last year, Nickel Company had a net income of $150,000, income tax expense of $30,000, and interest expense of $20,000.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

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, Copper Company had a net income of $500,000, income tax expense of $60,000, and interest expense of $40,000.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?

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