Question 1

Milton,Inc.provides the following income statement for 2019:  Calculate the times-interest-earned ratio.(Round your answer to two decimal places. )

Accepted Answer

Times-interest-earned ratio = (Net income + Income tax expense + Interest expense)/ Interest expense = ($40,300 + 5700 + 1000)/ 1000 = 47.00 times

Question 2

The rate of return on common stockholders' equity shows how much income is earned for each $1 of total stockholders' equity.

Accepted Answer

The rate of return on common stockholders' equity specifically measures how much income is earned for each $1 of common stockholders' equity, not total stockholders' equity, which includes preferred stock.

Question 3

Use the following to calculate the inventory turnover ratio for the year 2019.

Accepted Answer

The answer of Use the following to calculate the inventory...

Question 4

Surround,Inc.provides the following data:  Calculate the debt to equity ratio.(Round your answer to two decimal places. )

Accepted Answer

Debt to equity ratio = Total liabilities / Total equity = $91,600 / $141,400 = 0.65

Question 5

The debt to equity ratio shows the proportion of total liabilities relative to total equity.

Accepted Answer

The debt to equity ratio is calculated by dividing total liabilities by total equity, and it represents the amount of debt a company has relative to its equity.

Question 6

The times-interest-earned ratio measures the number of times earnings before interest and taxes can cover interest expense.

Accepted Answer

The times-interest-earned ratio determines a company's ability to pay off its interest expense with its earnings before interest and taxes. It is calculated by dividing EBIT by interest expense. A higher ratio implies that the company is in a better position to meet its interest obligations.

Question 7

A high times-interest-earned ratio indicates difficulty in paying interest expense.

Accepted Answer

A high times-interest-earned ratio indicates that a company has sufficient earnings to cover its interest expense, therefore it does not have difficulty in paying interest expense.

Question 8

Grand Office Supply reported the following gross profit percentages: 2017: 37.5%;2018: 36.2%;2019: 20.8%.The industry average is 35%.What are some possible reasons for the decline in 2019?

Accepted Answer

The answer of Grand Office Supply reported the following gross...

Question 9

Candle Shop,Inc.has net sales on account of $1,700,000.The average net accounts receivable are $630,000.Calculate the days' sales in receivables.(Use 365 days for any calculations.Round any intermediate calculations and your final answer to two decimal places. )

Accepted Answer

Accounts receivable turnover ratio = Net credit sales / Average net accounts receivable = $1,700,000 / $630,000 = 2.70
Days' sales in receivables = 365 / Accounts receivable turnover ratio = 365 / 2.70 = 135.19

Question 10

Danby,Inc.provides the following data from its income statement for 2018:  Calculate the gross profit percentage.(Round your answer to two decimal places. )

Accepted Answer

Gross profit percentage = Gross profit / Net sales × 100 = $350,000 / $540,000 × 100 = 64.81%

Question 11

Which of the following items is a measure of a company's ability to collect receivables?

Accepted Answer

Days' sales in receivables measures the average number of days it takes a company to collect its receivables. A lower number indicates a faster collection process, which is generally positive for a company's cash flow and liquidity. The other options do not directly measure a company's ability to collect receivables.

Question 12

Normally,companies with low gross profit percentages will have low asset turnover.

Accepted Answer

Companies with low gross profit percentages often have high asset turnover rates because they rely on high volume sales at lower margins to generate profits, necessitating efficient use of assets to generate sufficient sales.

Question 13

National,Inc.provides the following data:  For the year ending December 31,2019:
 Calculate the accounts receivable turnover ratio for 2019.(Round your answer to two decimal places. )

Accepted Answer

Accounts receivable turnover ratio = Net credit sales / Average net accounts receivable = $280,000 / $80,000 = 3.50 times

Question 14

The debt ratio is the ratio of total debt divided by total equity.

Accepted Answer

The debt ratio is calculated by dividing total liabilities (not just debt) by total assets, not total equity.

Question 15

Which of the following statements is TRUE for financial leverage?

Accepted Answer

Financial leverage is directly related to the debt ratio.The higher the debt ratio,the higher the financial leverage.

Question 16

A company reports total assets of $920,000 and stockholders' equity of $540,000.Calculate the debt ratio.(Round your answer to two decimal places. )

Accepted Answer

11ea8a75_4283_7757_a2a1_a3ecef0505ed_TB6701_00 Debt ratio = Total liabilities / Total assets = $380,000 / $920,000 = 41.30%

Question 17

The rate of return on total assets measures a company's success in using its assets to earn a profit.

Accepted Answer

The rate of return on total assets (ROTA) is a financial ratio that measures a company's ability to generate profits from its assets. It indicates how efficiently a company is using its assets to produce a profit.

Question 18

Elephant,Inc.'s cost of goods sold for the year is $1,900,000,and the average merchandise inventory for the year is $132,000.Calculate the inventory turnover ratio of the company.(Round your answer to two decimal places. )

Accepted Answer

Inventory turnover ratio = Cost of Goods Sold / Average Merchandise Inventory =
$1,900,000 / 132,000 = 14.39 times

Question 19

Ottawa,Inc.provides the following data:  For the year ending December 31,2019:
 Calculate the days' sales in inventory for 2019.(Use 365 days for any calculations.Round any intermediate calculations and your final answer to two decimal places. )

Accepted Answer

Inventory turnover ratio = Cost of Goods Sold / Average Merchandise Inventory =
$110,000 / [(55,000 + 25,000)/ 2] = $110,000 / $40,000 = 2.75 times
Days' sales in inventory = 365 / Inventory turnover ratio = 365 / 2.75 = 132.73

Question 20

The relationship between total liabilities and total assets is the ________.

Accepted Answer

The relationship between total liabilities and total assets is known as the debt ratio. It measures the proportion of a company's assets that are financed through debt. A high debt ratio may indicate a higher risk for the company in terms of its ability to repay its debts.

Quiz 17: Financial Statement Analysis

Milton,Inc.provides the following income statement for 2019: Calculate the times-interest-earned ratio.(Round your answer to two decimal places. )