Question 1

The year-end adjusting entry to record bad debt expense will increase which of the following ratios?

Accepted Answer

The year-end adjusting entry to record bad debt expense will increase the allowance for bad debts account, which is a contra-asset account. This will decrease the net accounts receivable balance, which will in turn decrease the current ratio. However, the bad debt expense will also increase the net income, which will increase the earnings quality ratio.

Question 2

At the end of 2016, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000.
Required:
Calculate the net profit margin ratio.

Accepted Answer

The answer of At the end of 2016, Doran Corporation...

Question 3

Packers Corporation reported the following data for the year ended December 31, 2016:
Calculate each of the following ratios:
Calculate each of the following ratios:
 A. Net profit margin
 B. Return on assets
 C. Return on equity
 D. Earnings per share
 E. Price/earnings ratio
 F. Debt-to-equity ratio
 G. Financial leverage percentage
 H. Fixed asset turnover ratio

Accepted Answer

The answer of Packers Corporation reported the following data for...

Question 4

The 2016 financial statements of Companies Y and Z showed the following:

Accepted Answer

The answer of The 2016 financial statements of Companies Y...

Question 5

Longhorn Company reported the following data at year-end:  Required:
Calculate each of the following ratios. Round your answers to two decimal places. 
A.Debt-to-equity ratio
B.Current ratio

Accepted Answer

The answer of Longhorn Company reported the following data at...

Question 6

Walkers World Company gathered the following information for 2016:  Required:
Calculate each of the following ratios. Round all dollar amounts to whole dollars and all other calculations to two decimal places. 
A.Receivable turnover ratio
B.Average days to collect receivables
C.Inventory turnover ratio
D.Average number of days to sell inventory

Accepted Answer

The answer of Walkers World Company gathered the following information...

Question 7

Which of the following ratios are not affected by issuing long-term bonds payable in exchange for cash?

Accepted Answer

Issuing long-term bonds affects the debt-to-equity, current, and cash ratios by increasing liabilities and cash. However, it does not directly affect earnings quality, which is related to the sustainability and reliability of earnings.

Question 8

The following return on investment ratios were computed for Steven Company:  Required: 
A.Compute financial leverage percentage for each year and state whether it is positive or negative.
B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Accepted Answer

The answer of The following return on investment ratios were...

Question 9

The journal entry to record depreciation expense decreases which of the following ratios?

Accepted Answer

Depreciation expense reduces net income, which in turn decreases earnings per share (EPS).

Question 10

The cash payment of a previously declared dividend increases which of the following ratios?

Accepted Answer

The answer of The cash payment of a previously declared...

Question 11

The following data were available for Holiday Company:
Sales revenue, $225,000 (including $75,000 cash sales)
Cost of goods sold, $175,000
Average balance in inventory, $20,000
Average balance in accounts receivable, $20,000
Assume 365 days in the year
Required:
Calculate each of the following ratios. Round your answers to two decimal places.
A.Inventory turnover ratio
B.Average days to sell inventory
C.Receivable turnover ratio
D.Average days to collect receivables

Accepted Answer

The answer of The following data were available for Holiday...

Question 12

Compete Corporation reported a quick ratio of 1.75, current assets of $50,000, and a current ratio of 2.
Required:
A.Calculate the total amount of quick assets.
B.What is another name for the quick ratio?
C.Describe what type of assets are considered quick assets and give some examples.
D.How does the quick ratio compare to the current ratio?

Accepted Answer

The answer of Compete Corporation reported a quick ratio of...

Question 13

The year-end adjusting entry to adjust the unearned revenue account for revenue earned decreases which of the following ratios?

Accepted Answer

The answer of The year-end adjusting entry to adjust the...

Question 14

At the end of 2016, Jared Corporation reported a return on assets of 16%; net income of $42,000; average total assets of $365,000, and average total liabilities of $165,000.
Required:
What was Jared's financial leverage percentage?

Accepted Answer

The answer of At the end of 2016, Jared Corporation...

Question 15

The records of Washington Company showed the following:
Average Assets
$230,000
Revenues
$100,000
Average Liabilities
130,000
Operating Expenses**
(81,000)
Average Stockholders' equity*
100,000
Interest expense
(2,000)
Net income
$17,000
*10,000 shares outstanding; current market price, $30
**Including income tax; income tax rate is 30%
Required:
Calculate each of the following ratios:
A.Return on assets
B.Return on equity
C.Financial leverage percentage
D.Is the financial leverage percentage positive or negative?

Accepted Answer

The answer of The records of Washington Company showed the...

Question 16

Indicate the effect of each item on the particular ratio of that row of the schedule. In the last column of the schedule, place the answer of the effect of the item on the ratio. Use the letter I for increase in the ratio, D for decrease in the ratio, and N for no effect on the ratio. Each item is independent of the others.

Accepted Answer

The answer of Indicate the effect of each item on...

Question 17

The following data were reported by Universe Company at year-end:  Required:
Calculate each of the following ratios: 
A.Debt-to-equity
B.Current ratio
C.Quick ratio
D.Which of the above ratios, if any, are liquidity ratios?
E.Which of the above ratios, if any, are profitability ratios?

Accepted Answer

The answer of The following data were reported by Universe...

Question 18

Complete the following income statement for the dollar amounts and the component percentages:

Accepted Answer

The answer of Complete the following income statement for the...

Question 19

The following data were shown in the records of Victoria Company at the end of 2016:  Required:
Calculate each of the following ratios. Round your answers to one decimal place.
 A. Quick ratio
 B. Current ratio
 C. Receivable turnover ratio
 D. Inventory turnover ratio
 E. Average days to collect receivables
 F. Average days to sell inventory

Accepted Answer

The answer of The following data were shown in the...

Question 20

Which of the following transactions decreases the earnings quality ratio?

Accepted Answer

The answer of Which of the following transactions decreases the...

Quiz 13: Analyzing Financial Statements

The year-end adjusting entry to record bad debt expense will increase which of the following ratios?

At the end of 2016, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000. Required: Calculate the net profit margin ratio.

The 2016 financial statements of Companies Y and Z showed the following:

Longhorn Company reported the following data at year-end: Required: Calculate each of the following ratios. Round your answers to two decimal places. A.Debt-to-equity ratio B.Current ratio

Which of the following ratios are not affected by issuing long-term bonds payable in exchange for cash?

The following return on investment ratios were computed for Steven Company: Required: A.Compute financial leverage percentage for each year and state whether it is positive or negative. B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

The journal entry to record depreciation expense decreases which of the following ratios?

The cash payment of a previously declared dividend increases which of the following ratios?

The year-end adjusting entry to adjust the unearned revenue account for revenue earned decreases which of the following ratios?

At the end of 2016, Jared Corporation reported a return on assets of 16%; net income of $42,000; average total assets of $365,000, and average total liabilities of $165,000. Required: What was Jared's financial leverage percentage?

The following data were reported by Universe Company at year-end: Required: Calculate each of the following ratios: A.Debt-to-equity B.Current ratio C.Quick ratio D.Which of the above ratios, if any, are liquidity ratios? E.Which of the above ratios, if any, are profitability ratios?

Complete the following income statement for the dollar amounts and the component percentages:

Which of the following transactions decreases the earnings quality ratio?