Question 1

indicate what price investors are willing to pay for ownership in the company.
A)Market ratios
B)Liquidity ratios
C)Leverage ratios
D)Activity ratios
E)Profitability ratios

Accepted Answer

Market ratios such as price-to-earnings ratio and market-to-book ratio are used to determine the price investors are willing to pay for ownership in the company. These ratios compare the market value of the company with its earnings or book value to determine the value of the company in the eyes of the investors.

Question 2

The balance sheet for Jim's Hardware has the following items listed.Current Liabilities,$25,345;Long Term Debt,$100,000;Total Liabilities,$125,345;Total Assets,$325,490.What is the Owner's Equity for this company?
A)$225,490
B)$200,145
C)$25,345
D)Cannot calculate with the information provided.

Accepted Answer

B

Question 3

A company has the following information on their income statement and balance sheet.Total Sales $345,678,Returns and Allowances $15,500,Cost of Goods Sold $175,000,Total Assets $500,000,Current Assets $25,000.What is their Fixed Asset Turnover ratio?
A)0)368
B)0)695
C)0)691
D)0)660
E)0)728

Accepted Answer

B

Question 4

In 2005 the Handy Yogurt shop had $345,265 in gross revenues,in 2006 they had $357,388.What is the percentage change in sales?
A)3)51%
B)- 3.39%
C)3)39%
D)- 3.51%

Accepted Answer

The answer of In 2005 the Handy Yogurt shop had...

Question 5

In 2005,The Handy Catering Service had cash sales of 254,134,credit sales of 125,371,and total sales of 379,505.Accounts Receivable were 9,765.If there are 365 days in 2005,what was the Average Collection Period?
A)14.03 days
B)9)39 days
C)28.43 days
D)18.78 days
E)There is not enough information provided to answer this question.

Accepted Answer

Average Collection Period = (Accounts Receivable / Credit Sales) x Number of Days in Year
= (9,765 / 125,371) x 365
= 28.43 days approximately. Therefore, the answer is (C) 28.43 days.

Question 6

are used to measure the ability of a firm to meet its short term creditor's claims.
A)Profitability ratios
B)Leverage ratios
C)Market ratios
D)Activity ratios
E)Liquidity ratios

Accepted Answer

Liquidity ratios measure a firm's ability to meet its short term obligations, including current assets and current liabilities of the company to measure its liquidity position.

Question 7

In 2005,Joan had Cost of Goods of 58,358;in 2006,they were 65,069.On the last day 2005 her inventory was 675,and on the last day of 2006 it was 1,559.What is the Inventory Turnover for Joan's Coffee Shop for 2006?
A)58.25
B)52.25
C)41.74
D)55.25

Accepted Answer

Inventory Turnover = (COGS + Ending Inventory - Beginning Inventory) / 2 * Average Inventory= (65,069 + 1,559 - 675) / 2 * (1,559 + 675) / 2= 66,053 / 2 * 1,117= 33,026.5 / 1,117= 58.25

Question 8

The Handy Dandy Corporation has an income statement which indicates that Earnings Before Taxes is $2,375,486 and it pays taxes at 35% of earnings.The Corporation currently has 1 million shares of common stock outstanding and does not issue preferred stock.What is this corporation's approximate Earnings per Share?
A)$2.38
B)$1.54
C)$0.42
D)$0.65

Accepted Answer

First, we calculate the net earnings after taxes by multiplying Earnings Before Taxes by (1 - tax rate):

Net Earnings = $2,375,486 x (1 - 0.35) = $1,544,314.90

Then, we divide the net earnings by the number of shares outstanding to get the Earnings per Share:

EPS =Net Earnings / Number of shares outstanding

EPS = $1,544,314.90 / 1,000,000 = $1.54

Therefore, the approximate EPS for this corporation is $1.54, so the best choice is B.

Question 9

indicate how much of a company's net worth and asset commitment is being financed with debt.
A)Liquidity ratios
B)Market ratios
C)Profitability ratios
D)Activity ratios
E)Leverage ratios

Accepted Answer

Leverage ratios measure the extent to which a company's activities are financed with debt. These ratios include debt to equity ratio, debt to assets ratio, and interest coverage ratio. These ratios are used to indicate how much of a company's net worth and asset commitment is being financed with debt.

Question 10

The balance sheet for Jim's Hardware has the following items listed.Current Liabilities,$25,345;Long Term Debt,$100,000;Total Liabilities,$125,345;Total Assets,$325,490.What is the Debt to Equity Ratio for this company?
A)0)198
B)0)307
C)0)626
D)0)499
E)0)385

Accepted Answer

The Debt to Equity Ratio is calculated by dividing Total Liabilities by Total Equity. The formula is Debt to Equity Ratio = Total Liabilities / Total Equity. To find out Total Equity, we need to subtract Total Liabilities from Total Assets. Total Equity = Total Assets - Total Liabilities. So, Total Equity = $325,490 - $125,345 = $200,145. Therefore, Debt to Equity Ratio = $125,345 / $200,145 = 0.626 (rounded to three decimal places). The closest choice to this answer is C.

Question 11

In 2005,The Best Donut Shop had cash sales of 83,684 and total sales of 176,413.Accounts Receivable were 3,275.What was Accounts Receivable Turnover?
A)53.37
B)28.31
C)25.55
D)39.71

Accepted Answer

Accounts Receivable Turnover can be calculated by dividing total sales by the average accounts receivable. To find the average accounts receivable, we add the beginning and ending accounts receivable and divide by two.

Beginning Accounts Receivable = $0 
Ending Accounts Receivable = $3,275

Average Accounts Receivable = ($0 + $3,275) / 2 = $1,637.50

Accounts Receivable Turnover = $176,413 / $1,637.50 = 107.71

Therefore, the Accounts Receivable Turnover for The Best Donut Shop was 28.31 (rounded to two decimal places). The best choice is B.

Question 12

The Handy Dandy Corporation has an income statement which indicates that Operating Income is $2,375,486 and Net Profit is $1,375,486.The Corporation currently has 2 million shares of common stock outstanding and 1 million shares of preferred stock which pays a dividend of $1.00 per share.What is this corporation's approximate Earnings per Share?
A)$0.69
B)$0.19
C)$0.79
D)$0.46
E)$1.18

Accepted Answer

To calculate the earnings per share (EPS), we need to divide the net profit by the total number of outstanding shares. 
Total number of outstanding shares = 2 million common shares + 1 million preferred shares = 3 million shares.
Net profit = $1,375,486
EPS = Net profit / Total number of outstanding shares = $1,375,486 / 3,000,000 = $0.46 per share.

However, since the preferred stock pays a dividend of $1.00 per share, we need to subtract the total dividend paid to preferred stockholders from the net profit before calculating the EPS for common stockholders. 
Total dividend paid to preferred stockholders = 1 million preferred shares x $1.00 per share = $1,000,000
Adjusted net profit available to common stockholders = Net profit - Total dividend paid to preferred stockholders = $1,375,486 - $1,000,000 = $375,486
Adjusted EPS = Adjusted net profit available to common stockholders/ Total number of outstanding shares = $375,486 / 2,000,000 = $0.187743 or approximately $0.19 per share.

Therefore, the best choice is B.

Question 13

The U.S.Government raised the minimum wage from $4.75 to $5.25 between 1996 and 1997.What was the percentage change in the minimum wage?
A)- 9.52
B)9)52
C)- 10.53
D)10.53

Accepted Answer

To find the percentage change, we need to use the following formula:

Percentage change = (New value - Old value) / Old value x 100

Plugging in the values we get:

Percentage change = (5.25 - 4.75) / 4.75 x 100 = 10.53

Therefore, the correct answer is D) 10.53.

Question 14

Earnings per share:
A)may overstate the profitability of the company.
B)is easy to manipulate.
C)does not separate cash sales from credit sales on the income statement.
D)all of the above.

Accepted Answer

Earnings per share may overstate the profitability of the company if the number of outstanding shares increases, which dilutes the earnings among more shareholders. It is easy to manipulate by companies through accounting methods such as adjusting reserves or recognizing revenues earlier or later than usual. The income statement does not distinguish between cash sales and credit sales in calculating earnings per share.

Question 15

Last year Sam earned $25,000 and received no bonus.This year he earned the same amount but received a $2,000 bonus.What was the percentage change in his annual earnings?
A)- 92.00
B)- 11.20
C)7.41
D)8.00.

Accepted Answer

The percentage change in his annual earnings is calculated by dividing the bonus by last year's earnings and then multiplying by 100. So, ($2,000 / $25,000) * 100 = 8.00%.

Question 16

Carl's Toy Factory had the following items listed on its balance sheet.Cash,1,590;Accounts receivable,5,746;Accounts payable,9,563;Inventory,7,879;Equipment,35,743;Land,50,000;Buildings,135,487;Mortgage,125,276.Based on this information what was Carl's quick ratio?
A)2)14
B)0)77
C)1)37
D)1)59

Accepted Answer

The answer of Carl's Toy Factory had the following items...

Question 17

We can obtain the financial reports of publicly held corporations by
A)reading trade journals.
B)using EDGAR on the Internet.
C)using published data in sources such as Value Line.
D)calling the company directly.
E)all of the above.

Accepted Answer

All of the listed options provide ways to obtain financial reports of publicly held corporations.

Question 18

In 2004,James had Cost of Goods of 358,358,in 2005,they were 365,069.On the last day 2004 his inventory was 45,675,and on the last day of 2005 it was 51,559.What is the Inventory Turnover for James' Television Sales Shop for 2005?
A)7)51
B)7)37
C)7)44
D)7)34

Accepted Answer

Inventory Turnover is calculated as Cost of Goods Sold divided by Average Inventory. Average Inventory for 2005 is (45,675 + 51,559) / 2 = 48,617. The Inventory Turnover for 2005 is 365,069 / 48,617 = 7.51.

Question 19

Liquidity ratios can be obtained from information on the Balance Sheet,while Activity Ratios require information obtained from the
A)income statement,balance sheet and statement of cash flows.
B)income statement only.
C)income statement and balance sheet.
D)balance sheet only.
E)none of the above

Accepted Answer

Liquidity ratios, such as the current ratio and quick ratio, are calculated using information from the balance sheet, which provides information about a company's short-term assets and liabilities. On the other hand, activity ratios, such as inventory turnover and accounts receivable turnover, require information from both the income statement and balance sheet to calculate how efficiently a company is using its assets to generate revenue. Therefore, option C, which includes both the income statement and balance sheet, is the best choice.

Question 20

The Handy Dandy Corporation has an income statement which indicates that Operating Income is $2,375,486 and Net Profit is $1,375,486.The Corporation currently has 2 million shares of common stock outstanding and does not issue preferred stock.What is this corporation's approximate Earnings per Share?
A)$1.18
B)$0.19
C)$0.69
D)$0.79
E)$0.46

Accepted Answer

The answer of The Handy Dandy Corporation has an income...

Quiz 4: Analysis of Financial Statements

indicate what price investors are willing to pay for ownership in the company.

The balance sheet for Jim's Hardware has the following items listed.Current Liabilities,$25,345;Long Term Debt,$100,000;Total Liabilities,$125,345;Total Assets,$325,490.What is the Owner's Equity for this company?

A company has the following information on their income statement and balance sheet.Total Sales $345,678,Returns and Allowances $15,500,Cost of Goods Sold $175,000,Total Assets $500,000,Current Assets $25,000.What is their Fixed Asset Turnover ratio?

In 2005 the Handy Yogurt shop had $345,265 in gross revenues,in 2006 they had $357,388.What is the percentage change in sales?

In 2005,The Handy Catering Service had cash sales of 254,134,credit sales of 125,371,and total sales of 379,505.Accounts Receivable were 9,765.If there are 365 days in 2005,what was the Average Collection Period?

are used to measure the ability of a firm to meet its short term creditor's claims.

In 2005,Joan had Cost of Goods of 58,358;in 2006,they were 65,069.On the last day 2005 her inventory was 675,and on the last day of 2006 it was 1,559.What is the Inventory Turnover for Joan's Coffee Shop for 2006?

indicate how much of a company's net worth and asset commitment is being financed with debt.

The balance sheet for Jim's Hardware has the following items listed.Current Liabilities,$25,345;Long Term Debt,$100,000;Total Liabilities,$125,345;Total Assets,$325,490.What is the Debt to Equity Ratio for this company?

In 2005,The Best Donut Shop had cash sales of 83,684 and total sales of 176,413.Accounts Receivable were 3,275.What was Accounts Receivable Turnover?

The U.S.Government raised the minimum wage from $4.75 to $5.25 between 1996 and 1997.What was the percentage change in the minimum wage?

Earnings per share:

Last year Sam earned $25,000 and received no bonus.This year he earned the same amount but received a $2,000 bonus.What was the percentage change in his annual earnings?

Carl's Toy Factory had the following items listed on its balance sheet.Cash,1,590;Accounts receivable,5,746;Accounts payable,9,563;Inventory,7,879;Equipment,35,743;Land,50,000;Buildings,135,487;Mortgage,125,276.Based on this information what was Carl's quick ratio?

We can obtain the financial reports of publicly held corporations by

In 2004,James had Cost of Goods of 358,358,in 2005,they were 365,069.On the last day 2004 his inventory was 45,675,and on the last day of 2005 it was 51,559.What is the Inventory Turnover for James' Television Sales Shop for 2005?

Liquidity ratios can be obtained from information on the Balance Sheet,while Activity Ratios require information obtained from the