Question 1

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The accounts receivable turnover was

Accepted Answer

The accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable. The average accounts receivable is ($800,000 + $900,000) / 2 = $850,000. The turnover is $8,040,000 / $850,000 = 9.5 times.

Question 2

Bill's Dollar Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $6,400,000. The accounts receivable turnover was

Accepted Answer

The accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable. The average accounts receivable is ($760,000 + $840,000) / 2 = $800,000. Therefore, the turnover is $6,400,000 / $800,000 = 8.0 times.

Question 3

LKN Company had net credit sales of $5,005,000 and cost of goods sold of $3,500,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover was

Accepted Answer

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

Average Accounts Receivable = ($600,000 + $700,000) / 2 = $650,000

Accounts Receivable Turnover = $5,005,000 / $650,000 = 7.7 times.

Therefore, the answer is B.

Question 4

A high accounts receivable turnover indicates

Accepted Answer

A high accounts receivable turnover indicates that customers are making payments quickly, which means that the company is collecting on its outstanding invoices in a timely manner. This is a positive sign for the financial health of the company.

Question 5

Somen to Park Corporation had net credit sales of $5,075,000 and cost of goods sold of $3,750,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $650,000 and $750,000, respectively. The accounts receivable turnover was

Accepted Answer

The accounts receivable turnover is calculated as net credit sales divided by the average accounts receivable. Average accounts receivable = ($650,000 + $750,000) / 2 = $700,000. Turnover = $5,075,000 / $700,000 = 7.25, which rounds to 7.3 times.

Question 6

A company with $60,000 in current assets and $35,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

Accepted Answer

The current ratio increases because the reduction in current liabilities is proportionally greater than the reduction in current assets. Working capital remains the same because both current assets and current liabilities decrease by the same amount ($1,000).

Question 7

Long-term creditors are usually most interested in evaluating

Accepted Answer

Long-term creditors are concerned with the ability of a company to meet its long-term obligations. Solvency, which refers to a company's ability to meet its long-term debt obligations, is therefore the most important consideration for long-term creditors. While liquidity and profitability are important considerations, they are not the primary focus of long-term creditors. Marketability, which refers to a company's ability to sell its products or services, is not directly relevant to a creditor's evaluation of a company's ability to repay its long-term debt.

Question 8

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $1,250,000. The inventory turnover for the year is

Accepted Answer

Inventory turnover is calculated as Cost of Goods Sold divided by Average Inventory. Thus, $9,250,000 / $1,250,000 = 7.4 times.

Question 9

Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The average collection period of the accounts receivable in terms of days was

Accepted Answer

The answer of Winsor Clothing Store had a balance in...

Question 10

The current ratio is a

Accepted Answer

The current ratio measures a company's ability to meet short-term obligations and is therefore a liquidity ratio.

Question 11

In ratio analysis, the ratios are never expressed as a

Accepted Answer

Ratios in financial analysis are typically expressed as rates, percentages, or simple proportions, but not as logarithms.

Question 12

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $1,250,000. The average days in inventory during the year was approximately

Accepted Answer

The answer of Savory Thymes, Inc. had net credit sales...

Question 13

The accounts receivable turnover and inventory turnover are used to analyze

Accepted Answer

Accounts receivable turnover and inventory turnover are both liquidity ratios. Accounts receivable turnover ratio measures how quickly a company collects its accounts receivable, while inventory turnover ratio measures how efficiently a company manages its inventory. These ratios are important in determining a company's ability to meet its short-term obligations.

Question 14

Which one of the following would be considered a long-term solvency ratio?

Accepted Answer

Long-term solvency ratios focus on a company's ability to meet its long-term debt obligations. The debt to assets ratio is a long-term solvency ratio that measures the proportion of a company's assets that are financed with debt, providing an indication of the company's ability to repay its long-term debt. Accounts receivable turnover and return on assets are profitability ratios, while the current ratio measures a company's short-term liquidity.

Question 15

The current ratio is

Accepted Answer

The current ratio is used to evaluate a company's liquidity and short-term debt paying ability. It is calculated by dividing current assets by current liabilities. Option A and D are incorrect as they provide incorrect formulas for calculating the current ratio. Option C is incorrect as it refers to the debt to equity ratio, which evaluates a company's solvency and long-term debt paying ability.

Question 16

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $1,250,000. The average days in inventory during the year was approximately

Accepted Answer

The answer of Chodron Corporation had net credit sales of...

Question 17

Return on common stockholders' equity is most closely related to

Accepted Answer

Return on common stockholders' equity is a measure of the profitability of the company for its shareholders. It is calculated as net income divided by average common stockholders' equity. Given that common stockholders' equity is a subset of total assets, return on common stockholders' equity is closely related to return on assets. Additionally, leverage (debt to assets ratio) can impact return on common stockholders' equity, as a company with a higher proportion of debt may have lower equity, which could affect the return for shareholders.

Question 18

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The average collection period of the receivables in terms of days was

Accepted Answer

Using the formula for average collection period:
Average Collection Period (in days) = (Accounts Receivable / Net Credit Sales) x Number of Days in Period

We are given:
Beginning Accounts Receivable = $800,000
Ending Accounts Receivable = $900,000
Net Credit Sales = $8,040,000

First, we need to find the average Accounts Receivable for the year:
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($800,000 + $900,000) / 2
Average Accounts Receivable = $850,000

Now we can calculate the Average Collection Period:
Average Collection Period = ($850,000 / $8,040,000) x 365 days
Average Collection Period = 38.4 days

Therefore, the best choice is B (38.4 days).

Question 19

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $1,250,000. The inventory turnover for the year is

Accepted Answer

The answer of Savory Thymes, Inc. had net credit sales...

Question 20

Stockholders are most interested in evaluating

Accepted Answer

Stockholders are primarily interested in the profitability of the company, as this determines their return on investment. While liquidity and solvency are also important factors, they are more relevant to creditors and lenders, who are looking to ensure that the company can meet its debt obligations. Marketability refers to the company's ability to sell its products or services, which is important for revenue but is not the primary concern of stockholders.

Quiz 13: Financial Statement Analysis

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The accounts receivable turnover was

Bill's Dollar Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $6,400,000. The accounts receivable turnover was

LKN Company had net credit sales of $5,005,000 and cost of goods sold of $3,500,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover was

A high accounts receivable turnover indicates

Somen to Park Corporation had net credit sales of $5,075,000 and cost of goods sold of $3,750,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $650,000 and $750,000, respectively. The accounts receivable turnover was

A company with $60,000 in current assets and $35,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

Long-term creditors are usually most interested in evaluating

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $1,250,000. The inventory turnover for the year is

Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The average collection period of the accounts receivable in terms of days was

The current ratio is a

In ratio analysis, the ratios are never expressed as a

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $1,250,000. The average days in inventory during the year was approximately

The accounts receivable turnover and inventory turnover are used to analyze

Which one of the following would be considered a long-term solvency ratio?

The current ratio is

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $1,250,000. The average days in inventory during the year was approximately

Return on common stockholders' equity is most closely related to

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The average collection period of the receivables in terms of days was

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $1,250,000. The inventory turnover for the year is

Stockholders are most interested in evaluating