Question 1

If management wishes to measure a business's ability to pay upcoming debts,they could refer to measures for:
A)leverage.
B)liquidity.
C)debt management.
D)profitability.

Accepted Answer

Liquidity measures a company's ability to pay off its short-term obligations. It is the most relevant measure for management to assess a business's ability to pay upcoming debts. Leverage measures a company's use of debt financing, while debt management measures a company's ability to manage its overall debt load. Profitability measures a company's ability to generate profits.

Question 2

With a beginning Accounts Receivable balance of $40,000,an ending balance of $100,000,and net credit sales of $600,000,compute accounts receivable turnover ratio (rounded to the nearest tenth).
A)7)6
B)11.4
C)8)57
D)3)8

Accepted Answer

The answer of With a beginning Accounts Receivable balance of...

Question 3

The ratio that indicates how many days it takes to turn accounts receivable into cash is the:
A)accounts receivable turnover ratio.
B)average turnover ratio.
C)average collection period.
D)quick assets turnover ratio.

Accepted Answer

The ratio that indicates how many days it takes to turn accounts receivable into cash is the average collection period, which is calculated by dividing the number of days in a period by the accounts receivable turnover ratio. Therefore, option C is the correct choice. Options A, B, and D are incorrect as they refer to different types of ratios.

Question 4

With a beginning Accounts Receivable balance of $30,000,an ending balance of $46,000,and net credit sales of $480,000,compute accounts receivable turnover ratio.
A)0)08
B)12.63
C)16.0
D)10.43

Accepted Answer

The accounts receivable turnover ratio is calculated as net credit sales divided by the average accounts receivable. The average accounts receivable is ($30,000 + $46,000) / 2 = $38,000. Thus, the turnover ratio is $480,000 / $38,000 = 12.63.

Question 5

If the average collection period is 35 days,this means:
A)from the date of purchase to the date of payment is 35 days.
B)from the date of sale to the date of receipt of payment is 35 days.
C)from the date of discount to the date of receipt of payment is 35 days.
D)None of these answers is correct.

Accepted Answer

The average collection period refers to the average number of days it takes for a business to receive payment from its customers from the date of sale. Option A refers to the average payment period, while option C refers to the average discount period, which are not relevant in this case.

Question 6

If beginning and ending inventories are $20,000 and $30,000,respectively,and cost of goods sold is $450,000,what is the inventory turnover ratio?
A)18
B)16
C)15.5
D)15

Accepted Answer

The answer of If beginning and ending inventories are $20,000...

Question 7

If management wishes to evaluate the ability of a business to use sales to cover the operating expenses,they could use the:
A)rate of return on total assets.
B)rate of return on common stockholders' equity.
C)gross profit rate.
D)times interest earned.

Accepted Answer

The gross profit rate reflects the percentage of sales revenue that exceed the cost of goods sold, which can be used to cover operating expenses. It is calculated by dividing gross profit by net sales. A higher gross profit rate indicates that the business is able to cover its operating expenses with sales revenue. A and B measure profitability, while D measures the ability of a business to meet its interest obligations.

Question 8

A company has $50,000 in cash,$15,000 in accounts receivable,$25,000 in temporary investments and $125,000 in merchandise inventory.The company has $50,000 in current liabilities.The company's acid test (quick)ratio is:
A)1)30.
B)0)526.
C)4)30.
D)1)80.

Accepted Answer

The answer of A company has $50,000 in cash,$15,000 in...

Question 9

If management wishes to determine the average degree of delinquency of the charge customers,they could use the:
A)rate of return on total assets.
B)rate of return on common stockholders' equity.
C)accounts receivable turnover.
D)quick (acid test)ratio.

Accepted Answer

The accounts receivable turnover ratio measures how quickly a company collects its accounts receivable from customers. A higher turnover ratio indicates that customers are paying their bills more quickly, while a lower ratio indicates that customers are paying more slowly or not at all. Therefore, by using the accounts receivable turnover ratio, management can determine the average degree of delinquency of the charge customers.

Question 10

If management wishes to know how well the inventory is moving for a business,they could use the:
A)accounts receivable turnover.
B)inventory turnover.
C)acid test ratio.
D)current ratio.

Accepted Answer

Inventory turnover is the best choice to determine how well inventory is moving. It measures how many times inventory is sold and replaced during a specific period of time. A high inventory turnover ratio indicates that a business is selling its inventory quickly and efficiently, while a low ratio indicates that inventory is not moving as well and may lead to issues such as excess inventory or stockouts. Accounts receivable turnover is not related to inventory, while the acid test ratio and current ratio are measures of a business's liquidity.

Question 11

If management wishes to measure how effectively the assets were used in generating a profit,they could use the:
A)rate of return on total assets.
B)rate of return on common stockholders' equity.
C)return on sales.
D)times interest earned.

Accepted Answer

The rate of return on total assets measures the efficiency of the company in generating profits from its assets. It indicates how much profit the company is able to generate for each dollar of assets invested. The other options do not specifically measure the effectiveness of assets in generating profits. Return on sales measures how much profit the company generates for each dollar of sales, while times interest earned measures the ability of the company to pay off its interest expenses. The rate of return on common stockholders' equity measures the profitability of common shareholders' investment in the company.

Question 12

If management wishes to know how long it takes to collect from a charge customer,they could use the:
A)rate of return on total assets.
B)average collection period.
C)acid test ratio.
D)current ratio.

Accepted Answer

The average collection period would give management an idea of how long it takes to collect from a charge customer. This is a measure of the length of time it takes to convert accounts receivable into cash. The other options (rate of return on total assets, acid test ratio, current ratio) do not provide information specifically related to collecting from customers.

Question 13

The inventory turnover ratio calculates:
A)how many times the inventory turns over in one period.
B)number of times inventory is purchased in one period.
C)the dollar amount of change in inventory in one period.
D)None of these answers is correct.

Accepted Answer

The inventory turnover ratio is a measure of how efficiently a company is managing its inventory. It calculates how many times the inventory turns over in one period, which is typically one year. This is calculated by dividing the cost of goods sold by the average inventory value for the period.

Question 14

Chuck Company has a beginning Accounts Receivable balance of $85,000 and an ending balance of $50,000.Net credit sales are $300,000.The company's accounts receivable turnover ratio is:
A)4)444.
B)4)167.
C)4)000.
D)None of the above

Accepted Answer

Accounts receivable turnover ratio = Net credit sales / Average accounts receivableAverage accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2= ($85,000 + $50,000) / 2= $67,500Accounts receivable turnover ratio = $300,000 / $67,500= 4.444

Question 15

If management wishes to evaluate the amount of assets which were financed by creditors,they could use the:
A)debt to total assets.
B)rate of return on common stockholders' equity.
C)debt to total liabilities.
D)times interest earned.

Accepted Answer

The debt to total assets ratio compares the total amount of debt (liabilities) to the total amount of assets, giving a percentage of assets that have been financed by creditors.

Question 16

Carla's Fashions has an average collection period of 30 days.You could infer that Carla's Fashions:
A)bills her customers semi-monthly.
B)bills her customers quarterly.
C)has an accounts receivable turnover of approximately 12.
D)Both A and C can be inferred.

Accepted Answer

The average collection period is the average number of days it takes for a business to collect payment from its customers. Since Carla's Fashions has an average collection period of 30 days, this means that on average, it takes her 30 days to collect payment from her customers. This implies that her accounts receivable turnover is approximately 12 (365 days in a year divided by 30 days to collect payment). There is no information to suggest that Carla's Fashions bills her customers semi-monthly or quarterly.

Question 17

If management wishes to evaluate how effectively the assets of a business are being used,they could use the:
A)asset turnover.
B)rate of return on common stockholders' equity.
C)acid test ratio.
D)debt to total stockholders' equity.

Accepted Answer

Asset turnover is a financial ratio that measures how efficiently a company is using its assets to generate revenue. It is calculated by dividing the net sales by average total assets. A high asset turnover ratio is an indication that the company is effectively utilizing its assets to generate revenue. Therefore, it is the best choice for evaluating how effectively the assets of a business are being used. The other options, such as rate of return on common stockholders' equity, acid test ratio, and debt to total stockholders' equity, focus on other aspects of financial performance and are not specifically related to asset utilization.

Question 18

If management wishes to know the ability to pay off the current debts of a business,they could use the:
A)debt to total assets.
B)current ratio.
C)inventory turnover ratio.
D)times interest earned.

Accepted Answer

The current ratio is the ratio of current assets to current liabilities, and it indicates the ability of a business to pay off its short-term debts. A higher current ratio means the business has more current assets to cover its current liabilities, which suggests a better ability to repay debts. Therefore, the current ratio is the best choice to evaluate the ability to pay off current debts.

Question 19

Scott Company had a current ratio of 2.57:1 in Year 1 and 2.76:1 in Year 2.This change in current ratio indicates:
A)the company's debt paying ability has improved.
B)the company's debt paying ability has weakened.
C)the company's customers are paying their accounts sooner.
D)the company is able to sell its inventory faster.

Accepted Answer

The increase in the current ratio from Year 1 to Year 2 indicates that the company's ability to pay its short-term liabilities with its short-term assets has improved, suggesting an improvement in its debt-paying ability.

Question 20

If beginning and ending inventories are $175,000 and $125,000,respectively,and the cost of goods sold is $450,000,what is the inventory turnover ratio?
A)4)50
B)3)00
C)3)60
D)0)28

Accepted Answer

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($175,000 + $125,000) / 2 = $150,000
Inventory Turnover Ratio = $450,000 / $150,000 = 3.00

Quiz 22: Analyzing Financial Statements

If management wishes to measure a business's ability to pay upcoming debts,they could refer to measures for:

With a beginning Accounts Receivable balance of $40,000,an ending balance of $100,000,and net credit sales of $600,000,compute accounts receivable turnover ratio (rounded to the nearest tenth) .

The ratio that indicates how many days it takes to turn accounts receivable into cash is the:

With a beginning Accounts Receivable balance of $30,000,an ending balance of $46,000,and net credit sales of $480,000,compute accounts receivable turnover ratio.

If the average collection period is 35 days,this means:

If beginning and ending inventories are $20,000 and $30,000,respectively,and cost of goods sold is $450,000,what is the inventory turnover ratio?

If management wishes to evaluate the ability of a business to use sales to cover the operating expenses,they could use the:

A company has $50,000 in cash,$15,000 in accounts receivable,$25,000 in temporary investments and $125,000 in merchandise inventory.The company has $50,000 in current liabilities.The company's acid test (quick) ratio is:

If management wishes to determine the average degree of delinquency of the charge customers,they could use the:

If management wishes to know how well the inventory is moving for a business,they could use the:

If management wishes to measure how effectively the assets were used in generating a profit,they could use the:

If management wishes to know how long it takes to collect from a charge customer,they could use the:

The inventory turnover ratio calculates:

Chuck Company has a beginning Accounts Receivable balance of $85,000 and an ending balance of $50,000.Net credit sales are $300,000.The company's accounts receivable turnover ratio is:

If management wishes to evaluate the amount of assets which were financed by creditors,they could use the:

Carla's Fashions has an average collection period of 30 days.You could infer that Carla's Fashions:

If management wishes to evaluate how effectively the assets of a business are being used,they could use the:

If management wishes to know the ability to pay off the current debts of a business,they could use the:

Scott Company had a current ratio of 2.57:1 in Year 1 and 2.76:1 in Year 2.This change in current ratio indicates:

If beginning and ending inventories are $175,000 and $125,000,respectively,and the cost of goods sold is $450,000,what is the inventory turnover ratio?