Question 1

The gross profit rate reveals how much profit from each sales dollar is generated to cover administrative and selling expenses.

Accepted Answer

The gross profit rate, calculated by dividing gross profit by net sales, indicates the portion of each sales dollar that remains after deducting the cost of goods sold, which can then be used to cover administrative and selling expenses.

Question 2

The liabilities of a company at the end of the year are $530,000 and the total stockholders' equity at the end of the year is $1,080,000. The debt to stockholders' equity ratio is: (Round your answer two decimal places.)

Accepted Answer

The debt to stockholders' equity ratio is calculated as total liabilities divided by total stockholders' equity. So, $530,000 / $1,080,000 = 0.4907, which rounds to 0.49 to 1.

Question 3

If current assets were $150,000, merchandise inventory was $55,000, and current liabilities were $15,000, the acid test ratio is: (Round your answer two decimal places.)

Accepted Answer

The acid-test ratio is calculated as (Current Assets - Inventory) / Current Liabilities. Here, it is ($150,000 - $55,000) / $15,000 = $95,000 / $15,000 = 6.33:1.

Question 4

The debt-to-equity ratio measures the extent of (or proportion of) assets to equity, with which a business operates.

Accepted Answer

The debt-to-equity ratio actually measures a company's financial leverage by dividing its total liabilities by its shareholder equity, not the proportion of assets to equity.

Question 5

The net sales for James, Inc. were $4,000,000; net income before taxes was $830,000; and gross profit was $1,400,000. The return on sales ratio would be: (Round your answer two decimal places, X.XX%.)

Accepted Answer

The return on sales ratio is calculated as (Net Income Before Taxes / Net Sales) * 100. So, ($830,000 / $4,000,000) * 100 = 20.75%.

Question 6

What is Jane's rate of return on total assets if total assets are $135,000, net income is $2,700, interest expense is $1,800, and income tax is $3,000? (Round your answer two decimal places, X.XX%.)

Accepted Answer

Net income plus interest expense = $2,700 + $1,800 = $4,500$4,500/$135,000 = 5.56%

Question 7

The net income before taxes for the year ended was $320,000. Equity for common stockholders at the end of the year was $1,700,000 and $1,430,000 at the beginning of the year. The return on common stockholders' equity would be: (Round your answer two decimal places, X.XX%.)

Accepted Answer

The return on common stockholders' equity is calculated as (Net Income / Average Equity) * 100. The average equity is ($1,700,000 + $1,430,000) / 2 = $1,565,000. Thus, the return is ($320,000 / $1,565,000) * 100 = 20.45%.

Question 8

Isaiah Company has net income before interest and taxes of $834,000; beginning total assets of $2,190,000; and ending total assets of $2,500,000. Isaiah's return on total assets is: (Round your answer two decimal places.)

Accepted Answer

Return on total assets = Net income before interest and taxes / Average total assets= $834,000 / (($2,190,000 + $2,500,000) / 2)= $834,000 / $2,345,000= 35.57%

Question 9

Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable.

Accepted Answer

Accounts receivable turnover is indeed calculated by dividing net credit sales by the average accounts receivable, which measures how efficiently a company collects its receivables.

Question 10

Topiary's Unlimited has a cost of goods sold of $1,440,000. The beginning merchandise inventory was $203,000 and its ending merchandise inventory is $212,000. Topiary's inventory turnover ratio is: (Round your answer two decimal places.)

Accepted Answer

The answer of Topiary's Unlimited has a cost of goods...

Question 11

What is George's gross profit rate if net sales are $108,000, operating expenses are $26,000, and cost of goods sold is $66,000? (Round your answer two decimal places, X.XX%.)

Accepted Answer

Gross profit rate is calculated as (Net Sales - Cost of Goods Sold) / Net Sales. Here, it's ($108,000 - $66,000) / $108,000 = $42,000 / $108,000 = 0.3889 or 38.89%.

Question 12

With the asset turnover ratio, assets that are not used in producing sales, such as investments, are subtracted from total assets.

Accepted Answer

The asset turnover ratio is calculated by dividing net sales by total assets. Total assets include all assets owned by the company, regardless of whether they are used in producing sales. However, investments are not used in producing sales, so they are subtracted from total assets when calculating the asset turnover ratio.

Question 13

Examination of the relationship between two numbers or sets of numbers on financial reports describes:

Accepted Answer

Ratio analysis involves examining the relationship between two numbers or sets of numbers on financial reports to assess financial performance and condition.

Question 14

What is the rate of return on common stockholders' equity if net income before taxes is $30,200, sales are $202,000, and common stockholders' equity is $81,000? (Round your answer two decimal places, X.XX%.)

Accepted Answer

The answer of What is the rate of return on...

Question 15

Which of the following is considered a debt management ratio?

Accepted Answer

All of the options listed are considered debt management ratios. Debt to total assets and debt to stockholders' equity ratios measure the proportion of a company's assets financed by debt, while the times interest earned ratio assesses a company's ability to cover its interest obligations with its earnings.

Question 16

The income before taxes and interest expense of Barry Builders for the year just ended is $213,000. Their interest expense is $21,000 and their income taxes are $82,500. The number of times interest would be earned is: (Round your answer two decimal places.)

Accepted Answer

The times interest earned ratio is calculated as (Income before taxes and interest) / (Interest expense). So, $213,000 / $21,000 = 10.14.

Question 17

Rick's Cars had a beginning account receivables balance of $327,000. The ending account receivables balance was $281,000. Net credit sales for the company were $4,270,000. The accounts receivable turnover for Rick's Cars is: (Round your answer two decimal places.)

Accepted Answer

The answer of Rick's Cars had a beginning account receivables...

Question 18

Coal Company has an income before taxes of $500,700, and an interest expense of $100,400. What is the times interest earned ratio?

Accepted Answer

The times interest earned ratio is calculated as (Income Before Taxes + Interest Expense) / Interest Expense. Plugging in the numbers: ($500,700 + $100,400) / $100,400 = 5.99 times.

Question 19

Tom's Toys has a cash balance of $109,000; temporary investments of $42,000; net receivables of $63,000; and inventory of $407,000. Tom's current liabilities total $126,000. His quick (acid test) ratio is: (Round your answer two decimal places.)

Accepted Answer

The quick ratio is calculated by dividing the sum of cash, temporary investments, and net receivables by current liabilities. In this case, the quick ratio is ($109,000 + $42,000 + $63,000) / $126,000 = 1.70 to 1.

Question 20

A company has cash of $221,000; short-term investments of $54,000; net receivables of $75,000; and inventory of $103,000. Current liabilities total $83,000. The current ratio is: (Round your answer two decimal places.)

Accepted Answer

The answer of A company has cash of $221,000; short-term...

Quiz 22: Analyzing Financial Statements