Question 1

Presented below are selected data from the financial statements of Korn Corp. for 2014 and 2013.  The price-earnings ratio for 2014 is
A) 1.09.
B) 5.46.
C) 6.0.
D) 11.0.

Accepted Answer

The answer of Presented below are selected data from the...

Question 2

A company has an average inventory on hand of $100,000 and the days in inventory are 73 days. What is the cost of goods sold?
A) $500,000
B) $7,300,000
C) $1,000,000
D) $3,650,000

Accepted Answer

Supporting calculations:
365 / 73 = 5
5 × $100,000 = $500,000

Question 3

Last year Neil Company had a net income of $170,000, income tax expense of $37,000, and interest expense of $24,000. The company's times-interest-earned ratio was closest to
A) 8.63.
B) 7.08.
C) 9.63.
D) 6.24.

Accepted Answer

First, we need to calculate the earnings before interest and taxes (EBIT):
EBIT = Net income + Income tax expense + Interest expense
EBIT = $170,000 + $37,000 + $24,000
EBIT = $231,000

Next, we can calculate the times-interest-earned ratio:
Times-interest-earned ratio = EBIT / Interest expense
Times-interest-earned ratio = $231,000 / $24,000
Times-interest-earned ratio = 9.63

Therefore, the closest choice is C) 9.63.

Question 4

Presented below are selected data from the financial statements of DeBruce Corp. for 2014 and 2013.  The dividend payout ratio for 2014 is
A) 0.382.
B) 0.05.
C) 0.28.
D) 0.50.

Accepted Answer

The answer of Presented below are selected data from the...

Question 5

The current assets of Caitlin Company are $360,000. The current liabilities are $240,000. The current ratio is
A) 1.25.
B) 1.50.
C) 0.67.
D) cannot be determined from the information provided.

Accepted Answer

Current ratio is calculated by dividing current assets by current liabilities. Therefore, current ratio = $360,000/$240,000 = 1.50.

Question 6

If a company has an acid-test ratio of 1.2, what respective effects will the borrowing of cash by short-term debt and the collection of accounts receivable have on the ratio? Short-term Collection of
Borrowing Receivable
A) Increase No effect
B) Increase Increase
C) Decrease No effect
D) Decrease Decrease

Accepted Answer

If a company has an acid-test ratio of 1.2, it means that for every $1 of current liabilities, the company has $1.20 of current assets that can be converted to cash quickly. Borrowing cash by short-term debt will increase the current liabilities, which will decrease the acid-test ratio. On the other hand, collecting accounts receivable will increase the cash available in the current assets, but it will not affect the current liabilities. Therefore, the collection of accounts receivable will have no effect on the acid-test ratio. As a result, the best choice is C - Decrease (due to the borrowing of cash by short-term debt), No effect (due to the collection of accounts receivable).

Question 7

Lost Shoe Company, a retailer, had cost of goods sold of $220,000 last year. The beginning inventory balance was $30,000 and the ending inventory balance was $21,000. The company's inventory turnover ratio was closest to
A) 10.48.
B) 7.33.
C) 4.31.
D) 8.63.

Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory balance.

Average inventory = (beginning inventory + ending inventory) / 2
= ($30,000 + $21,000) / 2
= $25,500

Inventory turnover ratio = cost of goods sold / average inventory
= $220,000 / $25,500
= 8.63

Therefore, the closest answer is D) 8.63.

Question 8

Which one of the following would be considered a leverage ratio?
A) accounts receivable turnover
B) return on total assets
C) quick ratio
D) debt ratio

Accepted Answer

A leverage ratio measures the extent to which a company uses its debt to fund its operations. The debt ratio calculates the proportion of a company's assets that are financed through debt, making it the only option in the given choices. Accounts receivable turnover and return on total assets are profitability ratios, while the quick ratio is a liquidity ratio.

Question 9

Goslier Company's net income last year was $130,000. The company paid preferred dividends of $42,000 and its average common stockholders' equity was $610,000. The company's return on common stockholders' equity for the year was closest to
A) 15.8%.
B) 28.1%.
C) 21.3%.
D) 14.4%.

Accepted Answer

The return on common stockholders' equity is calculated by subtracting preferred dividends from net income and then dividing by average common stockholders' equity. So, ($130,000 - $42,000) / $610,000 = $88,000 / $610,000 = 0.144 or 14.4%.

Question 10

A company has a receivables turnover of 15 times. The average net receivables during the period are $430,000. What is the amount of net credit sales for the period?
A) $430,000
B) $6,450,000
C) $6,000,000
D) $500,000

Accepted Answer

The amount of net credit sales is calculated by multiplying the receivables turnover ratio by the average net receivables. Therefore, $430,000 * 15 = $6,450,000.

Question 11

Figure 16-1.
Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2013. The weighted average number of shares outstanding in 2013 was 50,000 shares. Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange.
-Refer to Figure 16-1. Starbuck's price-earnings ratio is
A)2
B)5
C)10
D)8.

Accepted Answer

The answer of Figure 16-1.
Starbuck Corporation had net income of...

Question 12

A liquidity ratio measures the
A) income or operating success of an enterprise over a period of time.
B) ability of the enterprise to survive over a long period of time.
C) short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash.
D) number of times interest is earned.

Accepted Answer

A liquidity ratio measures the short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash. It is different from ratios that measure income or operating success over a period of time, the ability of the enterprise to survive over a long period of time, or the number of times interest is earned.

Question 13

Lisa's Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was $13,000 and the ending inventory balance was $18,000. The company's average inventory turnover in days was closest to
A) 36.50 days.
B) 26.36 days.
C) 31.43 days.
D) 62.86 days.

Accepted Answer

First, we need to calculate the inventory turnover ratio, which is COGS divided by average inventory.

COGS = $180,000 
Average inventory = (beginning inventory + ending inventory) / 2
= ($13,000 + $18,000) / 2 
= $15,500

Inventory turnover ratio = COGS / Average inventory 
= $180,000 / $15,500 
= 11.61

Next, we need to convert this to average inventory turnover in days.

Average inventory turnover in days = 365 days / inventory turnover ratio 
= 365 days / 11.61 
= 31.43 days (rounded to two decimal places)

Therefore, the closest answer is C) 31.43 days.

Question 14

Opis Company has total assets of $475,000 and total liabilities of $130,000. The company's debt-to-equity ratio is closest to
A) 0.32.
B) 0.21.
C) 0.38.
D) 0.27.

Accepted Answer

Debt-to-equity ratio is calculated by dividing total liabilities by total equity (or assets minus liabilities).

Debt-to-equity ratio = Total Liabilities / Total Equity

Total Equity = Total Assets - Total Liabilities

Total Equity = $475,000 - $130,000 = $345,000

Debt-to-equity ratio = $130,000 / $345,000 = 0.38

Therefore, the company's debt-to-equity ratio is closest to 0.38, which is option C.

Question 15

Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivables turnover was
A) 7.4 times.
B) 8.7 times.
C) 6.2 times.
D) 8 times.

Accepted Answer

The answer of Parr Hardware Store had net credit sales...

Question 16

Figure 16-1.
Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2013. The weighted average number of shares outstanding in 2013 was 50,000 shares. Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange.
-Refer to Figure 16-1. Starbuck's dividend payout ratio for 2013 is
A) $5 per share.
B) 0.25.
C) 0.20.
D) 0.125.

Accepted Answer

Dividend payout ratio is calculated as dividends paid divided by net income. In this case, the dividend payout ratio would be $50,000/$250,000 = 0.20 or 20%. This means that for every dollar of net income, 20 cents is paid out as dividends to common stockholders.

Question 17

Presented below are selected data from the financial statements of Russell Corp. for 2014 and 2013.  Earnings per share is reported on the 2014 income statement as
A) $ 0.44.
B) $ 0.55.
C) $ 0.84.
D) $ 0.95.

Accepted Answer

The earnings per share for 2014 can be calculated using the formula: (Net income - preferred dividends) / Weighted average number of common shares outstanding. From the information given, we can see that the net income for 2014 is $42.4 million and the preferred dividends are $2.8 million. The weighted average number of common shares outstanding is not given, so we cannot calculate the exact earnings per share. However, we can eliminate choices A and B because they are too low compared to the net income. Choice D is too high compared to the net income and would require a very low weighted average number of common shares outstanding. Therefore, the best choice is C, which is a reasonable earnings per share based on the net income.

Question 18

Jackson Company, a retailer, had cost of goods sold of $140,000 last year. The beginning inventory balance was $8,000 and the ending inventory balance was $11,000. The company's inventory turnover ratio was closest to
A) 12.73.
B) 14.73.
C) 7.37.
D) 17.50.

Accepted Answer

The answer of Jackson Company, a retailer, had cost of...

Question 19

Cottle Company has total assets of $180,000 and total liabilities of $54,000. The company's debt-to-equity ratio is closest to
A) 0.32.
B) 2.3.
C) 0.30.
D) 0.43.

Accepted Answer

.43 = 54,000 / 126,000
 
Assets -Liabilities = Equity
$180,000 - $54,000 = $126,000

Question 20

Last year Fuller Company had a net income of $410,000, income tax expense of $50,000, and interest expense of $34,000. The company's times-interest-earned ratio was closest to
A) 12.06.
B) 9.88.
C) 14.53.
D) 13.53.

Accepted Answer

The answer of Last year Fuller Company had a net...

Quiz 16: Financial Statement Analysis

Presented below are selected data from the financial statements of Korn Corp. for 2014 and 2013. The price-earnings ratio for 2014 is

A company has an average inventory on hand of $100,000 and the days in inventory are 73 days. What is the cost of goods sold?

Last year Neil Company had a net income of $170,000, income tax expense of $37,000, and interest expense of $24,000. The company's times-interest-earned ratio was closest to

Presented below are selected data from the financial statements of DeBruce Corp. for 2014 and 2013. The dividend payout ratio for 2014 is

The current assets of Caitlin Company are $360,000. The current liabilities are $240,000. The current ratio is

If a company has an acid-test ratio of 1.2, what respective effects will the borrowing of cash by short-term debt and the collection of accounts receivable have on the ratio? Short-term Collection of Borrowing Receivable

Lost Shoe Company, a retailer, had cost of goods sold of $220,000 last year. The beginning inventory balance was $30,000 and the ending inventory balance was $21,000. The company's inventory turnover ratio was closest to

Which one of the following would be considered a leverage ratio?

Goslier Company's net income last year was $130,000. The company paid preferred dividends of $42,000 and its average common stockholders' equity was $610,000. The company's return on common stockholders' equity for the year was closest to

A company has a receivables turnover of 15 times. The average net receivables during the period are $430,000. What is the amount of net credit sales for the period?

A liquidity ratio measures the

Lisa's Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was $13,000 and the ending inventory balance was $18,000. The company's average inventory turnover in days was closest to

Opis Company has total assets of $475,000 and total liabilities of $130,000. The company's debt-to-equity ratio is closest to

Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivables turnover was

Presented below are selected data from the financial statements of Russell Corp. for 2014 and 2013. Earnings per share is reported on the 2014 income statement as

Jackson Company, a retailer, had cost of goods sold of $140,000 last year. The beginning inventory balance was $8,000 and the ending inventory balance was $11,000. The company's inventory turnover ratio was closest to

Cottle Company has total assets of $180,000 and total liabilities of $54,000. The company's debt-to-equity ratio is closest to

Last year Fuller Company had a net income of $410,000, income tax expense of $50,000, and interest expense of $34,000. The company's times-interest-earned ratio was closest to