Question 1

A company has long-term notes payable of $175,625,taxes of $9,500,ending merchandise inventory of $450,290,interest expense of $14,050,net sales of $720,000 a gross profit ratio of 35%,a times interest earned ratio of 4.23,and total assets of $1,300,417.What is the company's earnings before interest and taxes?
A)$252,000
B)$65,814
C)$269,710
D)106,696
E)$59,432

Accepted Answer

(X/14,050) = 4.23; X = 59,432 (rounded)

Question 2

A company has total assets of $5,600,482,common stock of 2,111,111,retained earnings of $1,058,473.What is the company's equity ratio?
A)43.41%
B)65.00%
C)41.57%
D)56.59%
E)54.22%

Accepted Answer

((2,111,111+1,058,473)/5,600,482) = 56.59%

Question 3

Simple Simon's balance sheet and income statement accounts follow:
$\begin{array}{lrrr}\text { At December } 31&2011&2010&2009\
\text { Assets }\
\text { Cash } & \$ 30,872 & \$ 36,086 & \$ 37,974 \
\hline \text { Accounts receivable, net } & 89,476 & 63,151 & 50,632 \
\hline \text { Merchandise inventory } & 112,499 & 83,450 & 54,467 \
\hline \text { Prepaid expenses } & 9,942 & 9,473 & 4,219 \
\hline \text { Plant assets, net } & 291,143 & 268,126 & 244,108 \
\text { Total assets } & \$ 533,932 & \$ 460,286 & \$ 391,400\
\text { Liabilities and Equity }\
\text { Accounts payable } & \$ 130,290 & \$ 76,233 & \$ 50,632 \
\hline \text { Long-term notes payable secured by } & 98,372 & 103,748 & 107,769 \
\text { mortgages on plant assets } & 142,500 & 132,500 & 102,500 \
\hline \text { Common stock, } \$ 10 \text { par value } & 182,770 & 147,805 & 130,499\
\text { Total liabilities and equity }&\$533.932&\$460,286&\$391,400
\end{array}$

What is Simple Simon's profit margin ratio for 2011?
A)65%
B)12%
C)3.7%
D)5.9%
E)5.0%

Accepted Answer

The answer of Simple Simon's balance sheet and income statement...

Question 4

A company has sales of $5,417,000,a gross profit ratio of 35%,ending merchandise inventory of $201,425,and total current assets of $1,539,600.What is the days sales' in inventory ratio for the year?
A)6.10
B)20.88
C)26.15
D)22.67
E)15.77

Accepted Answer

(201,425/(5,417,000*.65))*365 = 20.88

Question 5

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.
A)$200,000
B)$500,000
C)$50,000
D)$25,000
E)$175,000

Accepted Answer

(Net Income - Preferred dividends)/Average common stockholders' equity = 25%
($200,000 - Preferred dividends)/$700,000 = 25%
($200,000 - Preferred dividends) = 25% x $700,000
($200,000 - Preferred dividends) = $175,000
($200,000 - $175,000) = $25,000 preferred dividends

Question 6

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's current ratio for 2011?
A)1.96
B)2.32
C)1.07
D)1.92
E)2.17

Accepted Answer

To calculate the current ratio, we divide current assets by current liabilities. 
For Corona Company in 2011, the current assets are:
Cash and cash equivalents: $19,000
Accounts receivable: $35,000
Inventory: $41,000
Prepaid expenses: $2,000
Total current assets: $97,000

The current liabilities are:
Accounts payable: $30,000
Accrued expenses payable: $25,000
Current portion of long-term debt: $10,000
Total current liabilities: $65,000

Current ratio = Current assets / Current liabilities = $97,000 / $65,000 = 1.92

Therefore, the best choice is D, with an explanation as shown above.

Question 7

A company has a profit margin of 8%.If net income is equal to $40,000 and average total assets is equal to $332,500,how much are net sales?
A)$3,200
B)$500,000
C)$26,600
D)$4,156,250
E)$372,500

Accepted Answer

$40,000/.08 = $500,000

Question 8

A company has total assets of $5,600,482,common stock of 2,111,111,retained earnings of $1,058,473.What is the company's debt ratio?
A)43.41%
B)65.00%
C)41.57%
D)50.00%
E)42.81%

Accepted Answer

((5,600,482-2,111,111-1,058,476)/5,600,482) = 43.41%

Question 9

Simple Simon's balance sheet and income statement accounts follow:
$\begin{array}{lrrr}\text { At December } 31&2011&2010&2009\
\text { Assets }\
\text { Cash } & \$ 30,872 & \$ 36,086 & \$ 37,974 \
\hline \text { Accounts receivable, net } & 89,476 & 63,151 & 50,632 \
\hline \text { Merchandise inventory } & 112,499 & 83,450 & 54,467 \
\hline \text { Prepaid expenses } & 9,942 & 9,473 & 4,219 \
\hline \text { Plant assets, net } & 291,143 & 268,126 & 244,108 \
\text { Total assets } & \$ 533,932 & \$ 460,286 & \$ 391,400\
\text { Liabilities and Equity }\
\text { Accounts payable } & \$ 130,290 & \$ 76,233 & \$ 50,632 \
\hline \text { Long-term notes payable secured by } & 98,372 & 103,748 & 107,769 \
\text { mortgages on plant assets } & 142,500 & 132,500 & 102,500 \
\hline \text { Common stock, } \$ 10 \text { par value } & 182,770 & 147,805 & 130,499\
\text { Total liabilities and equity }&\$533.932&\$460,286&\$391,400
\end{array}$

What is Simple Simon's gross margin ratio for 2010?
A)65%
B)35%
C)67%
D)33%
E)39%

Accepted Answer

The answer of Simple Simon's balance sheet and income statement...

Question 10

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's days' sales uncollected ratio for 2011 assuming net sales and gross profit for the period were $1,236,783,$927,587 respectively?
A)25.20
B)23.03
C)20.99
D)24.58
E)22.17

Accepted Answer

The days' sales uncollected ratio is calculated as (Accounts Receivable / Net Sales) * 365. For 2011, it is (78,034 / 1,236,783) * 365 = 23.03 days.

Question 11

Simple Simon's balance sheet and income statement accounts follow:
$\begin{array}{lrrr}\text { At December } 31&2011&2010&2009\
\text { Assets }\
\text { Cash } & \$ 30,872 & \$ 36,086 & \$ 37,974 \
\hline \text { Accounts receivable, net } & 89,476 & 63,151 & 50,632 \
\hline \text { Merchandise inventory } & 112,499 & 83,450 & 54,467 \
\hline \text { Prepaid expenses } & 9,942 & 9,473 & 4,219 \
\hline \text { Plant assets, net } & 291,143 & 268,126 & 244,108 \
\text { Total assets } & \$ 533,932 & \$ 460,286 & \$ 391,400\
\text { Liabilities and Equity }\
\text { Accounts payable } & \$ 130,290 & \$ 76,233 & \$ 50,632 \
\hline \text { Long-term notes payable secured by } & 98,372 & 103,748 & 107,769 \
\text { mortgages on plant assets } & 142,500 & 132,500 & 102,500 \
\hline \text { Common stock, } \$ 10 \text { par value } & 182,770 & 147,805 & 130,499\
\text { Total liabilities and equity }&\$533.932&\$460,286&\$391,400
\end{array}$

What is Simple Simon's times interest earned ratio for 2010?
A)3.57%
B)4.22%
C)3.69%
D)2.75%
E)2.57%

Accepted Answer

(32,317+12,598+8,216)/12,598 = 4.22

Question 12

A company has sales of $2,458,422,a gross profit ratio of 23%,a days' sales in inventory ratio of 12.4,and total current assets of $539,600.What is the ending inventory for the year?
A)$46,013
B)$58,000
C)$64,310
D)$61,715
E)$55,951

Accepted Answer

(X/1,892,985) * 365 = 12.4; X = 64,310

Question 13

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's days' sales in inventory ratio for 2011 assuming net sales and gross profit for the period were $1,236,783,$927,587 respectively?
A)86.75
B)112.29
C)105.41
D)75.35
E)107.11

Accepted Answer

The answer of Corona Company's balance sheet accounts follow:
\(\begin{array}{lrrr}
 \text...

Question 14

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's accounts receivable turnover ratio for 2010 assuming net sales for the period were $1,236,783?
A)27.21
B)25.99
C)22.91
D)30.05
E)15.85

Accepted Answer

The answer of Corona Company's balance sheet accounts follow:
\(\begin{array}{lrrr}
 \text...

Question 15

A company has a profit margin of 5%.If net income is equal to $83,000 and average total assets is equal to $45,000,how much are net sales?
A)$4,150
B)$2,250
C)$1,660,000
D)$6,400
E)$128,000

Accepted Answer

$83,000/.05 = $1,660,000

Question 16

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's debt to equity ratio for 2010?
A)1.49
B).71
C).40
D)4.39
E).67

Accepted Answer

The answer of Corona Company's balance sheet accounts follow:
\(\begin{array}{lrrr}
 \text...

Question 17

Simple Simon's balance sheet and income statement accounts follow:
$\begin{array}{lrrr}\text { At December } 31&2011&2010&2009\
\text { Assets }\
\text { Cash } & \$ 30,872 & \$ 36,086 & \$ 37,974 \
\hline \text { Accounts receivable, net } & 89,476 & 63,151 & 50,632 \
\hline \text { Merchandise inventory } & 112,499 & 83,450 & 54,467 \
\hline \text { Prepaid expenses } & 9,942 & 9,473 & 4,219 \
\hline \text { Plant assets, net } & 291,143 & 268,126 & 244,108 \
\text { Total assets } & \$ 533,932 & \$ 460,286 & \$ 391,400\
\text { Liabilities and Equity }\
\text { Accounts payable } & \$ 130,290 & \$ 76,233 & \$ 50,632 \
\hline \text { Long-term notes payable secured by } & 98,372 & 103,748 & 107,769 \
\text { mortgages on plant assets } & 142,500 & 132,500 & 102,500 \
\hline \text { Common stock, } \$ 10 \text { par value } & 182,770 & 147,805 & 130,499\
\text { Total liabilities and equity }&\$533.932&\$460,286&\$391,400
\end{array}$

What is Simple Simon's return on common stockholders' equity ratio for 2010?
A)27.5%
B)25.4%
C)12.6%
D)29.4%
E)19.5%

Accepted Answer

The answer of Simple Simon's balance sheet and income statement...

Question 18

A company had a return on common stockholders' equity of 22%.Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000.Compute the amount of the preferred dividends declared.
A)$50,000
B)$550,000
C)$132,000
D)$10,763,636
E)$10,000

Accepted Answer

(Net Income - Preferred dividends)/Average common stockholders' equity = 22%
($600,000 - Preferred dividends)/$2,500,000 = 22%
($600,000 - Preferred dividends) = 22% x $2,500,000
($600,000 - Preferred dividends) = $550,000
($600,000 - $550,000) = $50,000 preferred dividends

Question 19

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's inventory turnover ratio for 2011 assuming net sales and gross profit for the period were $1,236,783,$927,587 respectively?
A)10.96
B)3.25
C)3.00
D)3.65
E)4.20

Accepted Answer

The answer of Corona Company's balance sheet accounts follow:
\(\begin{array}{lrrr}
 \text...

Question 20

Describe ratio analysis including its purpose,application and interpretation.

Accepted Answer

The answer of Describe ratio analysis including its purpose,application and...

Quiz 13: Analyzing and Interpreting Financial Statements

A company has total assets of $5,600,482,common stock of 2,111,111,retained earnings of $1,058,473.What is the company's equity ratio?

A company has sales of $5,417,000,a gross profit ratio of 35%,ending merchandise inventory of $201,425,and total current assets of $1,539,600.What is the days sales' in inventory ratio for the year?

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.

A company has a profit margin of 8%.If net income is equal to $40,000 and average total assets is equal to $332,500,how much are net sales?

A company has total assets of $5,600,482,common stock of 2,111,111,retained earnings of $1,058,473.What is the company's debt ratio?

A company has sales of $2,458,422,a gross profit ratio of 23%,a days' sales in inventory ratio of 12.4,and total current assets of $539,600.What is the ending inventory for the year?

A company has a profit margin of 5%.If net income is equal to $83,000 and average total assets is equal to $45,000,how much are net sales?

A company had a return on common stockholders' equity of 22%.Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000.Compute the amount of the preferred dividends declared.

Describe ratio analysis including its purpose,application and interpretation.