Question 1

The debt ratio is the ratio of total debt divided by total equity.

Accepted Answer

The debt ratio is calculated by dividing total liabilities (not just debt) by total assets, not by total equity.

Question 2

Wilson,Inc.provides the following data:

Calculate accounts receivable turnover ratio form 2017.(Round your answer to two decimal places. )
A)4.80 times
B)3.85 times
C)2.82 times
D)2.22 times

Accepted Answer

C)Accounts receivable turnover ratio = Net credit sales / Average net accounts receivable = $240,000 / $85,000 = 2.82 times

Question 3

e-Shop,Inc.has net sales on account of $1,600,000.The average net accounts receivable are $620,000.Calculate the days' sales in receivables.(Round any intermediate calculations and your final answer to two decimal places. )
A)313.90 days
B)365.00 days
C)141.47 days
D)2.58 days

Accepted Answer

C)Accounts receivable turnover ratio = Net credit sales / Average net accounts receivable = $1,600,000 / $620,000 = 2.58
Days' sales in receivables = 365 / Accounts receivable turnover ratio = 365 / 2.58 = 141.47

Question 4

Days' sales in receivables measures the return on average receivables.

Accepted Answer

Days' sales in receivables measures the average number of days it takes for a company to collect payment on its accounts receivables. It does not measure the return on average receivables.

Question 5

Use the following to calculate the inventory turnover ratio for the year 2017.

Accepted Answer

The answer of Use the following to calculate the inventory...

Question 6

Use the balance sheet of Maine,Inc.to calculate the current ratio for 2017 and 2018
  
Assets
  
Liabilities
  
Stockholders' Equity

Accepted Answer

The answer of Use the balance sheet of Maine,Inc.to calculate...

Question 7

Days' sales in inventory measures how quickly a company can collect its receivables.

Accepted Answer

Days' sales in inventory measures how quickly a company can sell its inventory, not how quickly it can collect receivables. The metric that measures how quickly a company can collect its receivables is called Days Sales Outstanding (DSO).

Question 8

The inventory turnover ratio measures the average number of days that inventory is held by a company.

Accepted Answer

The inventory turnover ratio measures how many times a company sells and replaces its inventory during a period, not the number of days inventory is held.

Question 9

The asset turnover ratio is a way to evaluate how well a company can pay its short-term liabilities.

Accepted Answer

The asset turnover ratio is a way to evaluate how efficiently a company is using its assets to generate revenue, not how well it can pay its short-term liabilities.

Question 10

Seidner,Inc.provides the following data:

Calculate the asset turnover ratio for 2017.(Round your answer to two decimal places. )
A)4.70 times
B)1.10 times
C)0.68 times
D)2.20 times

Accepted Answer

D)Asset turnover ratio = Net Sales / Average total assets = $540,000 / [($235,000 + $257,000)/ 2] = $540,000 / 246,000 = 2.20 times

Question 11

Pretty,Inc.provides the following data:

Calculate days' sales in inventory for 2017.(Round any intermediate calculations and your final answer to two decimal places. )
A)53.68
B)118.09
C)47.10
D)85.88

Accepted Answer

D)Inventory turnover ratio = Cost of Goods Sold / Average Merchandise Inventory =
$170,000 / [(55,000 + 25,000)/ 2] = $170,000 / $40,000 = 4.25 times
Days' sales in inventory = 365 / Inventory turnover ratio = 365 / 4.25 = 85.88

Question 12

Use the balance sheet of Detroit,Inc.to calculate working capital for 2018 and 2017.
  
Assets
  
Liabilities
  
Stockholders' Equity

Accepted Answer

The answer of Use the balance sheet of Detroit,Inc.to calculate...

Question 13

Coleman,Inc.provides the following data from its income statement for 2017:

Calculate the gross profit percentage.(Round your answer to two decimal places. )
A)25.00%
B)71.43%
C)100.00%
D)28.57%

Accepted Answer

B)Gross profit percentage = Gross profit / Net sales × 100 = $400,000 / $560,000 × 100 = 71.43%

Question 14

An accounts receivable turnover that is too high may indicate that credit is too tight,causing the loss of sales to good customers.

Accepted Answer

A high accounts receivable turnover ratio indicates that a company collects its outstanding credit sales quickly. However, if the ratio is excessively high, it may suggest that the company's credit policies are too strict, potentially leading to lost sales opportunities with creditworthy customers who might require more lenient terms.

Question 15

Extracts from the balance sheet of Michigan,Inc.are as follows:
  
Assets
Current Assets:
  
Compute the acid-test ratio.

Accepted Answer

The answer of Extracts from the balance sheet of Michigan,Inc.are...

Question 16

Newbury Office Supply reported the following gross profit percentages: 2014: 37.5%;2015: 36.2%;2016: 20.8%.The industry average is 35%.What are some possible reasons for the decline in 2016?

Accepted Answer

The answer of Newbury Office Supply reported the following gross...

Question 17

A high times-interest-earned ratio indicates difficulty in paying interest expense.

Accepted Answer

A high times-interest-earned ratio indicates that a company has a strong ability to pay its interest expense. This ratio measures a company's ability to cover interest expense with its earnings before interest and taxes (EBIT). A higher ratio indicates that a company has more earnings to cover its interest expense, which makes it easier for the company to pay its interest obligations.

Question 18

Which of the following items is a measure of a company's ability to collect receivables?
A)inventory turnover ratio
B)current ratio
C)days' sales in receivables
D)account receivable balance

Accepted Answer

Days' sales in receivables is a measure of the average number of days it takes a company to collect its accounts receivable. A lower number indicates a faster collection process and better liquidity. A, B, and D are not relevant to measuring a company's ability to collect receivables.

Question 19

Zebra,Inc.cost of goods sold for the year is $2,300,000,and the average merchandise inventory for the year is $130,000.Calculate the inventory turnover ratio of the company.(Round your answer to two decimal places. )
A)5.65 times
B)17.69 times
C)8.85 times
D)9.43 times

Accepted Answer

B)Inventory turnover ratio = Cost of Goods Sold / Average Merchandise Inventory =
$2,300,000 / 130,000 = 17.69 times

Question 20

The gross profit percentage is an indicator of how well a company is positioned to pay off its short-term liabilities.

Accepted Answer

The gross profit percentage is a measure of profitability and does not specifically relate to a company's ability to pay off short-term liabilities. Other financial ratios, such as the current ratio or quick ratio, are better indicators of a company's liquidity and ability to meet short-term obligations.

Quiz 17: Financial Statement Analysis

The debt ratio is the ratio of total debt divided by total equity.

Wilson,Inc.provides the following data: Calculate accounts receivable turnover ratio form 2017.(Round your answer to two decimal places. )

e-Shop,Inc.has net sales on account of $1,600,000.The average net accounts receivable are $620,000.Calculate the days' sales in receivables.(Round any intermediate calculations and your final answer to two decimal places. )

Days' sales in receivables measures the return on average receivables.

Use the following to calculate the inventory turnover ratio for the year 2017.

Use the balance sheet of Maine,Inc.to calculate the current ratio for 2017 and 2018 Assets Liabilities Stockholders' Equity

Days' sales in inventory measures how quickly a company can collect its receivables.

The inventory turnover ratio measures the average number of days that inventory is held by a company.

The asset turnover ratio is a way to evaluate how well a company can pay its short-term liabilities.

Seidner,Inc.provides the following data: Calculate the asset turnover ratio for 2017.(Round your answer to two decimal places. )

Pretty,Inc.provides the following data: Calculate days' sales in inventory for 2017.(Round any intermediate calculations and your final answer to two decimal places. )

Use the balance sheet of Detroit,Inc.to calculate working capital for 2018 and 2017. Assets Liabilities Stockholders' Equity

Coleman,Inc.provides the following data from its income statement for 2017: Calculate the gross profit percentage.(Round your answer to two decimal places. )

An accounts receivable turnover that is too high may indicate that credit is too tight,causing the loss of sales to good customers.

Extracts from the balance sheet of Michigan,Inc.are as follows: Assets Current Assets: Compute the acid-test ratio.

Newbury Office Supply reported the following gross profit percentages: 2014: 37.5%;2015: 36.2%;2016: 20.8%.The industry average is 35%.What are some possible reasons for the decline in 2016?

A high times-interest-earned ratio indicates difficulty in paying interest expense.

Which of the following items is a measure of a company's ability to collect receivables?

Zebra,Inc.cost of goods sold for the year is $2,300,000,and the average merchandise inventory for the year is $130,000.Calculate the inventory turnover ratio of the company.(Round your answer to two decimal places. )

The gross profit percentage is an indicator of how well a company is positioned to pay off its short-term liabilities.