Question 1

Clairmont Industries reported Net Income of $283,000 and average Total Assets of $637,000. The return on total assets is:
A)55.6%.
B)88.8%.
C)61.5%.
D)44.4%.
E)125.1%.

Accepted Answer

The return on total assets is calculated by dividing Net Income by Average Total Assets. So, $283,000 / $637,000 = 0.444 or 44.4%.

Question 2

Rajan Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its debt to equity ratio is:
A)0.42
B)0.58
C)1.38
D)0.73
E)1.00

Accepted Answer

The answer of Rajan Company's most recent balance sheet reported...

Question 3

A company had a market price of $27.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:
A)3.1.
B)22.0.
C)93.8.
D)32.0.
E)3.3.

Accepted Answer

The price-earnings ratio is calculated by dividing the market price per share by the earnings per share. 
Price-earnings ratio = Market price per share / Earnings per share
= $27.50 / $1.25 
= 22.0 
Therefore, the answer is B.

Question 4

Desjardin Landscaping's income statement reports net income of $75,300, which includes deductions for interest expense of $11,500 and income taxes of $34,900. Its times interest earned is:
A)10.6 times
B)7.5 times
C)4.0 times
D)6.5 times
E)0.15 times

Accepted Answer

The answer of Desjardin Landscaping's income statement reports net income...

Question 5

One of several ratios that reflects solvency includes the:
A)Acid-test ratio.
B)Current ratio.
C)Times interest earned ratio.
D)Total asset turnover.
E)Days' sales in inventory.

Accepted Answer

The times interest earned ratio is a solvency ratio that measures a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expense. A higher ratio indicates a company is more capable of fulfilling its debt obligations and is therefore more solvent.

Question 6

Refer to the following selected financial information from McCormik, LLC. Compute the company's current ratio for Year 2. 
A)2.26.
B)1.98.
C)2.95.
D)3.05.
E)1.88.

Accepted Answer

The answer of Refer to the following selected financial information...

Question 7

Annual cash dividends per share divided by market price per share is the:
A)Price-earnings ratio.
B)Price-dividends ratio.
C)Profit margin.
D)Dividend yield ratio.
E)Earnings per share.

Accepted Answer

The described calculation is used to determine the dividend yield ratio, which measures the amount of dividends received per dollar invested in a stock. A higher dividend yield ratio indicates a higher return on investment from dividends.

Question 8

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base. 
A)36.4% for 2017 and 41.1% for 2016.
B)55.0% for 2017 and 56.0% for 2016.
C)119.4% for 2017 and 100.0% for 2016.
D)117.2% for 2017 and 100.0% for 2016.
E)65.1% for 2017 and 56.0% for 2016.

Accepted Answer

The answer of Use the following selected information from Wheeler,...

Question 9

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for cost of goods sold using 2016 as the base. 
A)36.4% for 2017 and 41.1% for 2016.
B)55.0% for 2017 and 56.0% for 2016.
C)119.4% for 2017 and 100.0% for 2016.
D)117.2% for 2017 and 100.0% for 2016.
E)65.1% for 2017 and 64.6% for 2016.

Accepted Answer

The trend percentage for 2017 is calculated by taking the current year cost of goods sold divided by the base year cost of goods sold (11,184,000/9,552,000) times 100, which is 117.2%. The trend percentage for 2016 is 100%. Therefore, the answer is D.

Question 10

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for operating expenses using Net sales as the base. 
A)36.4% for 2017 and 41.1% for 2016.
B)55.0% for 2017 and 56.0% for 2016.
C)23.9% for 2017 and 23.0% for 2016.
D)103.8% for 2017 and 100.0% for 2016.
E)20.0% for 2017 and 23.0% for 2016.

Accepted Answer

The answer of Use the following selected information from Wheeler,...

Question 11

Refer to the following selected financial information from McCormik, LLC. Compute the company's working capital for Year 2. 
A)$232,700.
B)$220,600.
C)$147,200.
D)$111,700.
E)$142,700.

Accepted Answer

The answer of Refer to the following selected financial information...

Question 12

How long a company holds inventory before selling it can be measured by dividing Cost of Goods Sold by the average Inventory balance to determine the:
A)Accounts receivable turnover.
B)Inventory turnover.
C)Days' sales uncollected.
D)Current ratio.
E)Price earnings ratio.

Accepted Answer

The formula for inventory turnover is: Cost of Goods Sold / Average Inventory. This calculation measures how long a company holds inventory before selling it. Therefore, the best choice is B.

Question 13

All of the following statements regarding a business segment are true except:
A)A business segment is a part of a company's operations that serves a particular product line.
B)A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company.
C)A company's gain or loss from selling or closing down a segment is reported separately.
D)The income tax effects of a discontinued segment are combined with income tax from continuing operations.
E)A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately.

Accepted Answer

The income tax effects of a discontinued segment are reported separately and not combined with income tax from continuing operations.

Question 14

Refer to the following selected financial information from McCormik, LLC. Compute the company's acid-test ratio for Year 2. 
A)2.26.
B)1.98.
C)2.95.
D)3.05.
E)1.88.

Accepted Answer

The answer of Refer to the following selected financial information...

Question 15

The market price of Horokhiv Corporation's common stock at the end of the fiscal year 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The dividend yield ratio for 2016 is:
A)14.5%.
B)7.4%.
C)6.5%.
D)144.8%.
E)6.9%.

Accepted Answer

The answer of The market price of Horokhiv Corporation's common...

Question 16

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for net sales using 2016 as the base. 
A)36.4% for 2017 and 41.1% for 2016.
B)55.0% for 2017 and 56.0% for 2016.
C)119.4% for 2017 and 100.0% for 2016.
D)117.2% for 2017 and 100.0% for 2016.
E)65.1% for 2017 and 64.6% for 2016.

Accepted Answer

The answer of Use the following selected information from Wheeler,...

Question 17

Selected current year company information follows:  The total asset turnover is:
A)2.24 times
B)2.81 times
C)3.64 times
D)4.67 times
E)6.28 times

Accepted Answer

The answer of Selected current year company information follows: ...

Question 18

A component of operating efficiency and profitability, calculated by expressing Net Income as a percent of Net Sales, is the:
A)Acid-test ratio.
B)Merchandise turnover.
C)Price earnings ratio.
D)Accounts receivable turnover.
E)Profit margin ratio.

Accepted Answer

The Profit Margin Ratio is the component of operating efficiency and profitability that measures the percentage of each dollar of sales that results in net income. It is calculated by dividing net income by net sales. The higher the profit margin ratio, the more efficient and profitable the company is.

Question 19

A company reports basic earnings per share of $3.50, cash dividends per share of $1.25, and a market price per share of $64.75. The company's dividend yield equals:
A)1.93%.
B)2.14%.
C)4.67%.
D)5.41%.
E)18.50%.

Accepted Answer

The answer of A company reports basic earnings per share...

Question 20

Selected current year company information follows:  The return on total assets is:
A)2.24%
B)2.81%
C)3.64%
D)4.67%
E)6.28%

Accepted Answer

The answer of Selected current year company information follows: ...

Quiz 13: Analyzing and Interpreting Financial Statements

Clairmont Industries reported Net Income of $283,000 and average Total Assets of $637,000. The return on total assets is:

Rajan Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its debt to equity ratio is:

A company had a market price of $27.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:

Desjardin Landscaping's income statement reports net income of $75,300, which includes deductions for interest expense of $11,500 and income taxes of $34,900. Its times interest earned is:

One of several ratios that reflects solvency includes the:

Refer to the following selected financial information from McCormik, LLC. Compute the company's current ratio for Year 2.

Annual cash dividends per share divided by market price per share is the:

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base.

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for cost of goods sold using 2016 as the base.

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for operating expenses using Net sales as the base.

Refer to the following selected financial information from McCormik, LLC. Compute the company's working capital for Year 2.

How long a company holds inventory before selling it can be measured by dividing Cost of Goods Sold by the average Inventory balance to determine the:

All of the following statements regarding a business segment are true except:

Refer to the following selected financial information from McCormik, LLC. Compute the company's acid-test ratio for Year 2.

The market price of Horokhiv Corporation's common stock at the end of the fiscal year 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The dividend yield ratio for 2016 is:

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for net sales using 2016 as the base.

Selected current year company information follows: The total asset turnover is:

A component of operating efficiency and profitability, calculated by expressing Net Income as a percent of Net Sales, is the:

A company reports basic earnings per share of $3.50, cash dividends per share of $1.25, and a market price per share of $64.75. The company's dividend yield equals:

Selected current year company information follows: The return on total assets is: