accounting 245631

1. Inventory turnover is calculated by dividing:

average inventory by cost of goods sold.

cost of goods sold by the ending inventory.

cost of goods sold by the beginning inventory.

cost of goods sold by the average inventory.

2. If equal amounts are added to the numerator and the denominator of the current ratio, the ratio will always

increase.

decrease.

stay the same.

equal zero.

3. Donner Corporation had net income of $400,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Donner Corporation’s common stock is selling for $50 per share on the New York Stock Exchange. Donner Corporation’s payout ratio for 2012 is

$8 per share.

20%.

10%.

12.5%.

4. If the average collection period is 60 days, what is the receivables turnover?

6.0 times

6.1 times

12.2 times

None of these.

5. A company has a receivables turnover of 10 times. The average receivables during the period are $500,000. What is the amount of net credit sales for the period?

Cannot be determined from the information given

$50,000

$5,000,000

$500,000

6. Ratios are used as tools in financial analysis:

because they are prescribed by GAAP.

instead of horizontal and vertical analyses.

because even single ratios by themselves are quite meaningful.

because they may provide information that is not apparent from inspection of the individual components of the ratio.

7. Ratios that measure the short-term ability of the company to pay its maturing obligations are

profitability ratios.

solvency ratios.

trend ratios.

liquidity ratios.

8. If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?

Short-term Borrowing Collection of Receivable

Increase No effect

Decrease No effect

Increase Increase

Decrease Decrease

9. When performing vertical analysis, the base amount for administrative expense is generally

administrative expense in a previous year.

fixed assets.

net sales.

gross profit.

10. Each of the following is a liquidity ratio except the

acid-test ratio.

debt to total assets ratio.

inventory turnover.

current ratio.

11. A measure of the percentage of each dollar of sales that results in net income is

return on assets.

profit margin.

return on common stockholders’ equity.

earnings per share.

12. A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is

ratio analysis.

vertical analysis.

common size analysis.

horizontal analysis.

13. The following information pertains to Eura Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets

Cash and short-term investments $ 40,000

Accounts receivable (net) 30,000

Inventory 25,000

Property, plant and equipment 215,000

Total Assets $310,000

Liabilities and Stockholders’ Equity

Current liabilities $ 60,000

Long-term liabilities 75,000

Stockholders’ equity—common 175,000

Total Liabilities and Stockholders’ Equity $310,000

Income Statement

Sales $90,000

Cost of goods sold 45,000

Gross profit 45,000

Operating expenses 25,000

Net income $ 20,000

Number of shares of common stock 5,000

Market price of common stock $22

Dividends per share 1.00

What is the return on assets for Eura?

12.9%

9.7%

4.8%

6.5%

14. Stout Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Stout Corporation’s common stock is selling for $75 per share on the New York Stock Exchange. Stout Corporation’s price-earnings ratio is

15 times.

18.8 times.

3.8 times.

12 times.

15. The following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets

Cash and short-term investments $ 45,000

Accounts receivable (net) 35,000

Inventory 20,000

Property, plant and equipment 210,000

Total Assets $310,000

Liabilities and Stockholders’ Equity

Current liabilities $ 60,000

Long-term liabilities 90,000

Stockholders’ equity—common 160,000

Total Liabilities and Stockholders’ Equity $310,000

Income Statement

Sales $105,000

Cost of goods sold 66,000

Gross profit 39,000

Operating expenses 30,000

Net income $ 9,000

Number of shares of common stock 6,000

Market price of common stock $20

Dividends per share .50

What is the receivables turnover for Sampson?

1.5 times

3.0 times

3.0 times

12.9 times

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