FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 14: Analyzing Financial Statements

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following transactions decreases the quality of income ratio?

A) The accrual of interest expense.
B) Collecting cash on an account receivable.
C) Selling inventory on account for a profit.
D) Paying cash to a supplier.

E) C) and D)
F) A) and D)

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is false?

A) The cash ratio is the most stringent and reliable test of liquidity.
B) A company with a high level of inventory will have a quick ratio significantly lower than its current ratio.
C) A current ratio that is too high could indicate funds tied up in inventory and other working capital assets.
D) Analysts consider a current ratio of 2 to be financially conservative.

E) C) and D)
F) All of the above

Correct Answer

verified

Show Answer

Question 23

True/False

Review LaterAdd Note

A higher current ratio is preferable for companies with variable cash flows.

Lucas Company has provided the following information: Cash flow from operating activities,$360,000; Net income,$306,000; Interest expense,$30,000; Interest cash payments,$20,000; Income tax payments,$240,000; Income tax expense,$246,000. What was Lucas' cash coverage ratio?

Purchasing treasury stock increases the return on equity ratio.

MNF Corporation gathered the following data at the end of the accounting period,December 31,2009: $\begin{array}{lrl}\text { Net income } & \$ 60,000 \\\text { Net sales revenue } & 1,200,000 \\\text { Interest expense } & 25,000 \\\text { Total liabilities } & 200,000 \\\text { Average stockholders' equity }(50,000 \text { shares } & 300,000 \\\text { outstanding) } & \\\text { Dividends declared and paid during } 2009 & 22,500 \\\text { Market price per share of stock at year end } & 9 \\\text { Average income tax rate } &40\% \\\text { Requirements } &\end{array}$ Part 1: Calculate each of the following ratios: A.Profit margin B.Return on equity C.Earnings per share D.Dividend yield ratio E.Price/earnings ratio F.Return on assets G.Financial leverage percentage Part 2: Interpret the financial leverage percentage.

The records of Marshall Company include the following: $\begin{array} { l r } \text { Average total assets } & \$ 3,500,000 \\\text { Average total liabilities } & 1,220,000 \\\text { Total revenue } & 4,580,000 \\\text { Total expense (including income tax) } & 4,100,000 \\\text { Interest expense (included in total expenses) } & 90,000 \\\text { Income tax rate 40\% } &\end{array}$ The return on assets is (round to the nearest tenth of a percent)

Which of the following ratios is not considered to be a test of profitability?

Which of the following statements is incorrect?

Time series analysis is where we compare information for a specific company over a period of time to determine changes in operations.

The inventory turnover ratio is significantly affected by the choice of inventory accounting method.

Agnes Company reported the following data: $\begin{array} { l r } \text { Quick assets } & \$ 55,000 \\\text { Current assets } & 150,000 \\\text { Total liabilities } & 300,000 \\\text { Average net receivables } & 12,600 \\\text { Beginning inventory } & 38,000 \\\text { Long-term liabilities } & 200,000 \\\text { Net credit sales } & 126,000 \\\text { Cost of goods sold } & 84,000 \\\text { Ending inventory } & 46,000\end{array}$ What was the inventory turnover ratio?

Agnes Company reported the following data: $\begin{array} { l r } \text { Quick assets } & \$ 55,000 \\\text { Current assets } & 150,000 \\\text { Total liabilities } & 300,000 \\\text { Average net receivables } & 12,600 \\\text { Beginning inventory } & 38,000 \\\text { Long-term liabilities } & 200,000 \\\text { Net credit sales } & 126,000 \\\text { Cost of goods sold } & 84,000 \\\text { Ending inventory } & 46,000\end{array}$ What was the average days' supply in inventory?

Earnings per share (EPS)is affected by treasury stock transactions.

Polk Corporation reported the following information related to its common stock (par $10)outstanding and net income: $\begin{array} { l r } \text { Total stockholders' equity (no preferred stock) } & \$ 125,000 \\\text { Current market price per share of common stock } & 40 \\\text { Dividends declared and paid during } 2011 & 10,000 \\\text { Balance in the common stock account } & 40,000 \\\text { Net income } & 35,000\end{array}$ Calculate each of the following ratios: A.Price/earnings ratio B.Dividend yield

The debt to equity ratio is a risk measure used by both investors and lenders.

Longhorn Company reported the following data at year-end: $\begin{array} { l r } \text { Total stockholders' equity } & \$ 200,000 \\\text { Current liabilities } & 75,000 \\\text { Total assets } & 350,000 \\\text { Current assets } & 80,000 \\\text { Common stock (par } \$ 10 ) & 125,000\end{array}$ Calculate each of the following ratios: A.Debt to equity B.Current ratio

The fixed asset turnover ratio increases when net income increases.

A primary objective of financial statements is to provide information to current and potential investors and creditors.

The cash payment of a previously declared dividend increases which of the following ratios?