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Which ratio is used to evaluate how well a company is managing its property, plant, and equipment?


A) Receivables turnover
B) Inventory turnover
C) Fixed asset turnover
D) Asset turnover

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

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Vertical analysis:


A) identifies the relative contribution made by each financial statement line item.
B) identifies trends over time.
C) provides an understanding of the relationships among various items on financial statements by expressing the differences in terms of dollars.
D) involves comparing amounts across different financial statements.

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

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Company X has net sales revenue of $1,250,000, cost of goods sold of $760,000, and all other expenses of $290,000. The beginning balance of stockholders' equity is $400,000 and the beginning balance of fixed assets is $361,000. The ending balance of stockholders' equity is $600,000 and the ending balance of fixed assets is $389,000. Required: Compute the return on equity (ROE) ratio.

Correct Answer

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blured image Average stockholders' equity = (Beginni...

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The full disclosure principle refers to:


A) Financial reports should disclose only material transactions related to a company's business activities.
B) Financial reports should disclose every transaction related to a company's business activities.
C) Financial reports should present all information needed to properly interpret results of a company's business activities.
D) Financial reports should disclose all future transactions related to a company's business activities.

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

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Solvency ratio data are primarily concerned with the ability of a company to:


A) produce profits.
B) maintain long-term survival and repay its debt.
C) manage its cash flow.
D) provide income for stockholders.

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

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Which of the following is a profitability ratio?


A) Return on equity
B) Times interest earned
C) Inventory turnover
D) Receivables turnover

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

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Assume that Charmin and Barker are two retailers selling different goods. Charmin reports a days to sell ratio of 6 and Barker reports a days to sell ratio of 64. What types of merchandise are Charmin and Barker likely to sell, given their measures of days to sell?


A) Charmin sells clothing and Barker sells wine.
B) Charmin sells consumer electronics and Barker sells gasoline.
C) Charmin sells footwear and Barker sells consumer electronics.
D) Charmin sells groceries and Barker sells autos.

E) A) and B)
F) B) and C)

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Liquidity measures the ability of a company to meet its current financial obligations

A) True
B) False

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Which of the following could indicate bad news?


A) An increase in fixed asset turnover ratio
B) A decrease in days to sell
C) A decrease in EPS
D) A decrease in the debt-to-assets ratio

E) A) and B)
F) A) and C)

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Which of the following measures would assist in assessing the solvency of a company?


A) Debt-to-assets
B) Fixed asset turnover
C) Return on equity
D) Current ratio

E) B) and C)
F) C) and D)

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A times interest earned ratio of 11 means that the company's:


A) net income is large enough to pay interest and taxes 11 times.
B) net cash flow from operations before taxes and interest is large enough to pay interest and taxes 11 times.
C) net cash flow from operations is large enough to pay interest and taxes 11 times.
D) income before taxes and interest is large enough to pay interest 11 times.

E) A) and D)
F) B) and D)

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According to the full disclosure principle, financial reports should present detailed information about every transaction

A) True
B) False

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Which of the following ratios does not use net income in its calculation?


A) Net profit margin
B) Earnings per share
C) Return on equity
D) Fixed asset turnover

E) None of the above
F) A) and D)

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A debt-to-assets ratio of 0.50 indicates that the company has:


A) more liabilities than stockholders' equity.
B) equal amounts of liabilities and stockholders' equity.
C) more stockholders' equity than liabilities.
D) no liabilities.

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

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Which of these are solvency ratios?


A) Debt-to-assets
B) Current ratio
C) Return on equity
D) Net profit margin

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

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A decrease in receivables turnover ratio is indicative of:


A) an increase in sales revenue.
B) slower-selling inventory.
C) an increase in accounts receivable.
D) a decline in cost of goods solD.
Receivable turnover = Net sales ÷ Average net receivables

E) A) and B)
F) A) and C)

Correct Answer

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Net revenue divided by average net fixed assets is the calculation for which of the following ratios?


A) Net profit margin
B) Fixed asset turnover
C) Current ratio
D) Return on assets

E) None of the above
F) B) and C)

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Westcott, Inc. has the following information from its accounting records: Westcott, Inc. has the following information from its accounting records: If Westcott uses cash of $5,000 to pay a current liability, its: A) current ratio increases and its debt-to-assets ratio increases B) current ratio increases and its debt-to-assets ratio decreases C) current ratio decreases and its debt-to-assets ratio increases D) current ratio decreases and its debt-to-assets ratio decreases If Westcott uses cash of $5,000 to pay a current liability, its:


A) current ratio increases and its debt-to-assets ratio increases
B) current ratio increases and its debt-to-assets ratio decreases
C) current ratio decreases and its debt-to-assets ratio increases
D) current ratio decreases and its debt-to-assets ratio decreases

E) B) and C)
F) A) and B)

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Puffin Turnovers, Inc.'s fixed asset turnover was 0.9 while Muffin Tops, Inc.'s fixed asset turnover was 0.6. Which of the following statements about Puffin compared with Muffin is correct?


A) Puffin generated more sales per dollar of fixed assets.
B) Puffin has greater depreciation expense.
C) Puffin has more fixed assets.
D) Puffin has greater sales.

E) A) and B)
F) B) and C)

Correct Answer

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A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:


A) previous period amount from the current amount.
B) current period amount from the previous period amount.
C) current period amount from the previous period amount and then dividing the result by the previous period amount.
D) previous period amount from the current period amount and then dividing the result by the current period amount.

E) C) and D)
F) B) and D)

Correct Answer

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Showing 101 - 120 of 145

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