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Exam 13: Measuring and Evaluating Financial Performance

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Question 31

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In a common size income statement,each item on the income statement is expressed as a percentage of:

A) net income.
B) gross profit.
C) total expenses.
D) sales revenue.

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

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Question 32

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Consider the formula used to calculate each of the following financial performance ratios.From the list of financial statement items below,match its letter with the ratio it is used to calculate.Some financial statement items will be used more than once.Some ratios will use one letter from the list and some ratios will use two letters from the list. Ratio 1.___ Net Profit Margin 2.___ Debt-to-assets ratio 3.___ EPS 4.___ ROE 5.___ Days to collect 6.___ Days to sell 7.___ Price earnings ratio 8.___ Current ratio 9.___ Fixed asset turnover 10.___ Gross profit percentage 11.___ Quick ratio Financial Statement Item A)Net income B)Interest paid C)Cost of goods sold D)Net sales revenue E)Total liabilities F)Total assets at year end G)Average stockholders' equity H)Current liabilities

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1.A and D
2.E and F
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Question 33

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The ratio that measures the company's ability to meet required interest payments is the:

Which ratio is a test of liquidity?

Company X has net sales revenue of $436,000,cost of goods sold of $343,000,and net income of $3,000.If interest expense is $10,000 and income tax expense is $1,000,the times interest earned ratio is closest to:

Often loan agreements require the borrower to comply with certain requirements,such as maintaining a particular current ratio or limiting future borrowing.To decide if a company has complied with its loan covenants,a creditor would look at the company's:

Which of these ratios measure liquidity?

The assumption that a business is capable of continuing its operations long enough to meet its obligations is called the:

The following information is taken from the financial statements of Lopez Company.: The company's times interest earned ratio is closest to:

The conceptual framework for financial accounting and reporting consists of which three main components?

A company had 10,000 shares of common stock outstanding throughout the year.The following information is also available: Required: Calculate the Price/Earnings ratio at the end of the current year.

Trend data can be measured in dollar amounts or percentages.

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?

Which of the following statements about liquidity and solvency ratios is correct?

Carson Inc.reported net sales revenue of $850,000 and paid no dividends during the current year.The following information is also available at the end of the current and prior years: There was no preferred stock outstanding during the current year. Required: Part a.Calculate the return on equity for the current year. Part b.Calculate the debt-to-assets ratio for the current year. Part c.Calculate the fixed asset turnover ratio for the current year. Part d.Calculate the current ratio for the current year. Round all ratios to two decimal points.

In a common size balance sheet,each item on the balance sheet is expressed as a percentage of:

Special items,such as gains or losses relating to changes in the value of certain balance sheet accounts,are reported below the net income line on the income statement.

At the end of last year,Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000.The company issued shares to new stockholders at the beginning of the current year for $1,000,000.As a direct result of this transaction,the:

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

A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?