Name: ________________________ Class: FSA

Date: _17/11/2012_________

Quiz 3

1.Gross profit is the difference between:

a. net income and operating income.
b. revenues and expenses.
c. sales and cost of goods sold.
d. income from continuing operations and discontinued operations.
e. gross sales and sales discounts.
ANSWER: C
2.The following relate to Data Original in 2012. What is the ending inventory?
Purchases
Beginning Inventory
Purchase Returns
Sales
Cost of Goods Sold
a.
b.
c.
d.
e.

$540,000
80,000
10,000
800,000
490,000

$120,000
$140,000
$210,000
$260,000
none of the answers are correct
ANSWER: A
Beg Inventory+ Purchases-COGS-purchases returns= 80,000+540,000-490,000-10,000=
120,000

3.Statements in which all items are expressed only in relative terms (percentages of a base) are termed:
a. vertical Statements.
b. horizontal Statements.
c. funds Statements.
d. common-Size Statements.
e. None of the answers are correct.
ANSWER: D
4.In financial statement analysis, ratios are:
a. the only type of analysis where industry data are available.
b. absolute numbers converted to a common base.
c. fractions usually expressed in percent or times.
d. the only indication of the financial position of the firm.
e. None of the answers are correct.
ANSWER: C
5.Denver Dynamics has net income of $2,000,000. Oakland Enterprises has net income of $2,500,000. Which of
the following best compares the profitability of Denver and Oakland?
a. Oakland Enterprises is 25% more profitable than Denver Dynamics.

b. Oakland Enterprises is more profitable than Denver Dynamics, but the comparison can't
be quantified.
c. Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics.
d. Further information is needed for a reasonable comparison.
e. Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics.

ANSWER: D
6. Typically, which of the following would be considered to be the most indicative of a firm's short-term debt
paying ability?
a. Working capital
b. Current ratio
c. Acid test
d. Cash ratio
e. Days' sales in receivables
ANSWER : B
7. Total asset turnover measures the ability of a firm to:
a. generate profits on sales.
b. generate sales through the use of assets.
c. buy new assets.
d. move inventory.
e. cover long-term debt.
ANSWER: B
8.Return on assets cannot fall under which of the following circumstances?
I.
II.
III.
IV.
a.
b.
c.
d.
e.

Net Profit Margin

decline
rise
rise
decline

Total Asset Turnover

Rise
Decline
Rise
Decline

I
II
III
IV
The ratio could fall under all of the answers.
ANSWER: C

9.Which suppliers of funds bear the greatest risk and should therefore earn the greatest return?
a. Bondholders
b. Suppliers
c. General creditors such as banks
d. Preferred shareholders
e. Common shareholders
ANSWER: E
11.The stockholders' equity of Anamanda Company at September 30, 2012, is presented below:
Common Stock, par value $10, authorized 500,000 shares; 200,000
shares issued and outstanding

$2,000,000

Paid-In Capital in Excess of Par

Retained Earnings

300,000
1,300,000
$3,600,000

On October 1, 2012, the Board of Directors of Anamanda declared a 10% stock dividend to be distributed
on November 10. The market price of the common stock was $15 on October 1 and $17 on November 10.
What is the amount of the charge to retained earnings as a result of the declaration and distribution of this
stock dividend?
a. $0
b. $200,000
c. $300,000
d. $340,000
e. $750,000
ANSWER: C
12.Tim Company had sales of $30,000, increase in accounts payable of $5,000, decrease in accounts receivable
of $1,000, increase in inventories of $4,000, and depreciation expense of $4,000. What was the cash
collected from customers?
a. $31,000
b. $35,000
c. $34,000
d. $25,000
e. $26,000
ANSWER: A Cash collected=sales+ accounts receivable= 30,000+1,000= 31,000
13. Conroy Company had sales of $50,000, increase in accounts payable of $4,000, decrease in accounts
receivable of $3,000, tax expense of $5,000, and an increase in taxes payable of $1,000. What was the
cash outflow for taxes?
a. $54,000
b. $4,000
c. $6,000
d. $53,000
e. $45,000
ANSWER: B
Cash outflow for taxes= tax expense-increase in tax payable= 5,000 1,000= 4,000
14. In a statement of cash flows (indirect method), depreciation expense should be presented as:
a. a cash flow from financing activities.
b. a cash flow from investing activities.
c. a deduction from net income.
d. an addition to net income.
e. a financial activity.
ANSWER: D
15.Which of the following should not be considered as part of "cash and cash equivalents"?
a. Cash on hand
b. Cash on deposit
c. Highly liquid investments
d. Investments in short-term securities (<90 day maturity)
e. Cash restricted for retirement of bonds
ANSWER: E

16.Which of the following accounts will not be considered when computing cash flow from operations?
a. Accounts receivable
b. Inventories
c. Equipment
d. Accounts payable
e. Taxes payable
ANSWER: C
17.Which of the following accounts is not part of working capital?
a. Cash
b. Accounts receivable
c. Inventory
d. Accounts payable
e. Investments

ANSWER: E
18.Which of the following ratios appears most frequently in annual reports?
a. Earnings per Share
b. Return on Equity
c. Profit Margin
d. Effective Tax Rate
e. Debt/Equity
ANSWER: A
19.Book value per share may not approximate market value per share because:
a. the book value is after tax.
b. book values are based on replacement costs rather than market values.
c. book value is related to book figures and market value is related to the future potential as
seen by investors.
d. investors do not understand book value.
e. book value is not related to dividends.
ANSWER: C
20.If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be:
a. $20,000.
b. $80,000.
c. $120,000.
d. $30,000.
e. $30,000.

ANSWER: C

A= L + E= 70,000+50,000=$ 120,000