FS Analysis PDF

Chapter 15
Financial Statement Analysis
True / False Questions
1. Vertical analysis of financial statements is accomplished by preparing common-size statements.
True False
2. In determining whether a company's financial condition is improving or deteriorating over time,
horizontal analysis of financial statement data would be more useful than vertical analysis.
True False
3. A common-size financial statement is a vertical analysis in which each financial statement
account is expressed as a percentage.
True False
4. The acid-test ratio is usually greater than the current ratio.
True False
5. Liquidity refers to how quickly an asset can be converted into cash.
True False
.
6. If the acid-test ratio is less than one, then paying off some current liabilities with cash will increase
the acid-test (quick) ratio.
True False
7. A company could improve its acid-test ratio by selling some equipment it no longer needs for
cash.
True False
8. Acquiring land by taking out a long-term mortgage will not affect the current ratio.
True False
9. Purchasing marketable securities with cash will have no effect on a company's acid-test ratio.
True False
10. As the accounts receivable turnover ratio decreases, the average collection period increases.
True False
11. If a company's operating cycle is much longer than its average payment period for suppliers, it
creates the need to borrow money to fund its inventories and accounts receivable.
True False
12. All other things the same, purchasing inventory would decrease the inventory turnover ratio.
True False
.
13. Buying inventory in large lots to take advantage of quantity discounts can be responsible for a
high inventory turnover ratio.
True False
14. All other things the same, when a company increases its inventories in anticipation of later higher
sales, the accounts receivable turnover ratio for the current period increases.
True False
15. All other things the same, purchasing merchandise inventory would have no effect on the
accounts receivable turnover ratio at a retailer.
True False
16. All other things the same, when a customer purchases an item for cash, the accounts receivable
turnover ratio increases.
True False
17. As the inventory turnover increases, the average sales period decreases.
True False
18. To increase total asset turnover, management must either increase sales or reduce total
stockholders' equity.
True False
.
19. The formula for the average sale period is: Average sale period = Accounts receivable turnover ÷
Inventory turnover.
True False
20. The formula for total asset turnover is: Total asset turnover = Total assets ÷ Total stockholders'
equity.
True False
21. A company whose inventory turnover ratio is much slower than the average for its industry may
have too much inventory or the wrong sorts of inventory.
True False
22. All other things the same, those who hold the company's debt (i.e., its creditors) would like a low
debt-to-equity ratio to provide a buffer of protection.
True False
23. All other things the same, if long-term debt is exchanged for short-term debt, the debt-to-equity
ratio will be unchanged.
True False
24. The times interest earned ratio is based on net income because that is the amount of earnings
that is available for making interest payments. Interest expense is deducted before taxes are
determined; creditors have first claim on the earnings before taxes are paid.
True False
.
25. Issuing common stock will decrease a company's financial leverage.
True False
26. The formula for the times interest earned ratio is: Times interest earned = Earnings before
interest expense and income taxes ÷ Interest expense.
True False
27. If a company's return on assets is substantially lower than its cost of borrowing, then the common
stockholders would normally want the company to have a relatively high debt/equity ratio.
True False
28. The formula for the return on equity is: Return on equity = Net income ÷ Average total
True False
29. When computing the return on equity, retained earnings should be excluded from the average
total stockholders' equity.
True False
30. When computing the return on total assets, the interest expense is added back to net income to
show what earnings would have been if the company had no debt.
True False
31. When a company sells used equipment for a loss, the net profit margin percentage is unaffected.
True False
.
32. All other things the same, if a company uses long-term debt to purchase land to develop in the
future, the company's return on total assets will decrease.
True False
33. If a retailer sells a product whose contribution margin equals the gross margin percentage, the
gross margin percentage will be unaffected by the transaction.
True False
34. The gross margin percentage is computed by dividing the gross margin by net income before
interest and taxes.
True False
35. The formula for the net profit margin percentage is: Net profit margin percentage = Net income ÷
Sales.
True False
36. When fixed costs are included in the cost of goods sold, the gross margin percentage should
increase and decrease with sales volume.
True False
37. The gross margin percentage is computed by dividing sales by the gross margin.
True False
.
38. A high price-earnings ratio means that investors are willing to pay a premium for the company's
stock.
True False
39. An increase in the number of shares of common stock outstanding will increase a company's
price-earnings ratio if the market price per share remains unchanged.
True False
40. The dividend payout ratio is equal to the dividend per share divided by the earnings per share.
True False
41. All other things the same, if the company purchases equipment on credit, this transaction would
have no impact on the company's book value per share.
True False
42. Purchasing inventory on credit increases the book value per share of a retailer.
True False
43. The price-earnings ratio is determined by dividing market price per share of stock by the earnings
per share.
True False
44. Earnings per share is computed by multiplying net income by the average number of common
shares outstanding.
True False
.
Multiple Choice Questions
45. Selling used equipment at book value for cash will:
A. increase working capital.
B. decrease working capital.
C. decrease the debt-to-equity ratio.
D. increase net income.
46. If current assets exceed current liabilities, prepaying an expense on the last day of the year will:
A. decrease the current ratio.
B. increase the acid-test ratio.
C. decrease the acid-test ratio.
D. increase the current ratio.
.
47. Zack Company has a current ratio of 2.5. What will be the effect of a purchase of inventory with
cash on the acid-test ratio and on working capital?
A. Option A
B. Option B
C. Option C
D. Option D
48. Norton Inc. could improve its current ratio of 2 by:
A. paying a previously declared stock dividend.
B. writing off an uncollectible receivable.
C. selling merchandise on credit at a profit.
D. purchasing inventory on credit.
49. The ratio of total cash, marketable securities, accounts receivable, and short-term notes to
current liabilities is:
A. the debt-to-equity ratio.
B. the current ratio.
C. the acid-test ratio.
D. working capital.
.
50. A company's current ratio is greater than 1. Purchasing raw materials on credit would:
A. increase the current ratio.
B. decrease the current ratio.
C. increase net working capital.
D. decrease net working capital.
51. Sand Company has an acid-test ratio of 0.8. Which of the following actions would improve the
acid-test ratio?
A. Collect some accounts receivable.
B. Acquire some inventory on account.
C. Sell some equipment for cash.
D. Use cash to pay off some accounts payable.
52. A company's current ratio and an acid-test ratio are both greater than 1. Payment of an account
payable would:
A. increase the current ratio but the acid-test ratio would not be affected.
B. increase the acid-test ratio but the current ratio would not be affected.
C. increase both the current and acid-test ratios.
D. decrease both the current and acid-test ratios.
.
53. Turner Co. presently has a current ratio of 0.8. The company has been informed by its bank that it
must improve its current ratio to qualify for a line of credit. Which of the following actions would
improve the current ratio?
A. Use cash to pay off some current liabilities.
B. Purchase additional marketable securities with cash.
C. Acquire a parcel of land in exchange for common stock.
D. Purchase additional inventory on credit.
54. Accounts receivable turnover will normally decrease as a result of:
A. the write-off of an uncollectible account against the allowance for bad debts.
B. a significant sales volume decrease near the end of the accounting period.
C. an increase in cash sales in proportion to credit sales.
D. a change in credit policy to lengthen the period for cash discounts.
55. The gross margin percentage is equal to:
A. (Net operating income + Selling and administrative expenses)/Sales
B. Net operating income/Sales
C. Cost of goods sold/Sales
D. Cost of goods sold/Net income
.
56. Which of the following is not a source of financial leverage?
A. Bonds payable.
B. Accounts payable.
C. Taxes payable.
D. Prepaid rent.
57. Which one of the following statements about book value per share is most correct?
A. Market price per common share usually approximates book value per common share.
B. Book value per common share is based on past transactions whereas the market price of a
share of stock mainly reflects what investors expect to happen in the future.
C. A market price per common share that is greater than book value per common share is an
indication of an overvalued stock.
D. Book value per common share is the amount that would be paid to stockholders if the
company were sold to another company.
58. The market price of Friden Company's common stock increased from $15 to $18. Earnings per
share of common stock remained unchanged. The company's price-earnings ratio would:
A. increase.
B. decrease.
C. remain unchanged.
D. impossible to determine.
.
59. The Seabury Corporation has a current ratio of 3.5 and an acid-test ratio of 2.8. The corporation's
current assets consist of cash, marketable securities, accounts receivable, and inventories.
Inventory equals $49,000. Seabury Corporation's current liabilities must be:
A. $70,000
B. $100,000
C. $49,000
D. $125,000
60. Data from Fontecchio Corporation's most recent balance sheet appear below:
The corporation's acid-test ratio is closest to:
A. 0.35
B. 0.15
C. 0.68
D. 0.79
.
61. Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000, total
stockholders' equity of $1,057,000, total net plant and equipment of $1,031,000, total assets of
$1,514,000, and total liabilities of $457,000. The company's current ratio is closest to:
A. 0.32
B. 0.30
C. 1.39
D. 0.95
62. Gnas Corporation's total current assets are $210,000, its noncurrent assets are $590,000, its total
current liabilities are $160,000, its long-term liabilities are $490,000, and its stockholders' equity is
$150,000. The current ratio is closest to:
A. 1.31
B. 0.76
C. 0.33
D. 0.36
63. Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The
corporation's current ratio is closest to:
A. 1.41
B. 0.59
C. 3.42
D. 0.41
.
64. Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of $40,000 and
noncurrent assets of $70,000. The corporation's current assets consist of cash, marketable
securities, accounts receivable, prepaid expenses, and inventory; it has no short-term notes
receivable. If Dennisport's current ratio is 3.1, its inventory and prepaid expenses must be:
A. $12,400
B. $24,000
C. $30,000
D. $40,000
65. Calin Corporation has total current assets of $615,000, total current liabilities of $230,000, total
stockholders' equity of $1,183,000, total net plant and equipment of $958,000, total assets of
$1,573,000, and total liabilities of $390,000. The company's working capital is:
A. $615,000
B. $1,183,000
C. $385,000
D. $958,000
66. Mcrae Corporation's total current assets are $380,000, its noncurrent assets are $500,000, its
total current liabilities are $340,000, its long-term liabilities are $250,000, and its stockholders'
equity is $290,000. Working capital is:
A. $380,000
B. $40,000
C. $250,000
D. $290,000
.
67. Erastic Corporation has $14,000 in cash, $8,000 in marketable securities, $34,000 in account
receivable, $40,000 in inventories, and $42,000 in current liabilities. The corporation's current
assets consist of cash, marketable securities, accounts receivable, and inventory. The
corporation's acid-test ratio is closest to:
A. 1.33
B. 0.81
C. 2.29
D. 1.14
68. Windham Corporation has current assets of $400,000 and current liabilities of $500,000.
Windham Corporation's current ratio would be increased by:
A. the purchase of $100,000 of inventory on account.
B. the payment of $100,000 of accounts payable.
C. the collection of $100,000 of accounts receivable.
D. refinancing a $100,000 long-term loan with short-term debt.
69. Stimac Corporation has total cash of $210,000, no marketable securities, total current receivables
of $281,000, total inventory of $151,000, total prepaid expenses of $53,000, total current assets
of $695,000, total current liabilities of $261,000, total stockholders' equity of $1,014,000, total
assets of $1,415,000, and total liabilities of $401,000. The company's acid-test (quick) ratio is
closest to:
A. 2.08
B. 1.73
C. 2.66
D. 1.88
.
70. Orem Corporation's current liabilities are $75,000, its long-term liabilities are $225,000, and its
working capital is $100,000. If the corporation's debt-to-equity ratio is 0.30, total long-term assets
must equal:
A. $1,000,000
B. $1,300,000
C. $1,125,000
D. $1,225,000
71. Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The beginning
inventory balance was $24,000 and the ending inventory balance was $22,000. The company's
average sale period was closest to:
A. 36.5 days
B. 73.0 days
C. 38.1 days
D. 34.9 days
72. Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning
inventory balance was $26,000 and the ending inventory balance was $24,000. The corporation's
inventory turnover was closest to:
A. 12.08
B. 11.60
C. 5.80
D. 11.15
.
73. Natcher Corporation's accounts receivable at the end of Year 2 was $126,000 and its accounts
receivable at the end of Year 1 was $130,000. The company's inventory at the end of Year 2 was
$127,000 and its inventory at the end of Year 1 was $120,000. Sales, all on account, amounted to
$1,380,000 in Year 2. Cost of goods sold amounted to $800,000 in Year 2. The company's
operating cycle for Year 2 is closest to:
A. 44.7 days
B. 17.3 days
C. 62.8 days
D. 90.2 days
74. Kopas Corporation has provided the following data:
The inventory turnover for this year is closest to:
A. 3.09
B. 0.98
C. 1.03
D. 3.05
.
75. Granger Corporation had $180,000 in sales on account last year. The beginning accounts
receivable balance was $10,000 and the ending accounts receivable balance was $18,000. The
corporation's average collection period was closest to:
A. 20.3 days
B. 28.4 days
C. 36.5 days
D. 56.8 days
76. During the year just ended, the retailer James Corporation purchased $425,000 of inventory. The
inventory balance at the beginning of the year was $175,000. If the cost of goods sold for the year
was $450,000, then the inventory turnover for the year was:
A. 2.77
B. 2.57
C. 3.00
D. 2.62
.
77. Laverde Corporation has provided the following data:
The company's total asset turnover for Year 2 is closest to:
A. 1.22
B. 7.60
C. 0.13
D. 0.82
78. Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of
Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2. The company's
inventory turnover for Year 2 is closest to:
A. 5.92
B. 1.05
C. 6.07
D. 6.23
.
79. Frantic Corporation had $130,000 in sales on account last year. The beginning accounts
receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The
corporation's accounts receivable turnover was closest to:
A. 5.00
B. 13.00
C. 10.00
D. 8.13
80. Data from Keniston Corporation's most recent balance sheet and income statement appear
below:
The average collection period for this year is closest to:
A. 39.1 days
B. 45.1 days
C. 54.3 days
D. 57.5 days
.
81. Louie Corporation has provided the following data:
The company's operating cycle for Year 2 is closest to:
A. 81.0 days
B. 150.5 days
C. 79.2 days
D. 9.7 days
82. Last year Truro Corporation purchased $800,000 of inventory. The cost of goods sold was
$750,000 and the ending inventory was $125,000. The inventory turnover for the year was:
A. 6.0
B. 7.5
C. 6.4
D. 8.0
83. The accounts receivable for Note Corporation was $240,000 at the beginning of the year and
$260,000 at the end of the year. If the accounts receivable turnover for the year was 8 and 20%
of the total sales were cash sales, the total sales for the year were:
A. $2,600,000
B. $2,000,000
C. $2,400,000
D. $2,500,000
.
84. Smay Corporation has provided the following data:
The accounts receivable turnover for this year is closest to:
A. 1.01
B. 0.99
C. 6.08
D. 6.11
85. Rawe Corporation's accounts receivable at the end of Year 2 was $329,000 and its accounts
receivable at the end of Year 1 was $280,000. Sales, all on account, amounted to $1,350,000 in
Year 2. The company's average collection period (age of receivables) for Year 2 is closest to:
A. 1.2 days
B. 1.0 days
C. 82.4 days
D. 89.0 days
.
86. Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end
of Year 1 was $150,000. Cost of goods sold amounted to $870,000 in Year 2. The company's
average sale period (turnover in days) for Year 2 is closest to:
A. 230.1 days
B. 51.2 days
C. 57.0 days
D. 32.3 days
87. Deflorio Corporation's inventory at the end of Year 2 was $156,000 and its inventory at the end of
Year 1 was $140,000. The company's total assets at the end of Year 2 were $1,416,000 and its
total assets at the end of Year 1 were $1,390,000. Sales amounted to $1,320,000 in Year 2. The
company's total asset turnover for Year 2 is closest to:
A. 0.94
B. 1.06
C. 5.38
D. 0.19
.
88. Data from Estrin Corporation's most recent balance sheet and income statement appear below:
The average sale period for this year is closest to:
A. 101 days
B. 50 days
C. 108 days
D. 45 days
89. Shipley Corporation has provided the following data from its most recent balance sheet:
The debt-to-equity ratio is closest to:
A. 0.29
B. 3.47
C. 0.22
D. 0.78
.
90. Neelty Corporation has interest expense of $16,000, sales of $600,000, a tax rate of 30%, and
after-tax net income of $56,000. The company's times interest earned ratio is closest to:
A. 6.0
B. 5.0
C. 4.5
D. 3.5
91. Falmouth Corporation's debt to equity ratio is 0.6. Current liabilities are $120,000, long term
liabilities are $360,000, and working capital is $140,000. Total assets of the corporation must be:
A. $600,000
B. $1,200,000
C. $800,000
D. $1,280,000
92. Klein Corporation has provided the following data:
The company's equity multiplier is closest to:
A. 1.24
B. 0.56
C. 1.80
D. 0.81
.
93. Last year Javer Corporation had a net income of $200,000, income tax expense of $74,000, and
interest expense of $20,000. The corporation's times interest earned was closest to:
A. 10.0
B. 11.0
C. 5.3
D. 14.7
94. The times interest earned ratio of Whitney Corporation is 3.0. The interest expense for the year is
$21,000, and the corporation's tax rate is 40%. The corporation's after-tax net income must be:
A. $63,000
B. $25,200
C. $30,000
D. $42,000
.
95. A portion of Lapore Corporation's Balance Sheet appears below:
The company's debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.60
B. 0.37
C. 0.39
D. 0.27
.
96. Wittels Corporation has provided the following data:
In Year 2, the company's net operating income was $42,571, its net income before taxes was
$21,571, and its net income was $15,100. The company's equity multiplier is closest to:
A. 1.14
B. 0.53
C. 0.88
D. 1.87
97. Broch Corporation's income statement appears below:
The company's times interest earned is closest to:
A. 4.87
B. 1.41
C. 3.16
D. 2.16
.
98. Cutsinger Corporation has provided the following data from its most recent income statement:
The times interest earned ratio is closest to:
A. 1.83
B. 0.28
C. 1.28
D. 0.19
99. Karma Corporation has total assets of $190,000 and total liabilities of $90,000. The corporation's
debt-to-equity ratio is closest to:
A. 0.47
B. 0.90
C. 0.53
D. 0.32
.
100.Rough Corporation's total assets at the end of Year 2 were $1,247,000 and at the end of Year 1
were $1,270,000. The company's total liabilities at the end of Year 2 were $512,000 and at the
end of Year 1 were $550,000. The company's total stockholders' equity at the end of Year 2 was
$735,000 and at the end of Year 1 was $720,000. The company's equity multiplier is closest to:
A. 1.73
B. 1.44
C. 0.69
D. 0.58
101.Younis Corporation's income statement appears below:
The company's net profit margin percentage is closest to:
A. 37.1%
B. 3.5%
C. 2.4%
D. 1.7%
.
102.Crosswhite Corporation's sales last year were $1,270,000, its gross margin was $400,000, its net
operating income was $53,769, and its net income was $26,500. The company's net profit margin
percentage is closest to:
A. 31.5%
B. 3.2%
C. 4.2%
D. 2.1%
103.Mars Corporation has provided the following data for Year 2:
The company's total stockholders' equity at the end of Year 2 amounted to $1,095,000 and at the
end of Year 1 to $1,060,000. The company's return on equity for Year 2 is closest to:
A. 5.91%
B. 7.40%
C. 3.84%
D. 71.20%
.
104.Sapien Corporation has provided the following data for the most recent year:
The company's gross margin percentage is closest to:
A. 52.3%
B. 1691.2%
C. 5.9%
D. 34.3%
105.Mormino Corporation's income statement appears below:
A. 1888.9%
B. 5.3%
C. 41.1%
D. 69.9%
.
106.Jester Corporation's most recent income statement appears below:
The beginning balance of total assets was $360,000 and the ending balance was $320,000. The
return on total assets is closest to:
A. 26.5%
B. 18.5%
C. 22.6%
D. 32.4%
107.For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its net
operating income was $63,714, its net income before taxes was $42,714, and its net income was
$29,900. The company's total stockholders' equity at the end of Year 2 amounted to $829,000
and at the end of Year 1 to $800,000. The company's return on equity for Year 2 is closest to:
A. 3.67%
B. 60.16%
C. 5.24%
D. 7.82%
.
108.Kienle Corporation's Year 2 income statement appears below:
The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of Year
1 to $1,320,000. The company's return on total assets for Year 2 is closest to:
A. 2.48%
B. 3.14%
C. 2.52%
D. 3.10%
109.Valdovinos Corporation has provided the following data:
A. 38.3%
B. 3.5%
C. 1.3%
D. 2.0%
.
110.Braverman Corporation's net income last year was $75,000 and its interest expense was
$10,000. Total assets at the beginning of the year were $650,000 and total assets at the end of
the year were $610,000. The corporation's income tax rate was 30%. The corporation's return on
total assets for the year was closest to:
A. 13.5%
B. 12.4%
C. 13.0%
D. 11.9%
111.Grosvenor Corporation's most recent income statement appears below:
The gross margin percentage is closest to:
A. 80.9%
B. 44.7%
C. 376.0%
D. 26.6%
.
112.Fongeallaz Corporation's income statement for Year 2 appears below:
The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the
end of Year 1 to $810,000. The company's return on equity for Year 2 is closest to:
A. 64.40%
B. 8.93%
C. 6.75%
D. 4.72%
113.Weightman Corporation's net operating income in Year 2 was $76,385, net income before taxes
was $55,385, and the net income was $36,000. Total common stock was $200,000 at the end of
both Year 2 and Year 1. The par value of common stock is $4 per share. The company's total
stockholders' equity at the end of Year 2 amounted to $983,000 and at the end of Year 1 to
$950,000. The market price per share at the end of Year 2 was $7.92. The company's price-
earnings ratio for Year 2 is closest to:
A. 7.14
B. 0.58
C. 5.18
D. 11.00
.
114.The following information relates to Conejo Corporation for last year:
What is Conejo's price-earnings ratio for last year?
A. 1.6
B. 2.4
C. 8.0
D. 2.0
115.Goldsmith Corporation has provided the following data:
The company's net income in Year 2 was $24,400. The company's book value per share at the
end of Year 2 is closest to:
A. $8.32 per share
B. $4.66 per share
C. $14.34 per share
D. $0.27 per share
.
116.Linzey Corporation has provided the following data:
The company's net income in Year 2 was $33,000. The company's book value per share at the
end of Year 2 is closest to:
A. $22.45 per share
B. $12.45 per share
C. $0.55 per share
D. $15.45 per share
117.Tempel Corporation has provided the following data:
The market price of common stock at the end of Year 2 was $2.77 per share. The company's
price-earnings ratio for Year 2 is closest to:
A. 9.23
B. 0.35
C. 4.54
D. 13.40
.
118.Keyton Corporation's net operating income in Year 2 was $43,714, net income before taxes was
$30,714, and the net income was $21,500. Total common stock was $200,000 at the end of both
Year 2 and Year 1. The par value of common stock is $4 per share. The company's total
stockholders' equity at the end of Year 2 amounted to $1,148,000 and at the end of Year 1 to
$1,130,000. The company declared and paid $3,500 dividends on common stock in Year 2. The
market price per share was $8.43 at the end of Year 2. The company's dividend payout ratio for
Year 2 is closest to:
A. 0.8%
B. 1.8%
C. 16.3%
D. 11.4%
119.Rawdon Corporation's net operating income in Year 2 was $52,429, net income before taxes was
$960,000. The company's earnings per share for Year 2 is closest to:
A. $0.58 per share
B. $0.38 per share
C. $0.27 per share
D. $5.84 per share
.
120.Leflore Corporation has provided the following data:
Dividends on common stock during Year 2 totaled $6,000. The market price of common stock at
the end of Year 2 was $1.38 per share. The company's dividend yield ratio for Year 2 is closest
to:
A. 4.3%
B. 1.2%
C. 35.0%
D. 50.0%
121.Cameron Corporation had 50,000 shares of common stock issued and outstanding that it
originally issued for $40 per share. The following information pertains to these shares:
The total dividend on common stock for the year was $400,000. Cameron Corporation's dividend
yield ratio for the year was:
A. 20.00%
B. 11.43%
C. 9.41%
D. 8.89%
.
122.Hernande Corporation has provided the following data:
The company's earnings per share for Year 2 is closest to:
A. $4.25 per share
B. $0.43 per share
C. $0.61 per share
D. $0.75 per share
123.Delfavero Corporation has provided the following data:
A. $10.33 per share
B. $0.52 per share
C. $0.34 per share
D. $0.79 per share
.
124.Groeneweg Corporation has provided the following data:
the end of Year 2 was $9.45 per share. The company's dividend payout ratio for Year 2 is closest
to:
A. 8.7%
B. 13.4%
C. 4.5%
D. 1.0%
125.Spincic Corporation has provided the following data:
A. 0.52
B. 8.10
C. 6.16
D. 12.52
.
126.Kovack Corporation's net operating income in Year 2 was $66,571, net income before taxes was
$930,000. The company declared and paid $600 dividends on common stock. The market price
per share was $4.37. The company's dividend yield ratio for Year 2 is closest to:
A. 0.2%
B. 1.3%
C. 1.9%
D. 0.5%
127.Uhri Corporation has provided the following data:
the end of Year 2 was $6.08 per share. The company's dividend payout ratio for Year 2 is closest
to:
A. 7.8%
B. 1.3%
C. 11.1%
D. 0.8%
.
128.Sabino Corporation's total common stock was $500,000 at the end of both Year 2 and Year 1.
The par value of common stock is $5 per share. The company's total stockholders' equity at the
end of Year 2 amounted to $1,125,000 and at the end of Year 1 to $1,090,000. The company's
total liabilities and stockholders' equity at the end of Year 2 amounted to $1,581,000 and at the
end of Year 1 to $1,540,000. The company's retained earnings at the end of Year 2 amounted to
$545,000 and at the end of Year 1 to $510,000. The company's net income in Year 2 was
$39,000. The company's book value per share at the end of Year 2 is closest to:
A. $0.39 per share
B. $15.81 per share
C. $11.25 per share
D. $5.45 per share
Nickolls Corporation has provided the following financial data:
129.The company's working capital is:
A. $1,215,000
B. $542,000
C. $793,000
D. $709,000
.
130.The company's current ratio is closest to:
A. 0.47
B. 0.40
C. 0.19
D. 4.25
131.The company's acid-test (quick) ratio is closest to:
A. 2.47
B. 2.83
C. 3.10
D. 4.25
.
Macmillan Corporation has provided the following financial data:
the end of Year 2 was $3.69 per share.
.
132.The company's working capital at the end of Year 2 is:
A. $732,000
B. $831,000
C. $289,000
D. $590,000
133.The company's current ratio at the end of Year 2 is closest to:
A. 0.83
B. 1.96
C. 0.45
D. 0.37
134.The company's acid-test (quick) ratio at the end of Year 2 is closest to:
A. 1.96
B. 1.41
C. 1.20
D. 1.48
.
Mayfield Corporation has provided the following financial data:
135.The company's working capital is:
A. $671,000
B. $665,000
C. $418,000
D. $983,000
.
136.The company's current ratio is closest to:
A. 0.26
B. 2.65
C. 0.50
D. 0.53
137.The company's acid-test (quick) ratio is closest to:
A. 1.90
B. 1.85
C. 2.65
D. 1.81
Excerpts from Colter Corporation's most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720.
.
138.The working capital at the end of Year 2 is:
A. $850
B. $770
C. $400
D. $80
139.The current ratio at the end of Year 2 is closest to:
A. 0.32
B. 0.38
C. 1.25
D. 1.20
140.The acid-test ratio at the end of Year 2 is closest to:
A. 0.72
B. 0.83
C. 0.59
D. 1.25
141.The accounts receivable turnover for Year 2 is closest to:
A. 1.10
B. 0.91
C. 11.52
D. 12.10
.
142.The inventory turnover for Year 2 is closest to:
A. 1.06
B. 0.94
C. 4.36
D. 4.24
.
Freiman Corporation's most recent balance sheet and income statement appear below:
.
A. $260 thousand
B. $680 thousand
C. $700 thousand
D. $540 thousand
A. 0.45
B. 1.93
C. 0.44
D. 1.04
A. 0.96
B. 1.36
C. 1.50
D. 1.93
A. 5.95
B. 5.70
C. 1.09
D. 0.92
.
147.The average collection period for Year 2 is closest to:
A. 64.0 days
B. 0.9 days
C. 61.3 days
D. 1.1 days
A. 0.92
B. 6.50
C. 1.08
D. 6.24
149.The average sale period for Year 2 is closest to:
A. 58.5 days
B. 33.4 days
C. 217.3 days
D. 56.2 days
.
Data from Dunshee Corporation's most recent balance sheet appear below:
A. $270
B. $500
C. $770
D. $740
A. 0.38
B. 2.17
C. 0.94
D. 0.40
.
A. 2.17
B. 1.78
C. 1.74
D. 1.06
A. 1.1 days
B. 0.9 days
C. 84.3 days
D. 87.3 days
A. 28.1 days
B. 45.0 days
C. 50.0 days
D. 227.7 days
.
Financial statements for Maraby Corporation appear below:
.
155.Maraby Corporation's working capital (in thousands of dollars) at the end of Year 2 was closest
to:
A. $260
B. $620
C. $360
D. $990
156.Maraby Corporation's current ratio at the end of Year 2 was closest to:
A. 1.34
B. 1.72
C. 0.60
D. 0.44
157.Maraby Corporation's acid-test ratio at the end of Year 2 was closest to:
A. 0.51
B. 0.47
C. 1.14
D. 1.95
.
158.Maraby Corporation's accounts receivable turnover for Year 2 was closest to:
A. 13.5
B. 7.8
C. 11.2
D. 9.4
159.Maraby Corporation's average collection period for Year 2 was closest to:
A. 38.6 days
B. 46.6 days
C. 32.6 days
D. 27.0 days
160.Maraby Corporation's inventory turnover for Year 2 was closest to:
A. 11.2
B. 7.8
C. 9.4
D. 13.5
161.Maraby Corporation's average sale period for Year 2 was closest to:
A. 38.8 days
B. 32.6 days
C. 46.6 days
D. 27.0 days
.
Excerpts from Sydner Corporation's most recent balance sheet appear below:
A. $600
B. $1,000
C. $880
D. $240
A. 1.67
B. 0.32
C. 0.80
D. 0.41
.
A. 1.67
B. 1.00
C. 0.97
D. 1.25
A. 6.62
B. 1.10
C. 6.32
D. 0.91
A. 55.1 days
B. 0.9 days
C. 1.1 days
D. 57.8 days
A. 3.75
B. 1.20
C. 4.09
D. 0.83
.
A. 63.0 days
B. 89.2 days
C. 236.3 days
D. 97.3 days
Ribaudo Corporation has provided the following financial data from its balance sheet and income
statement:
169.The company's accounts receivable turnover for Year 2 is closest to:
A. 1.06
B. 5.06
C. 5.21
D. 0.94
.
170.The company's average collection period (age of receivables) for Year 2 is closest to:
A. 70.1 days
B. 1.1 days
C. 72.1 days
D. 1.0 days
171.The company's inventory turnover for Year 2 is closest to:
A. 3.89
B. 1.04
C. 3.97
D. 4.05
172.The company's average sale period (turnover in days) for Year 2 is closest to:
A. 91.9 days
B. 48.9 days
C. 90.1 days
D. 198.1 days
173.The company's operating cycle for Year 2 is closest to:
A. 95.9 days
B. 75.3 days
C. 162.0 days
D. 9.2 days
.
174.The company's total asset turnover for Year 2 is closest to:
A. 5.29
B. 0.19
C. 1.04
D. 0.96
.
Dahn Corporation has provided the following financial data:
.
A. 0.97
B. 10.38
C. 1.03
D. 10.22
A. 35.7 days
B. 1.1 days
C. 1.0 days
D. 35.2 days
A. 6.54
B. 5.67
C. 6.07
D. 0.87
A. 226.5 days
B. 60.1 days
C. 40.0 days
D. 64.4 days
.
A. 66.2 days
B. 16.5 days
C. 95.3 days
D. 45.6 days
A. 10.17
B. 0.10
C. 1.02
D. 0.98
Guttery Corporation has provided the following financial data from its balance sheet:
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
A. 12.95
B. 1.02
C. 0.98
D. 13.06
.
A. 1.1 days
B. 28.2 days
C. 1.0 days
D. 27.9 days
A. 5.17
B. 5.56
C. 6.00
D. 0.86
A. 65.6 days
B. 226.6 days
C. 43.8 days
D. 70.6 days
A. 71.2 days
B. 93.5 days
C. 18.6 days
D. 41.0 days
.
A. 1.17
B. 11.04
C. 0.09
D. 0.85
.
Mahoe Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $500. The market price of common stock at
.
A. 70.8 days
B. 10.0 days
C. 87.7 days
D. 148.5 days
A. 1.25
B. 0.80
C. 6.57
D. 0.15
189.The company's equity multiplier at the end of Year 2 is closest to:
A. 0.28
B. 1.28
C. 3.53
D. 0.78
.
Burdick Corporation has provided the following financial data from its balance sheet:
Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was
$860,000.
A. 10.4 days
B. 79.5 days
C. 141.3 days
D. 72.2 days
A. 0.99
B. 0.19
C. 5.32
D. 1.01
.
A. 0.70
B. 1.43
C. 2.34
D. 0.43
.
Financial statements for Narstad Corporation appear below:
.
193.Narstad Corporation's times interest earned for Year 2 was closest to:
A. 11.0
B. 10.0
C. 18.0
D. 7.0
194.Narstad Corporation's debt-to-equity ratio at the end of Year 2 was closest to:
A. 0.50
B. 0.36
C. 0.19
D. 0.17
.
Lasch Corporation has provided the following financial data from its balance sheet and income
statement:
195.The company's times interest earned for Year 2 is closest to:
A. 1.43
B. 3.47
C. 2.43
D. 1.00
.
196.The company's debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.30
B. 0.36
C. 0.41
D. 0.60
A. 1.60
B. 1.68
C. 0.63
D. 0.60
Deacon Corporation has provided the following financial data from its balance sheet and income
statement:
A. 2.74
B. 8.02
C. 5.21
D. 4.21
.
A. 0.29
B. 0.38
C. 0.23
D. 0.64
A. 0.64
B. 1.65
C. 1.57
D. 0.61
.
Fayer Corporation has provided the following financial data:
.
A. 7.71
B. 2.61
C. 5.01
D. 4.01
A. 0.22
B. 0.27
C. 0.45
D. 0.19
A. 0.69
B. 2.23
C. 0.45
D. 1.45
.
Tweedle Corporation's most recent balance sheet and income statement appear below:
.
204.The times interest earned for Year 2 is closest to:
A. 6.40
B. 9.16
C. 14.51
D. 10.16
205.The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.43
B. 0.24
C. 0.17
D. 0.54
Data from Lheureux Corporation's most recent balance sheet and the company's income
statement appear below:
.
206.The times interest earned for Year 2 is closest to:
A. 2.22
B. 4.17
C. 3.17
D. 5.95
207.The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.38
B. 0.13
C. 0.16
D. 0.43
Neef Corporation has provided the following financial data from its balance sheet and income
statement:
.
208.The company's net profit margin percentage for Year 2 is closest to:
A. 37.3%
B. 2.6%
C. 1.4%
D. 0.9%
209.The company's gross margin percentage for Year 2 is closest to:
A. 59.6%
B. 2.5%
C. 37.3%
D. 4076.9%
210.The company's return on total assets for Year 2 is closest to:
A. 0.99%
B. 1.00%
C. 1.85%
D. 1.83%
211.The company's return on equity for Year 2 is closest to:
A. 67.25%
B. 2.27%
C. 1.47%
D. 4.19%
.
Garrott Corporation's total assets were $1,505,000 at the end of Year 2 and $1,520,000 at the
end of Year 1. Its total stockholders' equity was $1,197,000 at the end of Year 2 and $1,180,000
at the end of Year 1.
A. 1.9%
B. 2.7%
C. 3.3%
D. 38.1%
A. 4.9%
B. 61.4%
C. 38.1%
D. 2031.9%
.
A. 2.09%
B. 2.08%
C. 1.67%
D. 1.66%
A. 3.02%
B. 3.77%
C. 2.11%
D. 79.14%
.
Kearin Corporation has provided the following financial data:
.
A. 3.9%
B. 38.5%
C. 2.5%
D. 1.6%
A. 62.5%
B. 4.2%
C. 38.5%
D. 2381.0%
A. 1.38%
B. 2.18%
C. 1.37%
D. 2.19%
.
A. 71.44%
B. 4.72%
C. 2.97%
D. 1.93%
Doonan Corporation has provided the following financial data from its balance sheet and income
statement:
The market price of common stock at the end of Year 2 was $4.79 per share.
A. 1.77%
B. 2.46%
C. 1.80%
D. 2.42%
.
A. 5.60%
B. 4.09%
C. 2.66%
D. 68.28%
222.The company's earnings per share for Year 2 is closest to:
A. $6.33 per share
B. $0.29 per share
C. $0.45 per share
D. $0.62 per share
223.The company's price-earnings ratio for Year 2 is closest to:
A. 0.76
B. 10.64
C. 16.52
D. 7.73
.
Settles Corporation has provided the following financial data:
.
A. 2.75%
B. 1.64%
C. 1.65%
D. 2.76%
A. 3.31%
B. 8.50%
C. 5.09%
D. 50.52%
A. $0.31 per share
B. $0.47 per share
C. $0.79 per share
D. $3.88 per share
A. 19.00
B. 12.53
C. 7.46
D. 1.52
.
Recher Corporation's common stock has a par value of $3 per share and has been stable at a
total value of $270,000 on the company's balance sheet for several years. The total stockholders'
equity at the end of this year was $1,023,000 and at the beginning of the year was $1,010,000.
Net income for the year was $17,500. Dividends on common stock during the year totaled
$4,500. The market price of common stock at the end of the year was $3.76 per share.
228.The company's earnings per share is closest to:
A. $7.37 per share
B. $0.45 per share
C. $0.30 per share
D. $0.19 per share
229.The company's price-earnings ratio is closest to:
A. 19.79
B. 0.51
C. 8.36
D. 12.53
230.The company's dividend payout ratio is closest to:
A. 1.3%
B. 1.7%
C. 17.1%
D. 26.3%
.
231.The company's dividend yield ratio is closest to:
A. 1.7%
B. 17.1%
C. 1.3%
D. 26.3%
232.The company's book value per share at the end of the year is closest to:
A. $11.37 per share
B. $7.37 per share
C. $0.19 per share
D. $16.81 per share
Sperle Corporation has provided the following data concerning its stockholders' equity accounts:
Net income for Year 2 was $30,400. Dividends on common stock during Year 2 totaled $6,400.
.
A. $8.18 per share
B. $0.38 per share
C. $0.54 per share
D. $0.68 per share
A. 0.38
B. 4.53
C. 5.70
D. 8.11
235.The company's dividend payout ratio for Year 2 is closest to:
A. 1.6%
B. 21.1%
C. 2.6%
D. 14.7%
236.The company's dividend yield ratio for Year 2 is closest to:
A. 21.1%
B. 2.6%
C. 1.6%
D. 14.7%
.
237.The company's book value per share at the end of Year 2 is closest to:
A. $0.38 per share
B. $8.18 per share
C. $18.08 per share
D. $13.93 per share
.
Symons Corporation has provided the following financial data:
.
A. $0.53 per share
B. $11.54 per share
C. $0.19 per share
D. $0.27 per share
A. 3.79
B. 10.58
C. 0.17
D. 7.44
240.The company's dividend payout ratio for Year 2 is closest to:
A. 26.3%
B. 2.5%
C. 18.4%
D. 1.0%
241.The company's dividend yield ratio for Year 2 is closest to:
A. 1.0%
B. 18.4%
C. 26.3%
D. 2.5%
.
242.The company's book value per share at the end of Year 2 is closest to:
A. $17.94 per share
B. $28.26 per share
C. $0.19 per share
D. $11.54 per share
Essay Questions
243.Rubendall Corporation's total current assets are $310,000, its noncurrent assets are $630,000,
its total current liabilities are $250,000, its long-term liabilities are $300,000, and its stockholders'
equity is $390,000.
Required:
Compute the company's current ratio. Show your work!
.
244.Gremel Corporation has provided the following financial data:
Required:
a. What is the company's working capital?
b. What is the company's current ratio?
c. What is the company's acid-test (quick) ratio?
.
245.Steinkraus Corporation has provided the following data:
Required:
Compute the accounts receivable turnover for this year. Show your work!
246.Arkin Corporation's total current assets are $290,000, its noncurrent assets are $520,000, its total
current liabilities are $210,000, its long-term liabilities are $420,000, and its stockholders' equity
is $180,000.
Required:
Compute the company's working capital. Show your work!
.
247.Wowk Corporation has provided the following financial data:
Required:
.
248.Data from Yochem Corporation's most recent balance sheet appear below:
Required:
Compute the company's acid-test ratio. Show your work!
.
249.Excerpts from Candle Corporation's most recent balance sheet (in thousands of dollars) appear
below:
Sales on account during the year totaled $1,200 thousand. Cost of goods sold was $800
thousand.
Required:
Compute the following for Year 2:
a. Working capital.
b. Current ratio.
c. Acid-test ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
.
250.Wegener Corporation's most recent balance sheet and income statement appear below:
Required:
a. Working capital.
.
b. Current ratio.
c. Acid-test ratio.
.
251.Abdool Corporation has provided the following financial data:
Required:
.
a. What is the company's working capital at the end of Year 2?
b. What is the company's current ratio at the end of Year 2?
c. What is the company's acid-test (quick) ratio at the end of Year 2?
d. What is the company's accounts receivable turnover for Year 2?
e. What is the company's average collection period (age of receivables) for Year 2?
f. What is the company's inventory turnover for Year 2?
g. What is the company's average sale period (turnover in days) for Year 2?
h. What is the company's operating cycle for Year 2?
i. What is the company's total asset turnover for Year 2?
.
252.Financial statements for Rardin Corporation appear below:
Required:
.
a. Current ratio.
b. Acid-test ratio.
c. Average collection period.
d. Inventory turnover.
e. Times interest earned.
f. Debt-to-equity ratio.
.
253.Mondok Corporation has provided the following financial data:
Required:
.
j. What is the company's times interest earned for Year 2?
k. What is the company's debt-to-equity ratio at the end of Year 2?
l. What is the company's equity multiplier at the end of Year 2?
.
254.Two-Rivers Inc. (TRI) manufactures a variety of consumer products. The company's founders
have run the company for thirty years and are now interested in retiring. Consequently, they are
seeking a purchaser, and a group of investors is looking into the acquisition of TRI. To evaluate
its financial stability, TRI was requested to provide its latest financial statements and selected
financial ratios. Summary information provided by TRI is presented below.
.
Required:
a. Calculate the select financial ratios for the fiscal year Year 2.
b. Interpret what each of these financial ratios means in terms of TRI's financial stability and
operating efficiency.
.
255.Financial statements for Praeger Corporation appear below:
Dividends during Year 2 totaled $45 thousand. The market price of a share of common stock on
.
December 31, Year 2 was $30.
Required:
a. Return on total assets.
b. Working capital.
c. Current ratio.
d. Acid-test ratio.
e. Accounts receivable turnover.
f. Average collection period.
g. Inventory turnover.
h. Average sale period.
i. Times interest earned.
j. Debt-to-equity ratio.
.
256.Kaloi Corporation has provided the following financial data:
.
Required:
m. What is the company's net profit margin percentage for Year 2?
n. What is the company's gross margin percentage for Year 2?
o. What is the company's return on total assets for Year 2?
p. What is the company's return on equity for Year 2?
.
257.Hyrkas Corporation's most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $30 thousand. The market price of common
stock at the end of Year 2 was $6.90 per share.
Required:
.
a. Gross margin percentage.
b. Earnings per share.
c. Price-earnings ratio.
d. Dividend payout ratio.
e. Dividend yield ratio.
f. Return on total assets.
g. Return on equity.
h. Book value per share.
i. Working capital.
j. Current ratio.
k. Acid-test ratio.
l. Accounts receivable turnover.
m. Average collection period.
n. Inventory turnover.
o. Average sale period.
p. Times interest earned.
q. Debt-to-equity ratio.
.
258.Kisselburg Corporation has provided the following financial data:
.
Required:
q. What is the company's earnings per share for Year 2?
r. What is the company's price-earnings ratio for Year 2?
s. What is the company's dividend payout ratio for Year 2?
t. What is the company's dividend yield ratio for Year 2?
u. What is the company's book value per share at the end of Year 2?
.
259.M. K. Berry is the managing director of CE Ltd. a small, family-owned company which
manufactures cutlery. His company belongs to a trade association which publishes a monthly
magazine. The latest issue of the magazine contains a very brief article based on the analysis of
the accounting statements published by the 40 companies which manufacture this type of
product. The article contains the following table:
CE Ltd's latest financial statements are as follows:
The country in which the company operates has no corporate income tax. No dividends were
paid during the year. All sales are on account.
.
Required:
a. Calculate each of the ratios listed in the magazine article for this year for CE, and comment
briefly on CE Ltd's performance in comparison to the industrial averages.
b. Explain why it could be misleading to compare CE Ltd's ratios with those taken from the
article.
.
260.Neiger Corporation has provided the following financial data:
Required:
.
d. What is the company's times interest earned for Year 2?
e. What is the company's debt-to-equity ratio at the end of Year 2?
f. What is the company's equity multiplier at the end of Year 2?
.
261.Walker Corporation has provided the following financial data:
The company's net operating income for Year 2 was $63,615 and its interest expense was
$15,000.
Required:
.
262.Data from Ben Corporation's most recent balance sheet and income statement appear below:
Required:
Compute the average sale period for this year:
.
263.Dilisio Corporation has provided the following data:
Required:
Compute the inventory turnover for this year:
.
264.Hagle Corporation has provided the following financial data:
Required:
.
a. What is the company's accounts receivable turnover for Year 2?
b. What is the company's average collection period (age of receivables) for Year 2?
c. What is the company's inventory turnover for Year 2?
d. What is the company's average sale period (turnover in days) for Year 2?
e. What is the company's operating cycle for Year 2?
f. What is the company's total asset turnover for Year 2?
265.Data from Dalpiaz Corporation's most recent balance sheet and income statement appear below:
Required:
Compute the average collection period for this year:
.
266.Kestner Corporation has provided the following financial data:
Required:
.
267.Wyand Corporation's net operating income last year was $212,000; its interest expense was
$26,000; its total stockholders' equity was $1,000,000; and its total liabilities were $370,000.
Required:
a. Times interest earned.
b. Debt-to-equity ratio.
.
268.Fraction Corporation has provided the following financial data:
Required:
a. What is the company's times interest earned for Year 2?
b. What is the company's debt-to-equity ratio at the end of Year 2?
c. What is the company's equity multiplier at the end of Year 2?
.
269.Babbitt Corporation has provided the following data from its most recent income statement:
Required:
Compute the times interest earned ratio. Show your work!
.
270.Gambino Corporation has provided the following financial data:
Required:
.
.
271.Sidell Corporation's most recent balance sheet and income statement appear below:
Required:
.
.
272.Lindboe Corporation has provided the following financial data:
.
Required:
d. What is the company's net profit margin percentage for Year 2?
e. What is the company's gross margin percentage for Year 2?
f. What is the company's return on total assets for Year 2?
g. What is the company's return on equity for Year 2?
.
273.Schepp Corporation has provided the following financial data:
Required:
.
274.Brill Corporation has provided the following financial data:
Required:
h. What is the company's earnings per share for Year 2?
i. What is the company's price-earnings ratio for Year 2?
j. What is the company's dividend payout ratio for Year 2?
k. What is the company's dividend yield ratio for Year 2?
l. What is the company's book value per share at the end of Year 2?
.
275.Jaquez Corporation has provided the following financial data:
Required:
.
.
276.Medina Corporation has provided the following financial data:
.
Required:
.
277.Tobia Corporation has provided the following financial data:
.
Required:
d. What is the company's earnings per share for Year 2?
e. What is the company's price-earnings ratio for Year 2?
f. What is the company's dividend payout ratio for Year 2?
g. What is the company's dividend yield ratio for Year 2?
h. What is the company's book value per share at the end of Year 2?
.
278.Vogelsberg Corporation has provided the following financial data:
The company's net operating income in Year 2 was $62,308; its interest expense was $12,000;
and its net income was $32,700. Dividends on common stock during Year 2 totaled $2,700. The
market price of common stock at the end of Year 2 was $6.37 per share.
Required:
.
279.Remley Corporation has provided the following financial data:
Required:
.
280.Pribyl Corporation has provided the following financial data:
Required:
a. What is the company's net profit margin percentage for Year 2?
b. What is the company's gross margin percentage for Year 2?
c. What is the company's return on total assets for Year 2?
d. What is the company's return on equity for Year 2?
.
281.Perrett Corporation has provided the following financial data:
Required:
.
282.Jepson Corporation's most recent income statement appears below:
Required:
Compute the gross margin percentage.
.
283.Gehlhausen Corporation has provided the following financial data:
.
Required:
.
284.Degollado Corporation's most recent income statement appears below:
The beginning balance of total assets was $200,000 and the ending balance was $220,000.
Required:
Compute the return on total assets. Show your work!
.
285.Marovich Corporation has provided the following financial data:
Required:
e. What is the company's earnings per share for Year 2?
f. What is the company's price-earnings ratio for Year 2?
g. What is the company's dividend payout ratio for Year 2?
h. What is the company's dividend yield ratio for Year 2?
i. What is the company's book value per share at the end of Year 2?
.
286.Straton Corporation has provided the following financial data:
.
Required:
.
287.Moselle Corporation has provided the following financial data:
.
Required:
a. What is the company's earnings per share for Year 2?
b. What is the company's price-earnings ratio for Year 2?
c. What is the company's dividend payout ratio for Year 2?
d. What is the company's dividend yield ratio for Year 2?
e. What is the company's book value per share at the end of Year 2?
.
288.Mihok Corporation has provided the following financial data:
Required:

.
289.Sehrt Corporation has provided the following financial data:
The company's net income for Year 2 was $44,000. Dividends on common stock during Year 2
totaled $11,000. The market price of common stock at the end of Year 2 was $6.29 per share.
Required:
.
Chapter 15 Financial Statement Analysis Answer Key
True / False Questions
1. Vertical analysis of financial statements is accomplished by preparing common-size
statements.
TRUE
AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 15-01 Prepare and interpret financial statements in comparative and common-size form.
2. In determining whether a company's financial condition is improving or deteriorating over time,
horizontal analysis of financial statement data would be more useful than vertical analysis.
TRUE

Blooms: Understand
Difficulty: 1 Easy
.
3. A common-size financial statement is a vertical analysis in which each financial statement
account is expressed as a percentage.
TRUE

Blooms: Remember
Difficulty: 1 Easy
4. The acid-test ratio is usually greater than the current ratio.
FALSE
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 15-02 Compute and interpret financial ratios that managers use to assess liquidity.
5. Liquidity refers to how quickly an asset can be converted into cash.
TRUE

Blooms: Remember
Difficulty: 1 Easy
.
6. If the acid-test ratio is less than one, then paying off some current liabilities with cash will
increase the acid-test (quick) ratio.
FALSE
AACSB: Analytic
Blooms: Analyze
7. A company could improve its acid-test ratio by selling some equipment it no longer needs for
cash.
TRUE
AACSB: Analytic
Blooms: Analyze
8. Acquiring land by taking out a long-term mortgage will not affect the current ratio.
TRUE
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
9. Purchasing marketable securities with cash will have no effect on a company's acid-test ratio.
TRUE
AACSB: Analytic
Blooms: Analyze
10. As the accounts receivable turnover ratio decreases, the average collection period increases.
TRUE

Blooms: Understand
Learning Objective: 15-03 Compute and interpret financial ratios that managers use for asset management purposes.
11. If a company's operating cycle is much longer than its average payment period for suppliers, it
creates the need to borrow money to fund its inventories and accounts receivable.
TRUE

Blooms: Understand
Difficulty: 1 Easy
.
12. All other things the same, purchasing inventory would decrease the inventory turnover ratio.
TRUE
AACSB: Analytic
Blooms: Analyze
13. Buying inventory in large lots to take advantage of quantity discounts can be responsible for a
high inventory turnover ratio.
FALSE

Blooms: Understand
14. All other things the same, when a company increases its inventories in anticipation of later
higher sales, the accounts receivable turnover ratio for the current period increases.
FALSE
AACSB: Analytic
Blooms: Analyze
.
15. All other things the same, purchasing merchandise inventory would have no effect on the
accounts receivable turnover ratio at a retailer.
TRUE
AACSB: Analytic
Blooms: Analyze
16. All other things the same, when a customer purchases an item for cash, the accounts
receivable turnover ratio increases.
FALSE

Blooms: Understand
17. As the inventory turnover increases, the average sales period decreases.
TRUE

Blooms: Understand
.
18. To increase total asset turnover, management must either increase sales or reduce total
FALSE

Blooms: Understand
Difficulty: 1 Easy
19. The formula for the average sale period is: Average sale period = Accounts receivable
turnover ÷ Inventory turnover.
FALSE

Blooms: Remember
Difficulty: 1 Easy
20. The formula for total asset turnover is: Total asset turnover = Total assets ÷ Total
FALSE

Blooms: Remember
Difficulty: 1 Easy
.
21. A company whose inventory turnover ratio is much slower than the average for its industry
may have too much inventory or the wrong sorts of inventory.
TRUE

Blooms: Understand
Difficulty: 1 Easy
22. All other things the same, those who hold the company's debt (i.e., its creditors) would like a
low debt-to-equity ratio to provide a buffer of protection.
TRUE

Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 15-04 Compute and interpret financial ratios that managers use for debt management purposes.
23. All other things the same, if long-term debt is exchanged for short-term debt, the debt-to-equity
ratio will be unchanged.
TRUE

Blooms: Understand
.
24. The times interest earned ratio is based on net income because that is the amount of earnings
that is available for making interest payments. Interest expense is deducted before taxes are
determined; creditors have first claim on the earnings before taxes are paid.
FALSE

Blooms: Understand
Difficulty: 3 Hard
25. Issuing common stock will decrease a company's financial leverage.
TRUE

Blooms: Understand
26. The formula for the times interest earned ratio is: Times interest earned = Earnings before
interest expense and income taxes ÷ Interest expense.
TRUE

Blooms: Remember
Difficulty: 1 Easy
.
27. If a company's return on assets is substantially lower than its cost of borrowing, then the
common stockholders would normally want the company to have a relatively high debt/equity
ratio.
FALSE

Blooms: Remember
Learning Objective: 15-05 Compute and interpret financial ratios that managers use to assess profitability.
28. The formula for the return on equity is: Return on equity = Net income ÷ Average total
TRUE

Blooms: Remember
Difficulty: 1 Easy
29. When computing the return on equity, retained earnings should be excluded from the average
total stockholders' equity.
FALSE

Blooms: Understand
.
30. When computing the return on total assets, the interest expense is added back to net income
to show what earnings would have been if the company had no debt.
TRUE

Blooms: Remember
Difficulty: 1 Easy
31. When a company sells used equipment for a loss, the net profit margin percentage is
unaffected.
FALSE
AACSB: Analytic
Blooms: Analyze
32. All other things the same, if a company uses long-term debt to purchase land to develop in the
future, the company's return on total assets will decrease.
TRUE
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
33. If a retailer sells a product whose contribution margin equals the gross margin percentage, the
gross margin percentage will be unaffected by the transaction.
TRUE
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
34. The gross margin percentage is computed by dividing the gross margin by net income before
interest and taxes.
FALSE

Blooms: Understand
35. The formula for the net profit margin percentage is: Net profit margin percentage = Net income
÷ Sales.
TRUE

Blooms: Remember
Difficulty: 1 Easy
.
36. When fixed costs are included in the cost of goods sold, the gross margin percentage should
increase and decrease with sales volume.
TRUE

Blooms: Remember
Difficulty: 1 Easy
37. The gross margin percentage is computed by dividing sales by the gross margin.
FALSE

Blooms: Remember
Difficulty: 1 Easy
38. A high price-earnings ratio means that investors are willing to pay a premium for the
company's stock.
TRUE

Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 15-06 Compute and interpret financial ratios that managers use to assess market performance.
.
39. An increase in the number of shares of common stock outstanding will increase a company's
price-earnings ratio if the market price per share remains unchanged.
TRUE
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
40. The dividend payout ratio is equal to the dividend per share divided by the earnings per
share.
TRUE

Blooms: Remember
Difficulty: 1 Easy
41. All other things the same, if the company purchases equipment on credit, this transaction
would have no impact on the company's book value per share.
TRUE
AACSB: Analytic
Blooms: Analyze
.
42. Purchasing inventory on credit increases the book value per share of a retailer.
FALSE
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
43. The price-earnings ratio is determined by dividing market price per share of stock by the
earnings per share.
TRUE

Blooms: Remember
Difficulty: 1 Easy
44. Earnings per share is computed by multiplying net income by the average number of common
shares outstanding.
FALSE

Blooms: Remember
Difficulty: 1 Easy
.
Multiple Choice Questions
45. Selling used equipment at book value for cash will:
A. increase working capital.
B. decrease working capital.
C. decrease the debt-to-equity ratio.
D. increase net income.

Blooms: Understand
46. If current assets exceed current liabilities, prepaying an expense on the last day of the year
will:
A. decrease the current ratio.
B. increase the acid-test ratio.
C. decrease the acid-test ratio.
D. increase the current ratio.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
47. Zack Company has a current ratio of 2.5. What will be the effect of a purchase of inventory
with cash on the acid-test ratio and on working capital?
A. Option A
B. Option B
C. Option C
D. Option D
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
48. Norton Inc. could improve its current ratio of 2 by:
A. paying a previously declared stock dividend.
B. writing off an uncollectible receivable.
C. selling merchandise on credit at a profit.
D. purchasing inventory on credit.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
Source: CMA, adapted
.
49. The ratio of total cash, marketable securities, accounts receivable, and short-term notes to
current liabilities is:
A. the debt-to-equity ratio.
B. the current ratio.
C. the acid-test ratio.
D. working capital.

Blooms: Remember
Difficulty: 1 Easy
50. A company's current ratio is greater than 1. Purchasing raw materials on credit would:
A. increase the current ratio.
B. decrease the current ratio.
C. increase net working capital.
D. decrease net working capital.
AACSB: Analytic
Blooms: Analyze
.
51. Sand Company has an acid-test ratio of 0.8. Which of the following actions would improve the
acid-test ratio?
A. Collect some accounts receivable.
B. Acquire some inventory on account.
C. Sell some equipment for cash.
D. Use cash to pay off some accounts payable.
AACSB: Analytic
Blooms: Analyze
52. A company's current ratio and an acid-test ratio are both greater than 1. Payment of an
account payable would:
A. increase the current ratio but the acid-test ratio would not be affected.
B. increase the acid-test ratio but the current ratio would not be affected.
C. increase both the current and acid-test ratios.
D. decrease both the current and acid-test ratios.
AACSB: Analytic
Blooms: Analyze
.
53. Turner Co. presently has a current ratio of 0.8. The company has been informed by its bank
that it must improve its current ratio to qualify for a line of credit. Which of the following actions
would improve the current ratio?
A. Use cash to pay off some current liabilities.
B. Purchase additional marketable securities with cash.
C. Acquire a parcel of land in exchange for common stock.
D. Purchase additional inventory on credit.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
54. Accounts receivable turnover will normally decrease as a result of:
A. the write-off of an uncollectible account against the allowance for bad debts.
B. a significant sales volume decrease near the end of the accounting period.
C. an increase in cash sales in proportion to credit sales.
D. a change in credit policy to lengthen the period for cash discounts.

Blooms: Understand
Difficulty: 3 Hard
.
55. The gross margin percentage is equal to:
A. (Net operating income + Selling and administrative expenses)/Sales
B. Net operating income/Sales
C. Cost of goods sold/Sales
D. Cost of goods sold/Net income
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
56. Which of the following is not a source of financial leverage?
A. Bonds payable.
B. Accounts payable.
C. Taxes payable.
D. Prepaid rent.

Blooms: Understand
.
57. Which one of the following statements about book value per share is most correct?
A. Market price per common share usually approximates book value per common share.
B. Book value per common share is based on past transactions whereas the market price of a
share of stock mainly reflects what investors expect to happen in the future.
C. A market price per common share that is greater than book value per common share is an
indication of an overvalued stock.
D. Book value per common share is the amount that would be paid to stockholders if the
company were sold to another company.

Blooms: Remember
Difficulty: 1 Easy
58. The market price of Friden Company's common stock increased from $15 to $18. Earnings per
share of common stock remained unchanged. The company's price-earnings ratio would:
A. increase.
B. decrease.
C. remain unchanged.
D. impossible to determine.

Blooms: Remember
Difficulty: 1 Easy
.
59. The Seabury Corporation has a current ratio of 3.5 and an acid-test ratio of 2.8. The
corporation's current assets consist of cash, marketable securities, accounts receivable, and
inventories. Inventory equals $49,000. Seabury Corporation's current liabilities must be:
A. $70,000
B. $100,000
C. $49,000
D. $125,000
Current assets = Quick assets + Inventory
Current assets = Quick assets + $49,000
Acid-test ratio = Quick assets ÷ Current liabilities
2.8 = Quick assets ÷ Current liabilities
Quick assets = 2.8 × Current liabilities
Current ratio = Current assets ÷ Current liabilities
3.5 = Current assets ÷ Current liabilities
3.5 = (Quick assets + $49,000) ÷ Current liabilities
3.5 = [(2.8 × Current liabilities) + $49,000] ÷ Current liabilities
3.5 = 2.8 + ($49,000 ÷ Current liabilities)
3.5 - 2.8 = $49,000 ÷ Current liabilities
0.7 = $49,000 ÷ Current liabilities
Current liabilities = $49,000 ÷ 0.7 = $70,000
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
.
60. Data from Fontecchio Corporation's most recent balance sheet appear below:
The corporation's acid-test ratio is closest to:
A. 0.35
B. 0.15
C. 0.68
D. 0.79
Quick assets = Cash + Marketable securities + Accounts receivable + Short-term notes
receivable
= $18,000 + $24,000 + $39,000 + $0 = $81,000
= $81,000 ÷ $120,000 = 0.675
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
61. Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000,
total stockholders' equity of $1,057,000, total net plant and equipment of $1,031,000, total
assets of $1,514,000, and total liabilities of $457,000. The company's current ratio is closest
to:
A. 0.32
B. 0.30
C. 1.39
D. 0.95
= $483,000 ÷ $347,000 = 1.39 (rounded)
AACSB: Analytic
Blooms: Apply
.
62. Gnas Corporation's total current assets are $210,000, its noncurrent assets are $590,000, its
equity is $150,000. The current ratio is closest to:
A. 1.31
B. 0.76
C. 0.33
D. 0.36
= $210,000 ÷ $160,000 = 1.3125
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
63. Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The
corporation's current ratio is closest to:
A. 1.41
B. 0.59
C. 3.42
D. 0.41
Current assets = Working capital + Current liabilities
= $80,000 + $33,000 = $113,000
= $113,000 ÷ $80,000 = 1.4125
AACSB: Analytic
Blooms: Apply
.
64. Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of $40,000 and
noncurrent assets of $70,000. The corporation's current assets consist of cash, marketable
securities, accounts receivable, prepaid expenses, and inventory; it has no short-term notes
receivable. If Dennisport's current ratio is 3.1, its inventory and prepaid expenses must be:
A. $12,400
B. $24,000
C. $30,000
D. $40,000
3.1 = Current assets ÷ $40,000
Current assets = $124,000
Acid-test ratio = (Cash + Marketable securities + Accounts receivable + Short-term notes
receivable) ÷ Current liabilities
2.5 = (Cash + Marketable securities + Accounts receivable + 0) ÷ $40,000
Cash + Marketable securities + Accounts receivable = $100,000
Current assets = Cash + Marketable securities + Accounts receivable + Prepaid expenses +
Inventory
$124,000 = $100,000 + Prepaid expenses + Inventory
Prepaid expenses + Inventory = $24,000
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
.
65. Calin Corporation has total current assets of $615,000, total current liabilities of $230,000,
total stockholders' equity of $1,183,000, total net plant and equipment of $958,000, total
assets of $1,573,000, and total liabilities of $390,000. The company's working capital is:
A. $615,000
B. $1,183,000
C. $385,000
D. $958,000
Working capital = Current assets - Current liabilities
= $615,000 - $230,000 = $385,000
AACSB: Analytic
Blooms: Apply
.
66. Mcrae Corporation's total current assets are $380,000, its noncurrent assets are $500,000, its
equity is $290,000. Working capital is:
A. $380,000
B. $40,000
C. $250,000
D. $290,000
= $380,000 - $340,000 = $40,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
67. Erastic Corporation has $14,000 in cash, $8,000 in marketable securities, $34,000 in account
receivable, $40,000 in inventories, and $42,000 in current liabilities. The corporation's current
assets consist of cash, marketable securities, accounts receivable, and inventory. The
corporation's acid-test ratio is closest to:
A. 1.33
B. 0.81
C. 2.29
D. 1.14
Quick assets = Cash + Marketable securities + Accounts receivable
= $14,000 + $8,000 + $34,000 = $56,000
Acid-test ratio = Quick assets ÷ Current liabilities = $56,000 ÷ $42,000 = 1.33
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
68. Windham Corporation has current assets of $400,000 and current liabilities of $500,000.
Windham Corporation's current ratio would be increased by:
A. the purchase of $100,000 of inventory on account.
B. the payment of $100,000 of accounts payable.
C. the collection of $100,000 of accounts receivable.
D. refinancing a $100,000 long-term loan with short-term debt.
= $400,000 ÷ $500,000 = 0.80
= ($400,000 + $100,000) ÷ ($500,000 + $100,000) = 0.833
AACSB: Analytic
Blooms: Apply
.
69. Stimac Corporation has total cash of $210,000, no marketable securities, total current
receivables of $281,000, total inventory of $151,000, total prepaid expenses of $53,000, total
current assets of $695,000, total current liabilities of $261,000, total stockholders' equity of
$1,014,000, total assets of $1,415,000, and total liabilities of $401,000. The company's acid-
test (quick) ratio is closest to:
A. 2.08
B. 1.73
C. 2.66
D. 1.88
Acid-test (quick) ratio = Quick assets* ÷ Current liabilities
= $491,000 ÷ $261,000 = 1.88 (rounded)
*Quick assets = Cash + Marketable securities + Current receivables
= $210,000 + $0 + $281,000 = $491,000
AACSB: Analytic
Blooms: Apply
.
70. Orem Corporation's current liabilities are $75,000, its long-term liabilities are $225,000, and its
working capital is $100,000. If the corporation's debt-to-equity ratio is 0.30, total long-term
assets must equal:
A. $1,000,000
B. $1,300,000
C. $1,125,000
D. $1,225,000
$100,000 = Current assets - $75,000
Current assets = $100,000 + $75,000 = $175,000
Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
0.30 = ($75,000 + $225,000) ÷ Stockholders' equity
Stockholders' equity = ($75,000 + $225,000) ÷ 0.30 = $1,000,000
Total assets = Total liabilities + Stockholders' equity
Current assets + Long-term assets = Current liabilities + Long-term liabilities + Stockholders'
equity
$175,000 + Long-term assets = $75,000 + $225,000 + $1,000,000
Long-term assets = $75,000 + $225,000 + $1,000,000 - $175,000 = $1,125,000
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
.
71. Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The beginning
inventory balance was $24,000 and the ending inventory balance was $22,000. The
company's average sale period was closest to:
A. 36.5 days
B. 73.0 days
C. 38.1 days
D. 34.9 days
Average inventory balance = ($24,000 + $22,000) ÷ 2 = $23,000
Inventory turnover = Cost of goods sold ÷ Average inventory balance
= $230,000 ÷ $23,000 = 10
Average sale period = 365 days ÷ Inventory turnover
= 365 days ÷ 10 = 36.5 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
72. Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning
inventory balance was $26,000 and the ending inventory balance was $24,000. The
corporation's inventory turnover was closest to:
A. 12.08
B. 11.60
C. 5.80
D. 11.15
= $290,000 ÷ $25,000 = 11.6
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
73. Natcher Corporation's accounts receivable at the end of Year 2 was $126,000 and its
accounts receivable at the end of Year 1 was $130,000. The company's inventory at the end
of Year 2 was $127,000 and its inventory at the end of Year 1 was $120,000. Sales, all on
account, amounted to $1,380,000 in Year 2. Cost of goods sold amounted to $800,000 in Year
2. The company's operating cycle for Year 2 is closest to:
A. 44.7 days
B. 17.3 days
C. 62.8 days
D. 90.2 days
Inventory turnover = Cost of goods sold ÷ Average inventory*
= $800,000 ÷ $123,500 = 6.48 (rounded)
*Average inventory = ($127,000 + $120,000) ÷ 2 = $123,500
= 365 days ÷ 6.48 = 56.3 days (rounded)
Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,380,000 ÷ $128,000 = 10.78 (rounded)
*Average accounts receivable = ($126,000 + $130,000) ÷ 2 = $128,000
Average collection period = 365 days ÷ Accounts receivable turnover
Operating cycle = Average sale period + Average collection period
= 56.3 days + 33.9 days = 90.2 days
AACSB: Analytic
Blooms: Apply
.
74. Kopas Corporation has provided the following data:
The inventory turnover for this year is closest to:
A. 3.09
B. 0.98
C. 1.03
D. 3.05
= $488,000 ÷ $158,000 = 3.09 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
75. Granger Corporation had $180,000 in sales on account last year. The beginning accounts
receivable balance was $10,000 and the ending accounts receivable balance was $18,000.
The corporation's average collection period was closest to:
A. 20.3 days
B. 28.4 days
C. 36.5 days
D. 56.8 days
Average accounts receivable balance = ($10,000 + $18,000) ÷ 2 = $14,000
Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance
= $180,000 ÷ $14,000 = 12.86
= 365 days ÷ 12.86 = 28.4 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
76. During the year just ended, the retailer James Corporation purchased $425,000 of inventory.
The inventory balance at the beginning of the year was $175,000. If the cost of goods sold for
the year was $450,000, then the inventory turnover for the year was:
A. 2.77
B. 2.57
C. 3.00
D. 2.62
Cost of goods sold = Beginning inventory + Purchases - Ending inventory
$450,000 = $175,000 + $425,000 - Ending inventory
Ending inventory = $175,000 + $425,000 - $450,000 = $150,000
Average inventory balance = (Beginning inventory balance + Ending inventory balance)/2
= ($175,000 + $150,000)/2 = $162,500
= $450,000 ÷ $162,500 = 2.77 (rounded)
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
77. Laverde Corporation has provided the following data:
The company's total asset turnover for Year 2 is closest to:
A. 1.22
B. 7.60
C. 0.13
D. 0.82
Total asset turnover = Sales ÷ Average total assets*
= $1,220,000 ÷ $1,479,500 = 0.82 (rounded)
*Average total assets = ($1,489,000 + $1,470,000) ÷ 2 = $1,479,500
AACSB: Analytic
Blooms: Apply
.
78. Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the
end of Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2. The
company's inventory turnover for Year 2 is closest to:
A. 5.92
B. 1.05
C. 6.07
D. 6.23
= $710,000 ÷ $117,000 = 6.07 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
79. Frantic Corporation had $130,000 in sales on account last year. The beginning accounts
receivable balance was $10,000 and the ending accounts receivable balance was $16,000.
The corporation's accounts receivable turnover was closest to:
A. 5.00
B. 13.00
C. 10.00
D. 8.13
Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance*
= $130,000 ÷ $13,000 = 10
*Average accounts receivable balance = ($10,000 + $16,000) ÷ 2 = $13,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
80. Data from Keniston Corporation's most recent balance sheet and income statement appear
below:
The average collection period for this year is closest to:
A. 39.1 days
B. 45.1 days
C. 54.3 days
D. 57.5 days
= $813,000 ÷ $121,000 = 6.72 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
81. Louie Corporation has provided the following data:
The company's operating cycle for Year 2 is closest to:
A. 81.0 days
B. 150.5 days
C. 79.2 days
D. 9.7 days
= $860,000 ÷ $175,000 = 4.91 (rounded)
= $1,340,000 ÷ $279,500 = 4.79 (rounded)
= 74.3 days + 76.2 days = 150.5 days
AACSB: Analytic
Blooms: Apply
.
82. Last year Truro Corporation purchased $800,000 of inventory. The cost of goods sold was
$750,000 and the ending inventory was $125,000. The inventory turnover for the year was:
A. 6.0
B. 7.5
C. 6.4
D. 8.0
Ending inventory balance = Beginning inventory balance + Purchases - Cost of goods sold
$125,000 = Beginning inventory balance + $800,000 - $750,000
Beginning inventory balance = $125,000 - $800,000 + $750,000 = $75,000
Average inventory balance = (Beginning inventory balance + Ending inventory balance)/2
= ($75,000 + $125,000)/2 = $100,000
= $750,000 ÷ $100,000 = 7.5
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
83. The accounts receivable for Note Corporation was $240,000 at the beginning of the year and
$260,000 at the end of the year. If the accounts receivable turnover for the year was 8 and
20% of the total sales were cash sales, the total sales for the year were:
A. $2,600,000
B. $2,000,000
C. $2,400,000
D. $2,500,000
8 = Sales on account ÷ [($240,000 + $260,000)/2]
8 = Sales on account ÷ $250,000
Sales on account = 8 × $250,000 = $2,000,000
Total sales = Cash sales + Sales on account
Total sales = (0.20 × Total sales) + $2,000,000
0.8 × Total sales = $2,000,000
Total sales = $2,000,000 ÷ 0.8 = $2,500,000
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
84. Smay Corporation has provided the following data:
The accounts receivable turnover for this year is closest to:
A. 1.01
B. 0.99
C. 6.08
D. 6.11
= $654,000 ÷ $107,500 = 6.08 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
85. Rawe Corporation's accounts receivable at the end of Year 2 was $329,000 and its accounts
receivable at the end of Year 1 was $280,000. Sales, all on account, amounted to $1,350,000
in Year 2. The company's average collection period (age of receivables) for Year 2 is closest
to:
A. 1.2 days
B. 1.0 days
C. 82.4 days
D. 89.0 days
= $1,350,000 ÷ $304,500 = 4.43 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
86. Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the
end of Year 1 was $150,000. Cost of goods sold amounted to $870,000 in Year 2. The
company's average sale period (turnover in days) for Year 2 is closest to:
A. 230.1 days
B. 51.2 days
C. 57.0 days
D. 32.3 days
= $870,000 ÷ $136,000 = 6.40 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
87. Deflorio Corporation's inventory at the end of Year 2 was $156,000 and its inventory at the end
of Year 1 was $140,000. The company's total assets at the end of Year 2 were $1,416,000
and its total assets at the end of Year 1 were $1,390,000. Sales amounted to $1,320,000 in
Year 2. The company's total asset turnover for Year 2 is closest to:
A. 0.94
B. 1.06
C. 5.38
D. 0.19
= $1,320,000 ÷ $1,403,000 = 0.94 (rounded)
AACSB: Analytic
Blooms: Apply
.
88. Data from Estrin Corporation's most recent balance sheet and income statement appear
below:
The average sale period for this year is closest to:
A. 101 days
B. 50 days
C. 108 days
D. 45 days
= $501,000 ÷ $148,500 = 3.37 (rounded)
= 365 days ÷ 3.37 = 108 days (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
89. Shipley Corporation has provided the following data from its most recent balance sheet:
The debt-to-equity ratio is closest to:
A. 0.29
B. 3.47
C. 0.22
D. 0.78
= $590,000 ÷ $170,000 = 3.47
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
90. Neelty Corporation has interest expense of $16,000, sales of $600,000, a tax rate of 30%, and
after-tax net income of $56,000. The company's times interest earned ratio is closest to:
A. 6.0
B. 5.0
C. 4.5
D. 3.5
After-tax net income = Earnings before taxes and interest - Taxes - Interest expense
After-tax net income = Earnings before taxes and interest - [0.30 × (Earnings before taxes and
interest - Interest expense)] - Interest expense
After-tax net income = (0.70 × Earnings before taxes and interest) - (0.70 × Interest expense)
$56,000 = (0.70 × Earnings before taxes and interest) - (0.70 × $16,000)
$56,000 = 0.70 × Earnings before taxes and interest - $11,200
0.70 × Earnings before taxes and interest = $56,000 + $11,200
Earnings before taxes and interest = ($56,000 + $11,200) ÷ 0.70 = $96,000
Times interest earned = Earnings before interest expense and income taxes ÷ Interest
expense
= $96,000 ÷ $16,000 = 6
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
91. Falmouth Corporation's debt to equity ratio is 0.6. Current liabilities are $120,000, long term
liabilities are $360,000, and working capital is $140,000. Total assets of the corporation must
be:
A. $600,000
B. $1,200,000
C. $800,000
D. $1,280,000
0.6 = ($120,000 + $360,000) ÷ Stockholders' equity
Stockholders' equity = $480,000 ÷ 0.6 = $800,000
Total assets = Total liabilities + Stockholders' equity
= $480,000 + $800,000 = $1,280,000
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
92. Klein Corporation has provided the following data:
The company's equity multiplier is closest to:
A. 1.24
B. 0.56
C. 1.80
D. 0.81
Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,323,500 ÷ $734,500 = 1.80 (rounded)
**Average stockholders' equity = ($739,000 + $730,000) ÷ 2 = $734,500
AACSB: Analytic
Blooms: Apply
.
93. Last year Javer Corporation had a net income of $200,000, income tax expense of $74,000,
and interest expense of $20,000. The corporation's times interest earned was closest to:
A. 10.0
B. 11.0
C. 5.3
D. 14.7
expense
= ($200,000 + $74,000 + $20,000) ÷ $20,000 = 14.7
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
94. The times interest earned ratio of Whitney Corporation is 3.0. The interest expense for the
year is $21,000, and the corporation's tax rate is 40%. The corporation's after-tax net income
must be:
A. $63,000
B. $25,200
C. $30,000
D. $42,000
expense
3.0 = Earnings before interest expense and income taxes ÷ $21,000
Earnings before interest expense and income taxes = 3.0 × $21,000 = $63,000
Earnings after interest expense = $63,000 - $21,000 = $42,000
Income tax = 0.40 × $42,000 = $16,800
After-tax net income = $42,000 - $16,800 = $25,200
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
95. A portion of Lapore Corporation's Balance Sheet appears below:
The company's debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.60
B. 0.37
C. 0.39
D. 0.27
Debt-to-equity ratio = Liabilities ÷ Stockholders' equity
= $610,000 ÷ $1,019,000 = 0.60 (rounded)
AACSB: Analytic
Blooms: Apply
.
96. Wittels Corporation has provided the following data:
In Year 2, the company's net operating income was $42,571, its net income before taxes was
$21,571, and its net income was $15,100. The company's equity multiplier is closest to:
A. 1.14
B. 0.53
C. 0.88
D. 1.87
= $1,241,500 ÷ $663,500 = 1.87 (rounded)
AACSB: Analytic
Blooms: Apply
.
97. Broch Corporation's income statement appears below:
The company's times interest earned is closest to:
A. 4.87
B. 1.41
C. 3.16
D. 2.16
Times interest earned = Net operating income ÷ Interest expense
= $44,308 ÷ $14,000 = 3.16 (rounded)
AACSB: Analytic
Blooms: Apply
.
98. Cutsinger Corporation has provided the following data from its most recent income statement:
The times interest earned ratio is closest to:
A. 1.83
B. 0.28
C. 1.28
D. 0.19
expense
= $55,000 ÷ $43,000 = 1.28
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
99. Karma Corporation has total assets of $190,000 and total liabilities of $90,000. The
corporation's debt-to-equity ratio is closest to:
A. 0.47
B. 0.90
C. 0.53
D. 0.32
= $90,000 ÷ $100,000* = 0.90
*Stockholders' equity = Total assets - Total liabilities = $190,000 - $90,000 = $100,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
100. Rough Corporation's total assets at the end of Year 2 were $1,247,000 and at the end of Year
1 were $1,270,000. The company's total liabilities at the end of Year 2 were $512,000 and at
the end of Year 1 were $550,000. The company's total stockholders' equity at the end of Year
2 was $735,000 and at the end of Year 1 was $720,000. The company's equity multiplier is
closest to:
A. 1.73
B. 1.44
C. 0.69
D. 0.58
= $1,258,500 ÷ $727,500 = 1.73 (rounded)
AACSB: Analytic
Blooms: Apply
.
101. Younis Corporation's income statement appears below:
A. 37.1%
B. 3.5%
C. 2.4%
D. 1.7%
Net profit margin percentage = Net income ÷ Sales
= $20,600 ÷ $1,240,000 = 1.7% (rounded)
AACSB: Analytic
Blooms: Apply
.
102. Crosswhite Corporation's sales last year were $1,270,000, its gross margin was $400,000, its
net operating income was $53,769, and its net income was $26,500. The company's net profit
margin percentage is closest to:
A. 31.5%
B. 3.2%
C. 4.2%
D. 2.1%
= $26,500 ÷ $1,270,000 = 2.1% (rounded)
AACSB: Analytic
Blooms: Apply
.
103. Mars Corporation has provided the following data for Year 2:
The company's total stockholders' equity at the end of Year 2 amounted to $1,095,000 and at
the end of Year 1 to $1,060,000. The company's return on equity for Year 2 is closest to:
A. 5.91%
B. 7.40%
C. 3.84%
D. 71.20%
Return on equity = Net income ÷ Average stockholders' equity*
= $41,400 ÷ $1,077,500 = 3.84% (rounded)
*Average stockholders' equity = ($1,095,000 + $1,060,000) ÷ 2 = $1,077,500
AACSB: Analytic
Blooms: Apply
.
104. Sapien Corporation has provided the following data for the most recent year:
A. 52.3%
B. 1691.2%
C. 5.9%
D. 34.3%
Gross margin percentage = Gross margin ÷ Sales
= $460,000 ÷ $1,340,000 = 34.3% (rounded)
AACSB: Analytic
Blooms: Apply
.
105. Mormino Corporation's income statement appears below:
A. 1888.9%
B. 5.3%
C. 41.1%
D. 69.9%
= $510,000 ÷ $1,240,000 = 41.1% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
106. Jester Corporation's most recent income statement appears below:
The return on total assets is closest to:
A. 26.5%
B. 18.5%
C. 22.6%
D. 32.4%
Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $63,000 + [$20,000 × (1 - 0.30)] = $77,000
Average total assets = ($360,000 + $320,000) ÷ 2 = $340,000
Return on total assets = Adjusted net income ÷ Average total assets
= $77,000 ÷ $340,000 = 22.6% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
107. For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its
net operating income was $63,714, its net income before taxes was $42,714, and its net
income was $29,900. The company's total stockholders' equity at the end of Year 2 amounted
to $829,000 and at the end of Year 1 to $800,000. The company's return on equity for Year 2
is closest to:
A. 3.67%
B. 60.16%
C. 5.24%
D. 7.82%
= $29,900 ÷ $814,500 = 3.67% (rounded)
*Average stockholders' equity = ($829,000 + $800,000) ÷ 2 = $814,500
AACSB: Analytic
Blooms: Apply
.
108. Kienle Corporation's Year 2 income statement appears below:
The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of
Year 1 to $1,320,000. The company's return on total assets for Year 2 is closest to:
A. 2.48%
B. 3.14%
C. 2.52%
D. 3.10%
Return on total assets = Adjusted net income* ÷ Average total assets**
= $42,100 ÷ $1,339,500 = 3.14% (rounded)
*Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $33,700 + [$12,000 × (1 - 0.30)] = $42,100
**Average total assets = ($1,359,000 + $1,320,000) ÷ 2 = $1,339,500
AACSB: Analytic
Blooms: Apply
.
109. Valdovinos Corporation has provided the following data:
A. 38.3%
B. 3.5%
C. 1.3%
D. 2.0%
= $15,000 ÷ $1,150,000 = 1.3% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
110. Braverman Corporation's net income last year was $75,000 and its interest expense was
$10,000. Total assets at the beginning of the year were $650,000 and total assets at the end
of the year were $610,000. The corporation's income tax rate was 30%. The corporation's
return on total assets for the year was closest to:
A. 13.5%
B. 12.4%
C. 13.0%
D. 11.9%
Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $75,000 + [$10,000 × (1 - 0.30)] = $82,000
Return on total assets = Adjusted net income ÷ Average total assets
= $82,000 ÷ $630,000 = 13.0%
AACSB: Analytic
Blooms: Apply
.
111. Grosvenor Corporation's most recent income statement appears below:
The gross margin percentage is closest to:
A. 80.9%
B. 44.7%
C. 376.0%
D. 26.6%
= $361,000 ÷ $807,000 = $44.7%
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
112. Fongeallaz Corporation's income statement for Year 2 appears below:
The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at
the end of Year 1 to $810,000. The company's return on equity for Year 2 is closest to:
A. 64.40%
B. 8.93%
C. 6.75%
D. 4.72%
= $39,000 ÷ $825,500 = 4.72% (rounded)
AACSB: Analytic
Blooms: Apply
.
113. Weightman Corporation's net operating income in Year 2 was $76,385, net income before
taxes was $55,385, and the net income was $36,000. Total common stock was $200,000 at
the end of both Year 2 and Year 1. The par value of common stock is $4 per share. The
company's total stockholders' equity at the end of Year 2 amounted to $983,000 and at the
end of Year 1 to $950,000. The market price per share at the end of Year 2 was $7.92. The
company's price-earnings ratio for Year 2 is closest to:
A. 7.14
B. 0.58
C. 5.18
D. 11.00
Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $36,000 ÷ 50,000 shares = $0.72 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $200,000 ÷ $4 per share = 50,000 shares
Price-earnings ratio = Market price per share ÷ Earnings per share
= $7.92 ÷ $0.72 = 11.00 (rounded)
AACSB: Analytic
Blooms: Apply
.
114. The following information relates to Conejo Corporation for last year:
What is Conejo's price-earnings ratio for last year?
A. 1.6
B. 2.4
C. 8.0
D. 2.0
Dividend yield ratio = Dividends per share ÷ Market price per share
0.10 = $5 per share ÷ Market price per share
Market price per share = $5 per share ÷ 0.10 = $50
Dividend payout ratio = Dividends per share ÷ Earnings per share
0.20 = $5 per share ÷ Earnings per share
Earnings per share = $5 per share ÷ 0.20 = $25
= $50 per share ÷ $25 per share = 2.0
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
115. Goldsmith Corporation has provided the following data:
The company's net income in Year 2 was $24,400. The company's book value per share at
the end of Year 2 is closest to:
A. $8.32 per share
B. $4.66 per share
C. $14.34 per share
D. $0.27 per share
Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
= $270,000 ÷ $3 per share = 90,000 shares
AACSB: Analytic
Blooms: Apply
.
116. Linzey Corporation has provided the following data:
The company's net income in Year 2 was $33,000. The company's book value per share at
the end of Year 2 is closest to:
A. $22.45 per share
B. $12.45 per share
C. $0.55 per share
D. $15.45 per share
outstanding*
= $120,000 ÷ $2 per share = 60,000 shares
AACSB: Analytic
Blooms: Apply
.
117. Tempel Corporation has provided the following data:
A. 9.23
B. 0.35
C. 4.54
D. 13.40
= $240,000 ÷ $4 per share = 60,000 shares
= $2.77 ÷ $0.21 = 13.19 (rounded)
A more exact answer with less rounding error is 13.40.
AACSB: Analytic
Blooms: Apply
.
118. Keyton Corporation's net operating income in Year 2 was $43,714, net income before taxes
was $30,714, and the net income was $21,500. Total common stock was $200,000 at the end
of both Year 2 and Year 1. The par value of common stock is $4 per share. The company's
total stockholders' equity at the end of Year 2 amounted to $1,148,000 and at the end of Year
1 to $1,130,000. The company declared and paid $3,500 dividends on common stock in Year
2. The market price per share was $8.43 at the end of Year 2. The company's dividend payout
ratio for Year 2 is closest to:
A. 0.8%
B. 1.8%
C. 16.3%
D. 11.4%
= $200,000 ÷ $4 per share = 50,000 shares
Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.07 ÷ $0.43 = 16.3% (rounded)
*Dividends per share = Common dividends ÷ Common shares (see above)
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
.
119. Rawdon Corporation's net operating income in Year 2 was $52,429, net income before taxes
total stockholders' equity at the end of Year 2 amounted to $976,000 and at the end of Year 1
to $960,000. The company's earnings per share for Year 2 is closest to:
A. $0.58 per share
B. $0.38 per share
C. $0.27 per share
D. $5.84 per share
= $360,000 ÷ $4 per share = 90,000 shares
AACSB: Analytic
Blooms: Apply
.
120. Leflore Corporation has provided the following data:
Dividends on common stock during Year 2 totaled $6,000. The market price of common stock
at the end of Year 2 was $1.38 per share. The company's dividend yield ratio for Year 2 is
closest to:
A. 4.3%
B. 1.2%
C. 35.0%
D. 50.0%
Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.06 ÷ $1.38 = 4.3% (rounded)
AACSB: Analytic
Blooms: Apply
.
121. Cameron Corporation had 50,000 shares of common stock issued and outstanding that it
originally issued for $40 per share. The following information pertains to these shares:
The total dividend on common stock for the year was $400,000. Cameron Corporation's
dividend yield ratio for the year was:
A. 20.00%
B. 11.43%
C. 9.41%
D. 8.89%
Dividend yield ratio = Dividends per share ÷ Market price per share
= ($400,000 ÷ 50,000 shares) ÷ $90 per share
= $8 per share ÷ $90 per share = 0.0889 (rounded)
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
.
122. Hernande Corporation has provided the following data:
A. $4.25 per share
B. $0.43 per share
C. $0.61 per share
D. $0.75 per share
= $400,000 ÷ $4 per share = 100,000 shares
AACSB: Analytic
Blooms: Apply
.
123. Delfavero Corporation has provided the following data:
A. $10.33 per share
B. $0.52 per share
C. $0.34 per share
D. $0.79 per share
= $140,000 ÷ $2 per share = 70,000 shares
AACSB: Analytic
Blooms: Apply
.
124. Groeneweg Corporation has provided the following data:
at the end of Year 2 was $9.45 per share. The company's dividend payout ratio for Year 2 is
closest to:
A. 8.7%
B. 13.4%
C. 4.5%
D. 1.0%
= $100,000 ÷ $2 per share = 50,000 shares
= $0.09 ÷ $0.67 = 13.4% (rounded)
AACSB: Analytic
Blooms: Apply
.
125. Spincic Corporation has provided the following data:
A. 0.52
B. 8.10
C. 6.16
D. 12.52
= $200,000 ÷ $2 per share = 100,000 shares
= $4.13 ÷ $0.33 = 12.52 (rounded)
AACSB: Analytic
Blooms: Apply
.
126. Kovack Corporation's net operating income in Year 2 was $66,571, net income before taxes
total stockholders' equity at the end of Year 2 amounted to $962,000 and at the end of Year 1
to $930,000. The company declared and paid $600 dividends on common stock. The market
price per share was $4.37. The company's dividend yield ratio for Year 2 is closest to:
A. 0.2%
B. 1.3%
C. 1.9%
D. 0.5%
= $0.01 ÷ $4.37 = 0.23% (rounded)
= $600 ÷ 60,000 shares = $0.01 per share (rounded)
AACSB: Analytic
Blooms: Apply
.
127. Uhri Corporation has provided the following data:
at the end of Year 2 was $6.08 per share. The company's dividend payout ratio for Year 2 is
closest to:
A. 7.8%
B. 1.3%
C. 11.1%
D. 0.8%
= $320,000 ÷ $4 per share = 80,000 shares
= $0.05 ÷ $0.45 = 11.1% (rounded)
AACSB: Analytic
Blooms: Apply
.
128. Sabino Corporation's total common stock was $500,000 at the end of both Year 2 and Year 1.
The par value of common stock is $5 per share. The company's total stockholders' equity at
the end of Year 2 amounted to $1,125,000 and at the end of Year 1 to $1,090,000. The
company's total liabilities and stockholders' equity at the end of Year 2 amounted to
$1,581,000 and at the end of Year 1 to $1,540,000. The company's retained earnings at the
end of Year 2 amounted to $545,000 and at the end of Year 1 to $510,000. The company's net
income in Year 2 was $39,000. The company's book value per share at the end of Year 2 is
closest to:
A. $0.39 per share
B. $15.81 per share
C. $11.25 per share
D. $5.45 per share
outstanding*
= $1,125,000 ÷ 100,000 shares = $11.25 per share (rounded)
= $500,000 ÷ $5 per share = 100,000 shares
AACSB: Analytic
Blooms: Apply
.
Nickolls Corporation has provided the following financial data:
129. The company's working capital is:
A. $1,215,000
B. $542,000
C. $793,000
D. $709,000
= $709,000 - $167,000 = $542,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
130. The company's current ratio is closest to:
A. 0.47
B. 0.40
C. 0.19
D. 4.25
= $709,000 ÷ $167,000 = 4.25 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
131. The company's acid-test (quick) ratio is closest to:
A. 2.47
B. 2.83
C. 3.10
D. 4.25
= $473,000 ÷ $167,000 = 2.83 (rounded)
= $188,000 + $0 + $285,000 = $473,000
AACSB: Analytic
.
Blooms: Apply
Difficulty: 1 Easy
.
Macmillan Corporation has provided the following financial data:
at the end of Year 2 was $3.69 per share.
.
132. The company's working capital at the end of Year 2 is:
A. $732,000
B. $831,000
C. $289,000
D. $590,000
= $590,000 - $301,000 = $289,000
AACSB: Analytic
Blooms: Apply
133. The company's current ratio at the end of Year 2 is closest to:
A. 0.83
B. 1.96
C. 0.45
D. 0.37
= $590,000 ÷ $301,000 = 1.96 (rounded)
AACSB: Analytic
.
Blooms: Apply
134. The company's acid-test (quick) ratio at the end of Year 2 is closest to:
A. 1.96
B. 1.41
C. 1.20
D. 1.48

= $424,000 ÷ $301,000 = 1.41 (rounded)
= $156,000 + $0 + $268,000 = $424,000
AACSB: Analytic
Blooms: Apply
.
Mayfield Corporation has provided the following financial data:
.
135. The company's working capital is:
A. $671,000
B. $665,000
C. $418,000
D. $983,000

= $671,000 - $253,000 = $418,000
AACSB: Analytic
Blooms: Apply
136. The company's current ratio is closest to:
A. 0.26
B. 2.65
C. 0.50
D. 0.53
= $671,000 ÷ $253,000 = 2.65 (rounded)
AACSB: Analytic
Blooms: Apply
.
137. The company's acid-test (quick) ratio is closest to:
A. 1.90
B. 1.85
C. 2.65
D. 1.81
= $459,000 ÷ $253,000 = 1.81 (rounded)
= $223,000 + $0 + $236,000 = $459,000
AACSB: Analytic
Blooms: Apply
Excerpts from Colter Corporation's most recent balance sheet appear below:
.
138. The working capital at the end of Year 2 is:
A. $850
B. $770
C. $400
D. $80

= $400 - $320 = $80
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
139. The current ratio at the end of Year 2 is closest to:
A. 0.32
B. 0.38
C. 1.25
D. 1.20
Current ratio = Current assets ÷ Current liabilities = $400 ÷ $320 = 1.25
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
140. The acid-test ratio at the end of Year 2 is closest to:
A. 0.72
B. 0.83
C. 0.59
D. 1.25
receivable
= $90 + $0 + $100 = $190
Acid-test ratio = Quick assets ÷ Current liabilities = $190 ÷ $320 = 0.59 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
141. The accounts receivable turnover for Year 2 is closest to:
A. 1.10
B. 0.91
C. 11.52
D. 12.10
= $1,210 ÷ $105* = 11.52 (rounded)
*Average accounts receivable balance = ($100 + $110) ÷ 2 = $105
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
142. The inventory turnover for Year 2 is closest to:
A. 1.06
B. 0.94
C. 4.36
D. 4.24
= $720 ÷ $165* = 4.36 (rounded)
*Average inventory balance = ($170 + $160) ÷ 2 = $165
AACSB: Analytic
.
Blooms: Apply
Difficulty: 1 Easy
.
Freiman Corporation's most recent balance sheet and income statement appear below:
.
A. $260 thousand
B. $680 thousand
C. $700 thousand
D. $540 thousand

= $540 - $280 = $260
AACSB: Analytic
Blooms: Apply
A. 0.45
B. 1.93
C. 0.44
D. 1.04
= $540 ÷ $280 = 1.93 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 0.96
B. 1.36
C. 1.50
D. 1.93
Acid-test ratio = Quick assets* ÷ Current liabilities
= $380 ÷ $280 = 1.36 (rounded)
*Quick assets = Cash + Marketable securities + Accounts receivable + Short-term notes
receivable
= $160 + $0 + $220 + $0 = $380
AACSB: Analytic
Blooms: Apply
.
A. 5.95
B. 5.70
C. 1.09
D. 0.92
= $1,310 ÷ $230 = 5.70 (rounded)
AACSB: Analytic
Blooms: Apply
.
147. The average collection period for Year 2 is closest to:
A. 64.0 days
B. 0.9 days
C. 61.3 days
D. 1.1 days
= $1,310 ÷ $230 = 5.70 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 0.92
B. 6.50
C. 1.08
D. 6.24
Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $780 ÷ $125 = 6.24
AACSB: Analytic
Blooms: Apply
.
149. The average sale period for Year 2 is closest to:
A. 58.5 days
B. 33.4 days
C. 217.3 days
D. 56.2 days
= $780 ÷ $125 = 6.24
AACSB: Analytic
Blooms: Apply
Data from Dunshee Corporation's most recent balance sheet appear below:
.
A. $270
B. $500
C. $770
D. $740
Working capital = Current assets - Current liabilities = $500 - $230 = $270
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
A. 0.38
B. 2.17
C. 0.94
D. 0.40
Current ratio = Current assets ÷ Current liabilities = $500 ÷ $230 = 2.17 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 2.17
B. 1.78
C. 1.74
D. 1.06
receivable
= $130 + $0 + $270 = $400
= $400 ÷ $230 = 1.74 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 1.1 days
B. 0.9 days
C. 84.3 days
D. 87.3 days
= $1,170 ÷ $280* = 4.18 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 28.1 days
B. 45.0 days
C. 50.0 days
D. 227.7 days
= $730 ÷ $100* = 7.30
= 365 days ÷ 7.30 = 50.0 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
Financial statements for Maraby Corporation appear below:
.
155. Maraby Corporation's working capital (in thousands of dollars) at the end of Year 2 was
closest to:
A. $260
B. $620
C. $360
D. $990
AACSB: Analytic
Blooms: Apply
156. Maraby Corporation's current ratio at the end of Year 2 was closest to:
A. 1.34
B. 1.72
C. 0.60
D. 0.44
AACSB: Analytic
Blooms: Apply
.
157. Maraby Corporation's acid-test ratio at the end of Year 2 was closest to:
A. 0.51
B. 0.47
C. 1.14
D. 1.95
Acid-test ratio = Quick assets* ÷ Current liabilities = $410 ÷ $360 = 1.14 (rounded)
receivable
= $220 + $190 + $0 = $410
AACSB: Analytic
Blooms: Apply
.
158. Maraby Corporation's accounts receivable turnover for Year 2 was closest to:
A. 13.5
B. 7.8
C. 11.2
D. 9.4
= $1,960 ÷ $175* = 11.2 (rounded)
AACSB: Analytic
Blooms: Apply
.
159. Maraby Corporation's average collection period for Year 2 was closest to:
A. 38.6 days
B. 46.6 days
C. 32.6 days
D. 27.0 days
= $1,960 ÷ $175* = 11.2 (rounded)
Average collection period = 365 days ÷ Accounts receivable turnover (see above)
AACSB: Analytic
Blooms: Apply
.
160. Maraby Corporation's inventory turnover for Year 2 was closest to:
A. 11.2
B. 7.8
C. 9.4
D. 13.5
Inventory turnover = Cost of goods sold ÷ Average inventory balance = $1,370 ÷ $145* = 9.4
(rounded)
AACSB: Analytic
Blooms: Apply
.
161. Maraby Corporation's average sale period for Year 2 was closest to:
A. 38.8 days
B. 32.6 days
C. 46.6 days
D. 27.0 days
Inventory turnover = Cost of goods sold ÷ Average inventory balance = $1,370 ÷ $145* = 9.4
(rounded)
Average sale period = 365 days ÷ Inventory turnover (see above) = 365 days ÷ 9.4 = 38.8
days (rounded)
AACSB: Analytic
Blooms: Apply
Excerpts from Sydner Corporation's most recent balance sheet appear below:
.
A. $600
B. $1,000
C. $880
D. $240
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
A. 1.67
B. 0.32
C. 0.80
D. 0.41
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 1.67
B. 1.00
C. 0.97
D. 1.25
receivable
= $140 + $0 + $210 = $350
= $350 ÷ $360 = 0.97 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 6.62
B. 1.10
C. 6.32
D. 0.91
= $1,390 ÷ $220* = 6.32 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 55.1 days
B. 0.9 days
C. 1.1 days
D. 57.8 days
= $1,390 ÷ $220* = 6.32 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 3.75
B. 1.20
C. 4.09
D. 0.83
= $900 ÷ $220* = 4.09 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 63.0 days
B. 89.2 days
C. 236.3 days
D. 97.3 days
= $900 ÷ $220* = 4.09 (rounded)
= 365 days ÷ 4.09 = 89.2 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
.
169. The company's accounts receivable turnover for Year 2 is closest to:
A. 1.06
B. 5.06
C. 5.21
D. 0.94

= $1,290,000 ÷ $247,500 = 5.21 (rounded)
AACSB: Analytic
Blooms: Apply
.
170. The company's average collection period (age of receivables) for Year 2 is closest to:
A. 70.1 days
B. 1.1 days
C. 72.1 days
D. 1.0 days
= $1,290,000 ÷ $247,500 = 5.21 (rounded)
AACSB: Analytic
Blooms: Apply
.
171. The company's inventory turnover for Year 2 is closest to:
A. 3.89
B. 1.04
C. 3.97
D. 4.05
= $700,000 ÷ $176,500 = 3.97 (rounded)
AACSB: Analytic
Blooms: Apply
.
172. The company's average sale period (turnover in days) for Year 2 is closest to:
A. 91.9 days
B. 48.9 days
C. 90.1 days
D. 198.1 days
= $700,000 ÷ $176,500 = 3.97 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 95.9 days
B. 75.3 days
C. 162.0 days
D. 9.2 days
= $700,000 ÷ $176,500 = 3.97 (rounded)
= $1,290,000 ÷ $247,500 = 5.21 (rounded)
= 91.9 days + 70.1 days = 162.0 days
AACSB: Analytic
Blooms: Apply
.
174. The company's total asset turnover for Year 2 is closest to:
A. 5.29
B. 0.19
C. 1.04
D. 0.96
= $1,290,000 ÷ $1,340,000 = 0.96 (rounded)
AACSB: Analytic
Blooms: Apply
.
Dahn Corporation has provided the following financial data:
.
A. 0.97
B. 10.38
C. 1.03
D. 10.22
= $1,370,000 ÷ $132,000 = 10.38 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 35.7 days
B. 1.1 days
C. 1.0 days
D. 35.2 days
= $1,370,000 ÷ $132,000 = 10.38 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 6.54
B. 5.67
C. 6.07
D. 0.87
= $850,000 ÷ $140,000 = 6.07 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 226.5 days
B. 60.1 days
C. 40.0 days
D. 64.4 days
= $850,000 ÷ $140,000 = 6.07 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 66.2 days
B. 16.5 days
C. 95.3 days
D. 45.6 days
= $850,000 ÷ $140,000 = 6.07 (rounded)
= $1,370,000 ÷ $132,000 = 10.38 (rounded)
= 60.1 days + 35.2 days = 95.3 days
AACSB: Analytic
Blooms: Apply
.
A. 10.17
B. 0.10
C. 1.02
D. 0.98
= $1,370,000 ÷ $1,346,500 = 1.02 (rounded)
AACSB: Analytic
Blooms: Apply
Guttery Corporation has provided the following financial data from its balance sheet:
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
.
A. 12.95
B. 1.02
C. 0.98
D. 13.06

= $1,450,000 ÷ $111,000 = 13.06 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 1.1 days
B. 28.2 days
C. 1.0 days
D. 27.9 days
= $1,450,000 ÷ $111,000 = 13.06 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 5.17
B. 5.56
C. 6.00
D. 0.86
= $900,000 ÷ $162,000 = 5.56 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 65.6 days
B. 226.6 days
C. 43.8 days
D. 70.6 days
= $900,000 ÷ $162,000 = 5.56 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 71.2 days
B. 93.5 days
C. 18.6 days
D. 41.0 days
= $900,000 ÷ $162,000 = 5.56 (rounded)
= $1,450,000 ÷ $111,000 = 13.06 (rounded)
= 65.6 days + 27.9 days = 93.5 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 1.17
B. 11.04
C. 0.09
D. 0.85
= $1,450,000 ÷ $1,243,000 = 1.17 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
Mahoe Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $500. The market price of common stock at
.
A. 70.8 days
B. 10.0 days
C. 87.7 days
D. 148.5 days
= $890,000 ÷ $203,000 = 4.38 (rounded)
= $1,330,000 ÷ $237,500 = 5.60 (rounded)
= 83.3 days + 65.2 days = 148.5 days
AACSB: Analytic
Blooms: Apply
.
A. 1.25
B. 0.80
C. 6.57
D. 0.15
= $1,330,000 ÷ $1,652,500 = 0.80 (rounded)
AACSB: Analytic
Blooms: Apply
189. The company's equity multiplier at the end of Year 2 is closest to:
A. 0.28
B. 1.28
C. 3.53
D. 0.78
= $1,652,500 ÷ $1,292,500 = 1.28 (rounded)
**Average stockholders' equity = ($1,305,000 + $1,280,000) ÷ 2 = $1,292,500
AACSB: Analytic
.
Blooms: Apply
Burdick Corporation has provided the following financial data from its balance sheet:
Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was
$860,000.
.
A. 10.4 days
B. 79.5 days
C. 141.3 days
D. 72.2 days

= $860,000 ÷ $176,000 = 4.89 (rounded)
= $1,410,000 ÷ $258,000 = 5.47 (rounded)
= 74.6 days + 66.7 days = 141.3 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 0.99
B. 0.19
C. 5.32
D. 1.01
= $1,410,000 ÷ $1,402,500 = 1.01 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
A. 0.70
B. 1.43
C. 2.34
D. 0.43
= $1,402,500 ÷ $980,500 = 1.43 (rounded)
AACSB: Analytic
.
Blooms: Apply
Difficulty: 1 Easy
.
Financial statements for Narstad Corporation appear below:
.
193. Narstad Corporation's times interest earned for Year 2 was closest to:
A. 11.0
B. 10.0
C. 18.0
D. 7.0
expense
= $330 ÷ $30 = 11.0
AACSB: Analytic
Blooms: Apply
194. Narstad Corporation's debt-to-equity ratio at the end of Year 2 was closest to:
A. 0.50
B. 0.36
C. 0.19
D. 0.17
Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity = $650 ÷ $1,810 = 0.36 (rounded)
AACSB: Analytic
Blooms: Apply
.
Lasch Corporation has provided the following financial data from its balance sheet and income
statement:
195. The company's times interest earned for Year 2 is closest to:
A. 1.43
B. 3.47
C. 2.43
D. 1.00
= $43,714 ÷ $18,000 = 2.43 (rounded)
AACSB: Analytic
.
Blooms: Apply
196. The company's debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.30
B. 0.36
C. 0.41
D. 0.60
= $498,000 ÷ $835,000 = 0.60 (rounded)
AACSB: Analytic
Blooms: Apply
.
A. 1.60
B. 1.68
C. 0.63
D. 0.60
= $1,326,500 ÷ $827,500 = 1.60 (rounded)
AACSB: Analytic
Blooms: Apply
Deacon Corporation has provided the following financial data from its balance sheet and
income statement:
.
A. 2.74
B. 8.02
C. 5.21
D. 4.21

= $67,769 ÷ $13,000 = 5.21 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
A. 0.29
B. 0.38
C. 0.23
D. 0.64
= $466,000 ÷ $732,000 = 0.64 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 0.64
B. 1.65
C. 1.57
D. 0.61
= $1,179,000 ÷ $716,000 = 1.65 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
Fayer Corporation has provided the following financial data:
.
A. 7.71
B. 2.61
C. 5.01
D. 4.01
= $70,154 ÷ $14,000 = 5.01 (rounded)
AACSB: Analytic
Blooms: Apply
A. 0.22
B. 0.27
C. 0.45
D. 0.19
= $481,000 ÷ $1,072,000 = 0.45 (rounded)
AACSB: Analytic
.
Blooms: Apply
A. 0.69
B. 2.23
C. 0.45
D. 1.45

= $1,526,500 ÷ $1,056,000 = 1.45 (rounded)
AACSB: Analytic
Blooms: Apply
.
Tweedle Corporation's most recent balance sheet and income statement appear below:
.
204. The times interest earned for Year 2 is closest to:
A. 6.40
B. 9.16
C. 14.51
D. 10.16
expense
= $254 ÷ $25 = 10.16
AACSB: Analytic
Blooms: Apply
205. The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.43
B. 0.24
C. 0.17
D. 0.54
Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity = $440 ÷ $1.020 = 0.43 (rounded)
AACSB: Analytic
Blooms: Apply
.
Data from Lheureux Corporation's most recent balance sheet and the company's income
statement appear below:
206. The times interest earned for Year 2 is closest to:
A. 2.22
B. 4.17
C. 3.17
D. 5.95
expense
= $75 ÷ $18 = 4.17 (rounded)
AACSB: Analytic
Blooms: Apply
.
207. The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.38
B. 0.13
C. 0.16
D. 0.43
Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity = $400 ÷ $1,040 = 0.38 (rounded)
AACSB: Analytic
Blooms: Apply
.
Neef Corporation has provided the following financial data from its balance sheet and income
statement:
208. The company's net profit margin percentage for Year 2 is closest to:
A. 37.3%
B. 2.6%
C. 1.4%
D. 0.9%
= $13,000 ÷ $1,420,000 = 0.9% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
209. The company's gross margin percentage for Year 2 is closest to:
A. 59.6%
B. 2.5%
C. 37.3%
D. 4076.9%
= $530,000 ÷ $1,420,000 = 37.3% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
210. The company's return on total assets for Year 2 is closest to:
A. 0.99%
B. 1.00%
C. 1.85%
D. 1.83%
= $24,050 ÷ $1,316,000 = 1.83% (rounded)
= $13,000 + [$17,000 × (1 - 0.35)] = $24,050
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
211. The company's return on equity for Year 2 is closest to:
A. 67.25%
B. 2.27%
C. 1.47%
D. 4.19%
= $13,000 ÷ $882,500 = 1.47% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Garrott Corporation's total assets were $1,505,000 at the end of Year 2 and $1,520,000 at the
end of Year 1. Its total stockholders' equity was $1,197,000 at the end of Year 2 and
$1,180,000 at the end of Year 1.
.
A. 1.9%
B. 2.7%
C. 3.3%
D. 38.1%

= $25,100 ÷ $1,340,000 = 1.9% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
A. 4.9%
B. 61.4%
C. 38.1%
D. 2031.9%
= $510,000 ÷ $1,340,000 = 38.1% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 2.09%
B. 2.08%
C. 1.67%
D. 1.66%
= $31,400 ÷ $1,512,500 = 2.08% (rounded)
= $25,100 + [$9,000 × (1 - 0.30)] = $31,400
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 3.02%
B. 3.77%
C. 2.11%
D. 79.14%
= $25,100 ÷ $1,188,500 = 2.11% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
Kearin Corporation has provided the following financial data:
.
A. 3.9%
B. 38.5%
C. 2.5%
D. 1.6%
= $21,000 ÷ $1,300,000 = 1.6% (rounded)
AACSB: Analytic
Blooms: Apply
A. 62.5%
B. 4.2%
C. 38.5%
D. 2381.0%
= $500,000 ÷ $1,300,000 = 38.5% (rounded)
AACSB: Analytic
.
Blooms: Apply
A. 1.38%
B. 2.18%
C. 1.37%
D. 2.19%

= $33,350 ÷ $1,530,000 = 2.18% (rounded)
= $21,000 + [$19,000 × (1 - 0.35)] = $33,350
AACSB: Analytic
Blooms: Apply
.
A. 71.44%
B. 4.72%
C. 2.97%
D. 1.93%
= $21,000 ÷ $1,086,500 = 1.93% (rounded)
AACSB: Analytic
Blooms: Apply
Doonan Corporation has provided the following financial data from its balance sheet and
income statement:
.
A. 1.77%
B. 2.46%
C. 1.80%
D. 2.42%

= $36,050 ÷ $1,464,500 = 2.46% (rounded)
= $26,300 + [$15,000 × (1 - 0.35)] = $36,050
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 5.60%
B. 4.09%
C. 2.66%
D. 68.28%
= $26,300 ÷ $990,000 = 2.66% (rounded)
*Average stockholders' equity = ($1,000,000 + $980,000) ÷ 2 = $990,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
222. The company's earnings per share for Year 2 is closest to:
A. $6.33 per share
B. $0.29 per share
C. $0.45 per share
D. $0.62 per share
= $360,000 ÷ $4 per share = 90,000 shares
AACSB: Analytic
.
Blooms: Apply
Difficulty: 1 Easy
223. The company's price-earnings ratio for Year 2 is closest to:
A. 0.76
B. 10.64
C. 16.52
D. 7.73
= $360,000 ÷ $4 per share = 90,000 shares
= $4.79 ÷ $0.29 = 16.52 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
Settles Corporation has provided the following financial data:
.
A. 2.75%
B. 1.64%
C. 1.65%
D. 2.76%
= $30,750 ÷ $1,114,500 = 2.76% (rounded)
= $18,400 + [$19,000 × (1 - 0.35)] = $30,750

AACSB: Analytic
Blooms: Apply
.
A. 3.31%
B. 8.50%
C. 5.09%
D. 50.52%
= $18,400 ÷ $556,500 = 3.31% (rounded)
AACSB: Analytic
Blooms: Apply
A. $0.31 per share
B. $0.47 per share
C. $0.79 per share
D. $3.88 per share
= $240,000 ÷ $4 per share = 60,000 shares
AACSB: Analytic
.
Blooms: Apply
A. 19.00
B. 12.53
C. 7.46
D. 1.52
= $240,000 ÷ $4 per share = 60,000 shares
= $5.89 ÷ $0.31 = 19.00 (rounded)
AACSB: Analytic
Blooms: Apply
.
Recher Corporation's common stock has a par value of $3 per share and has been stable at a
total value of $270,000 on the company's balance sheet for several years. The total
stockholders' equity at the end of this year was $1,023,000 and at the beginning of the year
was $1,010,000. Net income for the year was $17,500. Dividends on common stock during the
year totaled $4,500. The market price of common stock at the end of the year was $3.76 per
share.
228. The company's earnings per share is closest to:
A. $7.37 per share
B. $0.45 per share
C. $0.30 per share
D. $0.19 per share
= $270,000 ÷ $3 per share = 90,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
229. The company's price-earnings ratio is closest to:
A. 19.79
B. 0.51
C. 8.36
D. 12.53
= $270,000 ÷ $3 per share = 90,000 shares
= $3.76 ÷ $0.19 = 19.79 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
230. The company's dividend payout ratio is closest to:
A. 1.3%
B. 1.7%
C. 17.1%
D. 26.3%
= $270,000 ÷ $3 per share = 90,000 shares
= $0.05 ÷ $0.19 = 26.3% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
231. The company's dividend yield ratio is closest to:
A. 1.7%
B. 17.1%
C. 1.3%
D. 26.3%
= $0.05 ÷ $3.76 = 1.33% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
232. The company's book value per share at the end of the year is closest to:
A. $11.37 per share
B. $7.37 per share
C. $0.19 per share
D. $16.81 per share
outstanding*
= $270,000 ÷ $3 per share = 90,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Sperle Corporation has provided the following data concerning its stockholders' equity
accounts:
Net income for Year 2 was $30,400. Dividends on common stock during Year 2 totaled
$6,400. The market price of common stock at the end of Year 2 was $3.08 per share.
.
A. $8.18 per share
B. $0.38 per share
C. $0.54 per share
D. $0.68 per share
= $400,000 ÷ $5 per share = 80,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
A. 0.38
B. 4.53
C. 5.70
D. 8.11
= $400,000 ÷ $5 per share = 80,000 shares
= $3.08 ÷ $0.38 = 8.11 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
235. The company's dividend payout ratio for Year 2 is closest to:
A. 1.6%
B. 21.1%
C. 2.6%
D. 14.7%
= $400,000 ÷ $5 per share = 80,000 shares
= $0.08 ÷ $0.38 = 21.1% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
236. The company's dividend yield ratio for Year 2 is closest to:
A. 21.1%
B. 2.6%
C. 1.6%
D. 14.7%
= $0.08 ÷ $3.08 = 2.60% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
237. The company's book value per share at the end of Year 2 is closest to:
A. $0.38 per share
B. $8.18 per share
C. $18.08 per share
D. $13.93 per share
outstanding*
= $400,000 ÷ $5 per share = 80,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
Symons Corporation has provided the following financial data:
.
A. $0.53 per share
B. $11.54 per share
C. $0.19 per share
D. $0.27 per share
= $250,000 ÷ $5 per share = 50,000 shares
AACSB: Analytic
Blooms: Apply
.
A. 3.79
B. 10.58
C. 0.17
D. 7.44
= $250,000 ÷ $5 per share = 50,000 shares
= $2.01 ÷ $0.19 = 10.58 (rounded)
AACSB: Analytic
Blooms: Apply
.
240. The company's dividend payout ratio for Year 2 is closest to:
A. 26.3%
B. 2.5%
C. 18.4%
D. 1.0%
= $250,000 ÷ $5 per share = 50,000 shares
= $0.05 ÷ $0.19 = 26.3% (rounded)
AACSB: Analytic
Blooms: Apply
.
241. The company's dividend yield ratio for Year 2 is closest to:
A. 1.0%
B. 18.4%
C. 26.3%
D. 2.5%
= $0.05 ÷ $2.01 = 2.49% (rounded)
AACSB: Analytic
Blooms: Apply
.
242. The company's book value per share at the end of Year 2 is closest to:
A. $17.94 per share
B. $28.26 per share
C. $0.19 per share
D. $11.54 per share
outstanding*
= $250,000 ÷ $5 per share = 50,000 shares
AACSB: Analytic
Blooms: Apply
Essay Questions
.
243. Rubendall Corporation's total current assets are $310,000, its noncurrent assets are $630,000,
its total current liabilities are $250,000, its long-term liabilities are $300,000, and its
stockholders' equity is $390,000.
Required:
Compute the company's current ratio. Show your work!
= $310,000 ÷ $250,000 = 1.24
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
244. Gremel Corporation has provided the following financial data:
Required:
a. Working capital = Current assets - Current liabilities
= $639,000 - $307,000 = $332,000
b. Current ratio = Current assets ÷ Current liabilities
= $639,000 ÷ $307,000 = 2.08 (rounded)
c. Acid-test (quick) ratio = Quick assets* ÷ Current liabilities
= $475,000 ÷ $307,000 = 1.55 (rounded)
= $241,000 + $0 + $234,000 = $475,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
245. Steinkraus Corporation has provided the following data:
Required:
Compute the accounts receivable turnover for this year. Show your work!
= $886,000 ÷ $109,500 = 8.09
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
246. Arkin Corporation's total current assets are $290,000, its noncurrent assets are $520,000, its
equity is $180,000.
Required:
Compute the company's working capital. Show your work!
= $290,000 - $210,000 = $80,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
247. Wowk Corporation has provided the following financial data:
Required:
= $529,000 - $203,000 = $326,000
= $529,000 ÷ $203,000 = 2.61 (rounded)
.
= $290,000 ÷ $203,000 = 1.43 (rounded)
= $133,000 + $0 + $157,000 = $290,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
248. Data from Yochem Corporation's most recent balance sheet appear below:
Required:
Compute the company's acid-test ratio. Show your work!
Acid-test ratio = Quick assets* ÷ Current liabilities
= $79,000 ÷ $109,000 = 0.72
receivable
= $16,000 + $24,000 + $39,000 = $79,000
AACSB: Analytic
.
Blooms: Apply
Difficulty: 1 Easy
.
249. Excerpts from Candle Corporation's most recent balance sheet (in thousands of dollars)
appear below:
Sales on account during the year totaled $1,200 thousand. Cost of goods sold was $800
thousand.
Required:
a. Working capital.
b. Current ratio.
c. Acid-test ratio.
= $580 - $320 = $260
= $580 ÷ $320 = 1.81
.
c. Acid-test ratio = Quick assets* ÷ Current liabilities
= $350 ÷ $320 = 1.09
*Quick assets
= Cash + Marketable securities + Accounts receivable + Short-term notes receivable
= $160 + $0 + $190 = $350
d. Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,200 ÷ $190 = 6.32
*Average accounts receivable = ($190 + $190) ÷ 2 = $190
e. Average collection period = 365 days ÷ Accounts receivable turnover (see above)
= 365 days ÷ 6.32 = 57.8 days
f. Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $800 ÷ $135 = 5.93
g. Average sale period = 365 days ÷ Inventory turnover (see above)
= 365 days ÷ 5.93 = 61.6 days
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
250. Wegener Corporation's most recent balance sheet and income statement appear below:
Required:
a. Working capital.
.
b. Current ratio.
c. Acid-test ratio.
= $510 - $200 = $310
= $510 ÷ $200 = 2.55
c. Acid-test ratio = Quick assets* ÷ Current liabilities
= $310 ÷ $200 = 1.55
*Quick assets
= Cash + Marketable securities + Accounts receivable + Short-term notes receivable
= $90 + $0 + $220 = $310
= $1,400 ÷ $245 = 5.71
e. Average collection period = 365 days ÷ Accounts receivable turnover (see above)
= 365 days ÷ 5.71 = 63.9 days
f. Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $860 ÷ $140 = 6.14
g. Average sale period = 365 days ÷ Inventory turnover (see above)
= 365 days ÷ 6.14 = 59.4 days
.
AACSB: Analytic
Blooms: Apply
.
251. Abdool Corporation has provided the following financial data:
Required:
.
= $628,000 - $351,000 = $277,000
= $628,000 ÷ $351,000 = 1.79 (rounded)
= $387,000 ÷ $351,000 = 1.10 (rounded)
= $190,000 + $0 + $197,000 = $387,000
= $1,330,000 ÷ $198,500 = 6.70 (rounded)
e. Average collection period = 365 days ÷ Accounts receivable turnover
f. Inventory turnover = Cost of goods sold ÷ Average inventory*
= $740,000 ÷ $216,000 = 3.43 (rounded)
.
g. Average sale period = 365 days ÷ Inventory turnover
h. Operating cycle = Average sale period + Average collection period
= 106.4 days + 54.5 days = 160.9 days
i. Total asset turnover = Sales ÷ Average total assets*
= $1,330,000 ÷ $1,311,500 = 1.01 (rounded)
AACSB: Analytic
Blooms: Apply
.
252. Financial statements for Rardin Corporation appear below:
Required:
.
a. Current ratio.
b. Acid-test ratio.
c. Average collection period.
d. Inventory turnover.
e. Times interest earned.
f. Debt-to-equity ratio.
a. Current ratio = Current assets ÷ Current liabilities

= $580 ÷ $460 = 1.26
b. Acid-test ratio = Quick assets* ÷ Current liabilities
= $340 ÷ $460 = 0.74
receivable
= $160 + $180 = $340
c. Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,900 ÷ $170 = 11.18
= 365 days ÷ 11.18 = 32.7 days
d. Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $1,330 ÷ $170 = 7.82
e. Times interest earned = Earnings before interest expense and income taxes ÷ Interest
expense
= $350 ÷ $30 = 11.67
.
f. Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $720 ÷ $1,040 = 0.69
AACSB: Analytic
Blooms: Apply
.
253. Mondok Corporation has provided the following financial data:
Required:
.
= $538,000 - $284,000 = $254,000
= $538,000 ÷ $284,000 = 1.89 (rounded)
= $361,000 ÷ $284,000 = 1.27 (rounded)
= $139,000 + $0 + $222,000 = $361,000
= $1,280,000 ÷ $226,000 = 5.66 (rounded)
.
= $840,000 ÷ $114,500 = 7.34 (rounded)
= 49.7 days + 64.5 days = 114.2 days
= $1,280,000 ÷ $1,377,500 = 0.93 (rounded)
j. Times interest earned = Net operating income ÷ Interest expense
= $52,769 ÷ $12,000 = 4.40 (rounded)
k. Debt-to-equity ratio = Liabilities ÷ Stockholders' equity
= $414,000 ÷ $981,000 = 0.42 (rounded)
l. Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,377,500 ÷ $970,500 = 1.42 (rounded)
AACSB: Analytic
Blooms: Apply
.
254. Two-Rivers Inc. (TRI) manufactures a variety of consumer products. The company's founders
have run the company for thirty years and are now interested in retiring. Consequently, they
are seeking a purchaser, and a group of investors is looking into the acquisition of TRI. To
evaluate its financial stability, TRI was requested to provide its latest financial statements and
selected financial ratios. Summary information provided by TRI is presented below.
.
Required:
a. Calculate the select financial ratios for the fiscal year Year 2.
b. Interpret what each of these financial ratios means in terms of TRI's financial stability and
operating efficiency.
a. The calculation of selected financial ratios for TRI for Year 2 follows.
• Current ratio = Current assets ÷ Current liabilities
= $9,900 ÷ $6,300 = 1.57
• Acid-test ratio = (Cash + Marketable securities + Accounts receivable) ÷ Current liabilities
= ($400 + $500 + $3,200) ÷ $6,300 = 0.65
• Times interest earned = Income before interest expense and income taxes ÷ Interest
expense
= ($7,060 + $900) ÷ $900 = 8.8
• Debt-to-equity = Total liabilities ÷ Stockholders' equity
= $8,300 ÷ $8,700 = 0.95
• Inventory turnover = Cost of goods sold ÷ Average Inventory
= $17,600 ÷ [($5,800 + $5,400)/2] = 3.14
b. Interpretations of the financial ratios:
• TRI's current ratio has declined over the last three years. This declining trend, coupled with
.
the fact that the current ratio is below the industry average, is probably not yet a major
concern. However, the current ratio should be monitored.
• The acid-test ratio has improved over the last three years; however, it is still below the
industry average. Furthermore, an acid-test ratio below 1 indicates that TRI may have difficulty
meeting its short-term obligations.
• TRI's times interest earned ratio has been improving over the last three years and is above
the industry average. This indicates that the relationship between profits and interest expense
is favorable and is one indication that TRI might consider increasing its debt—-particularly if
there are attractive investment opportunities.
• TRI's debt to equity ratio has deteriorated slightly in Year 2 but has been below the industry
average over the last three years. This indicates that TRI should be able to raise additional
financing through debt and still remain below the industry average.
• TRI's inventory turnover ratio has been steadily declining and is below the industry average.
This may indicate a decline in operating efficiency, problems with obsolete inventory, or
overpriced stocks.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
.
255. Financial statements for Praeger Corporation appear below:
Dividends during Year 2 totaled $45 thousand. The market price of a share of common stock
.
on December 31, Year 2 was $30.
Required:
a. Return on total assets.
b. Working capital.
c. Current ratio.
d. Acid-test ratio.
e. Accounts receivable turnover.
f. Average collection period.
g. Inventory turnover.
h. Average sale period.
i. Times interest earned.
j. Debt-to-equity ratio.
a. Return on total assets = Adjusted net income* ÷ Average total assets**
= $140 ÷ $2,445 = 5.73%
= $105 + [$50 × (1 - 0.30)] = $140
**Average total assets = ($2,460 + $2,430) ÷ 2 = $2,445
b. Working capital = Current assets - Current liabilities
= $440 - $310 = $130
c. Current ratio = Current assets ÷ Current liabilities
= $440 ÷ $310 = 1.42
d. Acid-test ratio = Quick assets* ÷ Current liabilities
= $270 ÷ $310 = 0.87
.
receivable
= $100 + $170 = $270
e. Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,100 ÷ $170 = 6.47
f. Average collection period = 365 days ÷ Accounts receivable turnover*
= 365 ÷ 6.47 = 56.4 days
*See above
g. Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $770 ÷ $110 = 7.00
h. Average sale period = 365 days ÷ Inventory turnover*
= 365 ÷ 7.00 = 52.1 days
*See above
i. Times interest earned = Earnings before interest expense and income taxes ÷ Interest
expense
= $200 ÷ $50 = 4.00
j. Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $810 ÷ $1,650 = 0.49
AACSB: Analytic
Blooms: Apply
.
256. Kaloi Corporation has provided the following financial data:
.
Required:
= $556,000 - $197,000 = $359,000
= $556,000 ÷ $197,000 = 2.82 (rounded)
= $397,000 ÷ $197,000 = 2.02 (rounded)
= $205,000 + $0 + $192,000 = $397,000
.
= $1,370,000 ÷ $196,000 = 6.99 (rounded)
= $830,000 ÷ $124,000 = 6.69 (rounded)
= 54.6 days + 52.2 days = 106.8 days
= $1,370,000 ÷ $1,349,500 = 1.02 (rounded)
= $61,714 ÷ $11,000 = 5.61 (rounded)
= $327,000 ÷ $1,042,000 = 0.31 (rounded)
= $1,349,500 ÷ $1,026,000 = 1.32 (rounded)
m. Net profit margin percentage = Net income ÷ Sales
= $35,500 ÷ $1,370,000 = 2.6% (rounded)
n. Gross margin percentage = Gross margin ÷ Sales
.
= $540,000 ÷ $1,370,000 = 39.4% (rounded)
o. Return on total assets = Adjusted net income* ÷ Average total assets**
= $43,200 ÷ $1,349,500 = 3.20% (rounded)
= $35,500 + [$11,000 × (1 - 0.30)] = $43,200
p. Return on equity = Net income ÷ Average stockholders' equity*
= $35,500 ÷ $1,026,000 = 3.46% (rounded)
AACSB: Analytic
Blooms: Apply
.
257. Hyrkas Corporation's most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $30 thousand. The market price of common
Required:
.
a. Gross margin percentage.
b. Earnings per share.
c. Price-earnings ratio.
d. Dividend payout ratio.
e. Dividend yield ratio.
f. Return on total assets.
g. Return on equity.
h. Book value per share.
i. Working capital.
j. Current ratio.
k. Acid-test ratio.
l. Accounts receivable turnover.
m. Average collection period.
n. Inventory turnover.
o. Average sale period.
p. Times interest earned.
q. Debt-to-equity ratio.
a. Gross margin percentage = Gross margin ÷ Sales
= $470 ÷ $1,200 = 39.2%
b. Earnings per share = Net income ÷ Average number of common shares outstanding*
= $80 ÷ (100 shares + 100 shares)/2 = $0.80 per share
= $200 ÷ $2 per share = 100 shares
c. Price-earnings ratio = Market price per share ÷ Earnings per share (see above)
= $6.90 per share ÷ $0.80 per share = 8.625
d. Dividend payout ratio = Dividends per share* ÷ Earnings per share (see above)
.
= $0.30 per share ÷ $0.80 per share = 37.5%
*Dividends per share = Dividends ÷ Number of common shares outstanding (see above)
= $30 ÷ 100 shares = $0.30 per share
e. Dividend yield ratio = Dividends per share (see above) ÷ Market price per share
= $0.30 per share ÷ $6.90 per share = 4.35%
f. Return on total assets = Adjusted net income* ÷ Average total assets**
= $94.7 ÷ $1,345 = 7.04%
= $80 + [$21 × (1 - 0.30)] = $94.7
**Average total assets = ($1,340 + $1,350) ÷ 2 = $1,345
g. Return on equity = Net income ÷ Average total stockholders' equity*
= $80 ÷ $715 = 11.2%
*Average total stockholders' equity = ($740 + $690) ÷ 2 = $715
h. Book value per share = Total stockholders' equity ÷ Number of common shares
outstanding*
= $740 ÷ 100 shares = $7.40 per share
= $200 ÷ $2 per share = 100 shares
i. Working capital = Current assets - Current liabilities
= $580 - $250 = $330
j. Current ratio = Current assets ÷ Current liabilities
= $580 ÷ $250 = 2.32
k. Acid-test ratio = Quick assets* ÷ Current liabilities

= $370 ÷ $250 = 1.48
receivable
= $150 + $0 + $220 + $0 = $370
.
l. Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,200 ÷ $230 = 5.22
m. Average collection period = 365 days ÷ Accounts receivable turnover (see above)
= 365 days ÷ 5.22 = 69.9 days
n. Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $730 ÷ $175 = 4.17
o. Average sale period = 365 days ÷ Inventory turnover (see above)
= 365 days ÷ 4.17 = 87.5 days
p. Times interest earned = Net operating income ÷ Interest expense
= $135 ÷ $21 = 6.43
q. Debt-to-equity ratio = Liabilities ÷ Stockholders' equity
= $400 ÷ $940 = 0.43
AACSB: Analytic
Blooms: Apply
.
258. Kisselburg Corporation has provided the following financial data:
.
Required:
q. What is the company's earnings per share for Year 2?
r. What is the company's price-earnings ratio for Year 2?
s. What is the company's dividend payout ratio for Year 2?
t. What is the company's dividend yield ratio for Year 2?
u. What is the company's book value per share at the end of Year 2?
= $513,000 - $233,000 = $280,000
= $513,000 ÷ $233,000 = 2.20 (rounded)
.
= $366,000 ÷ $233,000 = 1.57 (rounded)
= $243,000 + $0 + $123,000 = $366,000
= $1,360,000 ÷ $121,500 = 11.19 (rounded)
= $800,000 ÷ $108,000 = 7.41 (rounded)
= 49.3 days + 32.6 days = 81.9 days
= $1,360,000 ÷ $1,168,000 = 1.16 (rounded)
= $77,923 ÷ $21,000 = 3.71 (rounded)
= $493,000 ÷ $683,000 = 0.72 (rounded)
= $1,168,000 ÷ $666,500 = 1.75 (rounded)
.
m. Net profit margin percentage = Net income ÷ Sales
= $37,000 ÷ $1,360,000 = 2.7% (rounded)
n. Gross margin percentage = Gross margin ÷ Sales
= $560,000 ÷ $1,360,000 = 41.2% (rounded)
o. Return on total assets = Adjusted net income* ÷ Average total assets**
= $50,650 ÷ $1,168,000 = 4.34% (rounded)
= $37,000 + [$21,000 × (1 - 0.35)] = $50,650
p. Return on equity = Net income ÷ Average stockholders' equity*
= $37,000 ÷ $666,500 = 5.55% (rounded)
q. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $160,000 ÷ $2 per share = 80,000 shares
r. Price-earnings ratio = Market price per share ÷ Earnings per share
= $5.75 ÷ $0.46 = 12.50 (rounded)
s. Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.05 ÷ $0.46 = 10.9% (rounded)
t. Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.05 ÷ $5.75 = 0.87% (rounded)
.
u. Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
= $160,000 ÷ $2 per share = 80,000 shares
AACSB: Analytic
Blooms: Apply
.
259. M. K. Berry is the managing director of CE Ltd. a small, family-owned company which
manufactures cutlery. His company belongs to a trade association which publishes a monthly
magazine. The latest issue of the magazine contains a very brief article based on the analysis
of the accounting statements published by the 40 companies which manufacture this type of
product. The article contains the following table:
CE Ltd's latest financial statements are as follows:
The country in which the company operates has no corporate income tax. No dividends were
paid during the year. All sales are on account.
.
Required:
a. Calculate each of the ratios listed in the magazine article for this year for CE, and comment
briefly on CE Ltd's performance in comparison to the industrial averages.
b. Explain why it could be misleading to compare CE Ltd's ratios with those taken from the
article.
A. Return on equity = Net income ÷ Average total stockholders' equity*
= £110 ÷ £369 = 29.8%
*Average total stockholders' equity = [(£100 + £324) + (£100 + £214)] ÷ 2 = £369
Return on total assets = {Net income + [Interest expense × (1 - Tax rate)]} ÷ Average total
assets*
= {£110 + [£15 × (1 - 0.00)]} ÷ £695.5 = 18.0%
*Average total assets = (£721 + £670) ÷ 2 = £695.5
= £180 ÷ £900 = 20%
.
Current ratio = Current assets* ÷ Current liabilities
= £221 ÷ £147 = 1.5
*Current assets = £5 + £120 + £96 = £221
= £720 ÷ [(£96 + £80) ÷ 2] = 8.2 (rounded)
Average sale period = 365 days ÷ Inventory turnover*
= £900 ÷ £115 = 7.8 (rounded)
*Average accounts receivable balance = (£120 + £110) ÷ 2 = £115
CE Ltd's return on stockholders' equity is not as good as the industry's average. For every
pound invested, stockholders are obtaining a return which is smaller than they should expect,
based on the article's figures. Similarly, the return on total assets is much less than the
average. This indicates that the company is unable to make good use of the funds invested in
the company.
CE Ltd's gross margin percentage is also lower than average--perhaps because its selling
prices are lower than the average or its cost of sales are higher.
The current ratio indicates that CE Ltd's current assets are greater than its current liabilities by
a factor of 1.5. The industry average shows an even higher figure, with current assets
amounting to almost double current liabilities.
Most companies aim to turn over inventory as quickly as possible, in order to improve cash
flow. CE Ltd is not managing to do this as quickly as the industry's average of 37 days.
Similarly, companies should try to obtain payment from customers as soon as possible. CE
Ltd is taking much longer to do this than the average for the industry.
B. Care must be taken when comparing CE Ltd's ratios with industry averages because there
.
may be differences in accounting methods. Although accounting standards have reduced the
range of acceptable accounting policies, there is still scope for different firms to apply different
accounting policies. For example, one firm may use straight-line depreciation, while another
may use accelerated depreciation. These variations make comparisons difficult.
Size differences may also mean that ratios are not comparable. A very large manufacturing
business should be able to achieve economies of scale which are not possible for CE Ltd. For
example, large companies may be able to negotiate sizable discounts from suppliers.
A third problem arises from differences in product range. CE Ltd may produce cutlery which is
sold at the top end of the market, for very high prices, and in small volumes. Alternatively, it
may be producing high-volume, low quality cutlery for the catering industry. Either situation will
reduce the value of comparisons with the industry average.
AACSB: Communication
Blooms: Apply
Difficulty: 3 Hard
Source: CIMA, adapted
.
260. Neiger Corporation has provided the following financial data:
Required:
.
= $463,000 - $226,000 = $237,000
= $463,000 ÷ $226,000 = 2.05 (rounded)
= $347,000 ÷ $226,000 = 1.54 (rounded)
= $216,000 + $0 + $131,000 = $347,000
d. Times interest earned = Net operating income ÷ Interest expense
= $62,429 ÷ $11,000 = 5.68 (rounded)
e. Debt-to-equity ratio = Liabilities ÷ Stockholders' equity
= $346,000 ÷ $975,000 = 0.35 (rounded)
f. Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,300,500 ÷ $957,500 = 1.36 (rounded)
AACSB: Analytic
Blooms: Apply
.
.
261. Walker Corporation has provided the following financial data:
The company's net operating income for Year 2 was $63,615 and its interest expense was
$15,000.
Required:
= $575,000 - $254,000 = $321,000
= $575,000 ÷ $254,000 = 2.26 (rounded)
= $381,000 ÷ $254,000 = 1.50 (rounded)
= $195,000 + $0 + $186,000 = $381,000
.
d. Times interest earned = Net operating income ÷ Interest expense
= $63,615 ÷ $15,000 = 4.24 (rounded)
e. Debt-to-equity ratio = Liabilities ÷ Stockholders' equity
= $434,000 ÷ $988,000 = 0.44 (rounded)
f. Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,416,000 ÷ $974,000 = 1.45 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
262. Data from Ben Corporation's most recent balance sheet and income statement appear below:
Required:
Compute the average sale period for this year:
Average sale period = 365 days ÷ Inventory turnover*
= 365 days ÷ 3.80 = 96.1 days
*Inventory turnover = Cost of goods sold ÷ Average inventory balance*
= $660,000 ÷ $173,500 = 3.80
**Average inventory = ($159,000 + $188,000) ÷ 2 = $173,500
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
263. Dilisio Corporation has provided the following data:
Required:
Compute the inventory turnover for this year:
= $417,000 ÷ $210,000 = 1.99
*Average inventory balance = ($226,000 + $194,000) ÷ 2 = $210,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
264. Hagle Corporation has provided the following financial data:
Required:
.
a. Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,280,000 ÷ $143,000 = 8.95 (rounded)
b. Average collection period = 365 days ÷ Accounts receivable turnover
c. Inventory turnover = Cost of goods sold ÷ Average inventory*
= $750,000 ÷ $145,500 = 5.15 (rounded)
d. Average sale period = 365 days ÷ Inventory turnover
e. Operating cycle = Average sale period + Average collection period
= 70.9 days + 40.8 days = 111.7 days
f. Total asset turnover = Sales ÷ Average total assets*
= $1,280,000 ÷ $1,407,000 = 0.91 (rounded)
AACSB: Analytic
Blooms: Apply
.
265. Data from Dalpiaz Corporation's most recent balance sheet and income statement appear
below:
Required:
Compute the average collection period for this year:
Average collection period = 365 days ÷ Accounts receivable turnover*
= 365 days ÷ 5.94 = 61.4 days
*Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance**
= $647,000 ÷ $109,000 = 5.94
**Average accounts receivable = ($104,000 + $114,000) ÷ 2 = $109,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
266. Kestner Corporation has provided the following financial data:
Required:
a. Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,360,000 ÷ $197,500 = 6.89 (rounded)
b. Average collection period = 365 days ÷ Accounts receivable turnover
c. Inventory turnover = Cost of goods sold ÷ Average inventory*
= $870,000 ÷ $98,500 = 8.83 (rounded)
d. Average sale period = 365 days ÷ Inventory turnover
e. Operating cycle = Average sale period + Average collection period
= 41.3 days + 53.0 days = 94.3 days
.
f. Total asset turnover = Sales ÷ Average total assets*
= $1,360,000 ÷ $1,421,000 = 0.96 (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
267. Wyand Corporation's net operating income last year was $212,000; its interest expense was
$26,000; its total stockholders' equity was $1,000,000; and its total liabilities were $370,000.
Required:
a. Times interest earned = Net operating income ÷ Interest expense

= $212,000 ÷ $26,000 = 8.15
b. Debt-to-equity ratio = Liabilities ÷ Stockholders' equity
= $370,000 ÷ $1,000,000 = 0.37
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
268. Fraction Corporation has provided the following financial data:
Required:
= $38,571 ÷ $10,000 = 3.86 (rounded)
= $310,000 ÷ $1,137,000 = 0.27 (rounded)
c. Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,438,500 ÷ $1,128,500 = 1.27 (rounded)
AACSB: Analytic
Blooms: Apply
.
269. Babbitt Corporation has provided the following data from its most recent income statement:
Required:
Compute the times interest earned ratio. Show your work!
= $94,000 ÷ $62,000 = 1.52
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
270. Gambino Corporation has provided the following financial data:
Required:
.

= $64,692 ÷ $17,000 = 3.81 (rounded)
= $438,000 ÷ $1,104,000 = 0.40 (rounded)
= $1,536,000 ÷ $1,092,000 = 1.41 (rounded)
AACSB: Analytic
Blooms: Apply
.
271. Sidell Corporation's most recent balance sheet and income statement appear below:
Required:
.

= $215 ÷ $29 = 7.41
= $430 ÷ $830 = 0.52
AACSB: Analytic
Blooms: Apply
.
272. Lindboe Corporation has provided the following financial data:
.
Required:
= $61,714 ÷ $12,000 = 5.14 (rounded)
= $397,000 ÷ $1,150,000 = 0.35 (rounded)
= $1,538,500 ÷ $1,135,000 = 1.36 (rounded)
d. Net profit margin percentage = Net income ÷ Sales
= $34,800 ÷ $1,220,000 = 2.9% (rounded)
e. Gross margin percentage = Gross margin ÷ Sales
= $520,000 ÷ $1,220,000 = 42.6% (rounded)
= $43,200 ÷ $1,538,500 = 2.81% (rounded)
*Adjusted net income = Net income + [Interest expense × (1-Tax rate)]
= $34,800 + [$12,000 × (1 - 0.30)] = $43,200
.
g. Return on equity = Net income ÷ Average stockholders' equity*
= $34,800 ÷ $1,135,000 = 3.07% (rounded)
AACSB: Analytic
Blooms: Apply
.
273. Schepp Corporation has provided the following financial data:
Required:
= $32,143 ÷ $10,000 = 3.21 (rounded)
= $468,000 ÷ $852,000 = 0.55 (rounded)
.
= $1,305,000 ÷ $846,000 = 1.54 (rounded)
= $15,500 ÷ $1,440,000 = 1.1% (rounded)
= $560,000 ÷ $1,440,000 = 38.9% (rounded)
= $22,500 ÷ $1,305,000 = 1.72% (rounded)
= $15,500 + [$10,000 × (1 - 0.30)] = $22,500
= $15,500 ÷ $846,000 = 1.83% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
274. Brill Corporation has provided the following financial data:
Required:
.
= $35,857 ÷ $20,000 = 1.79 (rounded)
= $601,000 ÷ $759,000 = 0.79 (rounded)
= $1,340,000 ÷ $754,500 = 1.78 (rounded)
= $11,100 ÷ $1,300,000 = 0.9% (rounded)
= $400,000 ÷ $1,300,000 = 30.8% (rounded)
= $25,100 ÷ $1,340,000 = 1.87% (rounded)
= $11,100 + [$20,000 × (1 - 0.30)] = $25,100
= $11,100 ÷ $754,500 = 1.47% (rounded)
h. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $140,000 ÷ $2 per share = 70,000 shares
.
i. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $140,000 ÷ $2 per share = 70,000 shares
= $2.32 ÷ $0.16 = 14.50 (rounded)
j. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $140,000 ÷ $2 per share = 70,000 shares
= $0.03 ÷ $0.16 = 18.8% (rounded)
k. Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.03 ÷ $2.32 = 1.29% (rounded)
l. Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
= $140,000 ÷ $2 per share = 70,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
.
275. Jaquez Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $10,000. The market price of common
Required:
.

= $69,769 ÷ $19,000 = 3.67 (rounded)
= $573,000 ÷ $893,000 = 0.64 (rounded)
= $1,463,000 ÷ $881,500 = 1.66 (rounded)
= $33,000 ÷ $1,450,000 = 2.3% (rounded)
= $600,000 ÷ $1,450,000 = 41.4% (rounded)
= $45,350 ÷ $1,463,000 = 3.10% (rounded)
= $33,000 + [$19,000 × (1 - 0.35)] = $45,350
= $33,000 ÷ $881,500 = 3.74% (rounded)
.
= $300,000 ÷ $3 per share = 100,000 shares
= $300,000 ÷ $3 per share = 100,000 shares
= $5.45 ÷ $0.33 = 16.52 (rounded)
= $300,000 ÷ $3 per share = 100,000 shares
= $0.10 ÷ $0.33 = 30.3% (rounded)
= $0.10 ÷ $5.45 = 1.83% (rounded)
outstanding*
= $300,000 ÷ $3 per share = 100,000 shares
AACSB: Analytic
.
Blooms: Apply
Difficulty: 1 Easy
.
276. Medina Corporation has provided the following financial data:
.
Required:
= $26,308 ÷ $14,000 = 1.88 (rounded)
= $498,000 ÷ $856,000 = 0.58 (rounded)
= $1,332,000 ÷ $853,000 = 1.56 (rounded)
= $8,000 ÷ $1,280,000 = 0.6% (rounded)
= $440,000 ÷ $1,280,000 = 34.4% (rounded)
.
= $17,100 ÷ $1,332,000 = 1.28% (rounded)
= $8,000 + [$14,000 × (1 - 0.35)] = $17,100
= $8,000 ÷ $853,000 = 0.94% (rounded)
= $500,000 ÷ $5 per share = 100,000 shares
= $500,000 ÷ $5 per share = 100,000 shares
= $1.49 ÷ $0.08 = 18.63 (rounded)
= $500,000 ÷ $5 per share = 100,000 shares
= $0.02 ÷ $0.08 = 25.0% (rounded)
.
= $0.02 ÷ $1.49 = 1.34% (rounded)
outstanding*
= $500,000 ÷ $5 per share = 100,000 shares
AACSB: Analytic
Blooms: Apply
.
277. Tobia Corporation has provided the following financial data:
.
Required:
= $34,923 ÷ $16,000 = 2.18 (rounded)
= $467,000 ÷ $1,066,000 = 0.44 (rounded)
= $1,521,500 ÷ $1,063,000 = 1.43 (rounded)
d. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $210,000 ÷ $3 per share = 70,000 shares
e. Price-earnings ratio = Market price per share ÷ Earnings per share
= $1.78 ÷ $0.18 = 9.89 (rounded)
f. Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.09 ÷ $0.18 = 50.0% (rounded)
.
g. Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.09 ÷ $1.78 = 5.06% (rounded)
h. Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
= $210,000 ÷ $3 per share = 70,000 shares
AACSB: Analytic
Blooms: Apply
.
278. Vogelsberg Corporation has provided the following financial data:
The company's net operating income in Year 2 was $62,308; its interest expense was
$12,000; and its net income was $32,700. Dividends on common stock during Year 2 totaled
$2,700. The market price of common stock at the end of Year 2 was $6.37 per share.
Required:

= $62,308 ÷ $12,000 = 5.19 (rounded)
= $356,000 ÷ $930,000 = 0.38 (rounded)
= $1,263,000 ÷ $915,000 = 1.38 (rounded)
.
= $270,000 ÷ $3 per share = 90,000 shares
= $6.37 ÷ $0.36 = 17.69 (rounded)
= $0.03 ÷ $0.36 = 8.3% (rounded)
= $0.03 ÷ $6.37 = 0.47% (rounded)
outstanding*
= $270,000 ÷ $3 per share = 90,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
279. Remley Corporation has provided the following financial data:
Required:
.
= $39,077 ÷ $16,000 = 2.44 (rounded)
= $539,000 ÷ $902,000 = 0.60 (rounded)
= $1,415,500 ÷ $896,000 = 1.58 (rounded)
= $180,000 ÷ $3 per share = 60,000 shares
= $2.70 ÷ $0.25 = 10.80 (rounded)
= $0.05 ÷ $0.25 = 20.0% (rounded)
= $0.05 ÷ $2.70 = 1.85% (rounded)
outstanding*
.
= $180,000 ÷ $3 per share = 60,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
280. Pribyl Corporation has provided the following financial data:
Required:
a. Net profit margin percentage = Net income ÷ Sales
= $17,000 ÷ $1,270,000 = 1.3% (rounded)
b. Gross margin percentage = Gross margin ÷ Sales
= $550,000 ÷ $1,270,000 = 43.3% (rounded)
c. Return on total assets = Adjusted net income* ÷ Average total assets**
= $28,050 ÷ $1,463,000 = 1.92% (rounded)
= $17,000 + [$17,000 × (1 - 0.35)] = $28,050
.
d. Return on equity = Net income ÷ Average stockholders' equity*
= $17,000 ÷ $1,006,500 = 1.69% (rounded)
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
281. Perrett Corporation has provided the following financial data:
Required:
= $39,500 ÷ $1,200,000 = 3.3% (rounded)
= $430,000 ÷ $1,200,000 = 35.8% (rounded)
= $53,800 ÷ $1,460,000 = 3.68% (rounded)
= $39,500 + [$22,000 × (1 - 0.35)] = $53,800
= $39,500 ÷ $937,000 = 4.22% (rounded)
.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
282. Jepson Corporation's most recent income statement appears below:
Required:
Compute the gross margin percentage.
= $507,000 ÷ $865,000 = 58.6%
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
283. Gehlhausen Corporation has provided the following financial data:
.
Required:
= $27,600 ÷ $1,310,000 = 2.1% (rounded)
= $600,000 ÷ $1,310,000 = 45.8% (rounded)
= $39,950 ÷ $1,379,000 = 2.90% (rounded)
= $27,600 + [$19,000 × (1 - 0.35)] = $39,950
= $27,600 ÷ $851,000 = 3.24% (rounded)
AACSB: Analytic
Blooms: Apply
.
284. Degollado Corporation's most recent income statement appears below:
Required:
Compute the return on total assets. Show your work!
Return on total assets = Adjusted net income* ÷ Average total assets
= $35,000 ÷ $210,000 = 16.7%
= $28,000 + [$10,000 × (1 - 0.30)] = $35,000
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
285. Marovich Corporation has provided the following financial data:
Required:
.
= $36,000 ÷ $1,230,000 = 2.9% (rounded)
= $420,000 ÷ $1,230,000 = 34.1% (rounded)
= $41,850 ÷ $1,316,000 = 3.18% (rounded)
= $36,000 + [$9,000 × (1 - 0.35)] = $41,850
= $36,000 ÷ $1,026,000 = 3.51% (rounded)
e. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $200,000 ÷ $4 per share = 50,000 shares
f. Price-earnings ratio = Market price per share ÷ Earnings per share
= $6.41 ÷ $0.72 = 8.90 (rounded)
g. Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.08 ÷ $0.72 = 11.1% (rounded)
h. Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.08 ÷ $6.41 = 1.25% (rounded)

i. Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
.
= $200,000 ÷ $4 per share = 50,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
286. Straton Corporation has provided the following financial data:
.
Required:
= $28,100 ÷ $1,320,000 = 2.1% (rounded)
= $460,000 ÷ $1,320,000 = 34.8% (rounded)
= $42,400 ÷ $1,658,000 = 2.56% (rounded)
= $28,100 + [$22,000 × (1 - 0.35)] = $42,400
= $28,100 ÷ $1,083,000 = 2.59% (rounded)
e. Earnings per share = Net Income ÷ Average number of common shares outstanding*
.
= $140,000 ÷ $2 per share = 70,000 shares
f. Price-earnings ratio = Market price per share ÷ Earnings per share
= $5.56 ÷ $0.40 = 13.90 (rounded)
g. Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.03 ÷ $0.40 = 7.5% (rounded)
h. Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.03 ÷ $5.56 = 0.54% (rounded)
i. Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
= $140,000 ÷ $2 per share = 70,000 shares
AACSB: Analytic
Blooms: Apply
.
287. Moselle Corporation has provided the following financial data:
.
Required:
a. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $240,000 ÷ $4 per share = 60,000 shares
b. Price-earnings ratio = Market price per share ÷ Earnings per share
= $9.72 ÷ $0.54 = 18.00 (rounded)
c. Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.07 ÷ $0.54 = 13.0% (rounded)
d. Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.07 ÷ $9.72 = 0.72% (rounded)
e. Book value per share = Common stockholders' equity ÷ Number of common shares
outstanding*
.
= $240,000 ÷ $4 per share = 60,000 shares
AACSB: Analytic
Blooms: Apply
.
288. Mihok Corporation has provided the following financial data:
Required:
.
= $300,000 ÷ $3 per share = 100,000 shares
= $0.97 ÷ $0.10 = 9.70 (rounded)
= $0.05 ÷ $0.10 = 50.0% (rounded)
= $0.05 ÷ $0.97 = 5.15% (rounded)
outstanding*
= $300,000 ÷ $3 per share = 100,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
.
289. Sehrt Corporation has provided the following financial data:
The company's net income for Year 2 was $44,000. Dividends on common stock during Year
2 totaled $11,000. The market price of common stock at the end of Year 2 was $6.29 per
share.
Required:
= $300,000 ÷ $3 per share = 100,000 shares
= $6.29 ÷ $0.44 = 14.30 (rounded)
= $0.11 ÷ $0.44 = 25.0% (rounded)
= $0.11 ÷ $6.29 = 1.75% (rounded)
.
outstanding*
= $300,000 ÷ $3 per share = 100,000 shares
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy

FS Analysis PDF

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

FS Analysis PDF

Caricato da

Copyright:

Formati disponibili

Chapter 15

Financial Statement Analysis

True / False Questions

1. Vertical analysis of financial statements is accomplished by preparing common-size statements.

2. In determining whether a company's financial condition is improving or deteriorating over time,

3. A common-size financial statement is a vertical analysis in which each financial statement

account is expressed as a percentage.

4. The acid-test ratio is usually greater than the current ratio.

5. Liquidity refers to how quickly an asset can be converted into cash.

the acid-test (quick) ratio.

high inventory turnover ratio.

accounts receivable turnover ratio at a retailer.

turnover ratio increases.

have too much inventory or the wrong sorts of inventory.

debt-to-equity ratio to provide a buffer of protection.

ratio will be unchanged.

interest expense and income taxes ÷ Interest expense.

total stockholders' equity.

future, the company's return on total assets will decrease.

gross margin percentage will be unaffected by the transaction.

interest and taxes.

increase and decrease with sales volume.

price-earnings ratio if the market price per share remains unchanged.

have no impact on the company's book value per share.

45. Selling used equipment at book value for cash will:

A. increase working capital.

B. decrease working capital.

C. decrease the debt-to-equity ratio.

D. increase net income.

A. decrease the current ratio.

B. increase the acid-test ratio.

C. decrease the acid-test ratio.

D. increase the current ratio.

cash on the acid-test ratio and on working capital?

48. Norton Inc. could improve its current ratio of 2 by:

A. paying a previously declared stock dividend.

B. writing off an uncollectible receivable.

C. selling merchandise on credit at a profit.

D. purchasing inventory on credit.

current liabilities is:

A. the debt-to-equity ratio.

B. the current ratio.

C. the acid-test ratio.

A. increase the current ratio.

B. decrease the current ratio.

C. increase net working capital.

D. decrease net working capital.

A. Collect some accounts receivable.

B. Acquire some inventory on account.

C. Sell some equipment for cash.

D. Use cash to pay off some accounts payable.

C. increase both the current and acid-test ratios.

D. decrease both the current and acid-test ratios.

improve the current ratio?

A. Use cash to pay off some current liabilities.

B. Purchase additional marketable securities with cash.

C. Acquire a parcel of land in exchange for common stock.

D. Purchase additional inventory on credit.

54. Accounts receivable turnover will normally decrease as a result of:

C. an increase in cash sales in proportion to credit sales.

D. a change in credit policy to lengthen the period for cash discounts.

55. The gross margin percentage is equal to:

A. (Net operating income + Selling and administrative expenses)/Sales