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36) Danby, Inc. provides the following data from its income statement for 2018:
Net Sales
$520,000
Cost of Goods Sold
(190,000)
Gross Profit
$330,000
Calculate the gross profit percentage. (Round your answer to two decimal places.)
A) 17.37%
B) 63.46%
C) 100.00%
D) 36.54%
37) Use the following to calculate the inventory turnover ratio for the year 2019.
2019 2018
Cost of Goods Sold 585,000 475,000
Merchandise Inventory 320,000 295,000
38) Grand Office Supply reported the following gross profit percentages: 2017: 37.5%; 2018: 36.2%; 2019:
20.8%. The industry average is 35%. What are some possible reasons for the decline in 2019?
39) A high times-interest-earned ratio indicates difficulty in paying interest expense.
40) The debt ratio is the ratio of total debt divided by total equity.
41) The debt to equity ratio shows the proportion of total liabilities relative to total equity.
42) The times-interest-earned ratio measures the number of times earnings before interest and taxes can
cover interest expense.
43) A company reports total assets of $910,000 and stockholders' equity of $530,000. Calculate the debt
ratio. (Round your answer to two decimal places.)
A) 36.81%
B) 41.76%
C) 58.24%
D) 71.7%
44) Surround, Inc. provides the following data:
Surround, Inc.
Comparative Balance Sheet
Dec. 31, 2019
Assets
Current Assets:
Cash and Cash Equivalents
$29,000
Account Receivable, Net
31,000
Merchandise Inventory
53,000
Total Current Assets
$113,000
Property, Plant, and Equipment, Net
120,000
Total Assets
$233,000
Liabilities
Current Liabilities:
Accounts Payable
$4300
Notes Payable
2900
Total Current Liabilities
$7200
Long-term Liabilities
90,000
Total Liabilities
$97,200
Stockholders' Equity
Common Stock
$31,000
Retained Earnings
104,800
Total Stockholders' Equity
$135,800
Total Liabilities and Stockholders' Equity
$233,000
Calculate the debt to equity ratio. (Round your answer to two decimal places.)
A) 0.42
B) 0.05
C) 1.16
D) 0.72
45) Milton, Inc. provides the following income statement for 2019:
Net Sales
$240,000
Cost of Goods Sold
110,000
Gross Profit
$130,000
Operating Expenses:
Selling Expenses
45,000
Administrative Expenses
12,000
Total Operating Expenses
57,000
Operating Income
$73,000
Other Income and (Expenses):
Loss on Sale of Capital Assets
(25,000)
Interest Expense
(1000)
Total Other Income and (Expenses)
(26,000)
Income Before Income Taxes
$47,000
Income Tax Expense
5000
Net Income
$42,000
Calculate the times-interest-earned ratio. (Round your answer to two decimal places.)
A) 73.00 times
B) 47.00 times
C) 42.00 times
D) 48.00 times
46) Which of the following statements is true for financial leverage?
A) The asset turnover ratio measures financial leverage.
B) Financial leverage always increases profitability.
C) Financial leverage is measured in the proportion of total assets relative to total equity.
D) The higher the debt to equity ratio, the higher the financial leverage.
47) The relationship between total liabilities and total assets is the ________.
A) debt ratio
B) debt to equity ratio
C) current ratio
D) earnings per share
48) The rate of return on total assets measures a company's success in using its assets to earn a profit.
49) The rate of return on common stockholders' equity shows how much income is earned for each $1 of
total stockholders' equity.
50) Normally, companies with low gross profit percentages will have low asset turnover.
51) The asset turnover ratio is a way to evaluate how well a company can pay its short-term liabilities.
52) A corporation has 2000 shares, 10% preferred stock of $65.00 par preferred stock, and 6000 shares of
common stock outstanding. The net income for the year is $290,000. Calculate earnings per share. (Round
your answer to the nearest cent.)
A) $65.00
B) $46.17
C) $48.33
D) $145.00
53) Pizza, Inc. provides the following data:
2019
2018
Assets
Current Assets:
Cash and Cash Equivalents
$30,000
$25,000
Accounts Receivable, Net
37,000
62,000
Merchandise Inventory
59,000
50,000
Total Current Assets
$126,000
137,000
Property, Plant, and Equipment, Net
$124,000
120,000
Total Assets
$250,000
$257,000
For the year ending December 31, 2019:
Net Credit Sales
$510,000
Cost of Goods Sold
(160,000)
Gross Profit
$350,000
Calculate the asset turnover ratio for 2019. There are no cash sales. (Round your answer to two decimal
places.)
A) 4.05 times
B) 1.01 times
C) 0.64 times
D) 2.01 times
54) The net income of a company for the year was $600,000. The company has no preferred stock.
Common stockholders' equity was $1,200,000 at the beginning of the year and $2,500,000 at the end of the
year. Calculate the rate of return on common stockholders' equity. (Round your answer to two decimal
places.)
A) 24.00%
B) 19.35%
C) 50.00%
D) 32.43%
