1) How does the number of times interest is earned ratio help in evaluating a company’s
financial risk?
2) What type of financial statement matches sales revenue items with related expense
items and distinguishes between recurring operating activities and nonoperating items
such as gains and losses?
3) Renfro Company has two divisions, the Restaurants Division and the Commissary
Division. The following information was gathered for the two divisions in 2012:
Hays Company has set a target return on investment (ROI) of 12% for both divisions.
Restaurants and Commissary are the only divisions of Renfro Company. The company
has $1,000,000 in operating assets that are not assigned to either of the divisions and
$200,000 in corporate expenses that are not reflected in the information above. Based
on this information, what is the ROI for the company as a whole?
4) How is net present value calculated for a capital investment project?
5) For what activities do an organization’s managers need accounting information?
6) Indicate how the event affects the elements of the financial statements. Use the
following letters to record your answer in the box shown below each element:
You do not need to enter amounts.
Howard Corporation paid a $3,000 cash dividend to its stockholders.
7) What ratios and other forms of analysis would you use to examine a company’s
ability to pay its debts in the short term?
8) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts.
Hico Co. received a $5,000 cash advance for services to be provided to a customer in
the future.
9) Dress for Success produces a man’s suit that sells for $200. Although the company’s
production capacity is 3,000 suits per year, only 2,500 suits are currently being
produced and sold. At this level of production, the company incurs the following costs:
BizDress has offered to purchase 500 suits as a one-time special purchase at a price of
$144 per suit.
Required:
Prepare a quantitative analysis that indicates whether the special order should be
accepted.
10) Random Company estimated that its inventory purchases for January and February
2012 would be $600,000 and $700,000, respectively. The company generally pays for
70% of its inventory purchases in the month of purchase because it receives a 2%
discount for timely payment. The remaining 30% of purchases are paid for in the
following month, and there is no discount for these payments. What will be the amount
of cash payments for inventory in February 2012?