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85. The accounts receivable turnover ratio is calculated by dividing:
a. average credit sales by ending accounts receivable.
b. average inventory by beginning accounts receivable.
c. net sales by average accounts receivable.
d. net profit by total accounts receivable.
86. Nickel Store had net credit sales of $15,000,000 and cost of goods sold of $5,000,000 for the year. The Accounts
Receivable balances at the beginning and end of the year were $875,000 and $375,000 respectively. The accounts
receivable turnover ratio was:
a. 15 times.
b. 10 times.
c. 11 times.
d. 24 times.
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87. The Grand Department Store had net credit sales of $12,000,000 and cost of goods sold of $8,000,000 for the year.
The average inventory for the year amounted to $1,600,000.
The inventory turnover ratio for the year is
a. 4.0 times.
b. 7.2 times.
c. 5.0 times.
d. 2.5 times.
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88. A company has an account receivable turnover ratio of 4. The average accounts receivable during the period is
$200,000. What is the amount of net sales for the period?
a. $220,000
b. $800,000
c. $520,000
d. $740,000
89. If the accounts receivable turnover is 42 days, what is the account receivable turnover ratio (assuming a 365 day
year)?
a. 7.14 times
b. 8.69 times
c. 4.52 times
d. None of these
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90. Dartmouth Company has a quick ratio of 2.5 to 1. It has current liabilities of $40,000 and noncurrent assets of
$70,000. If Dartmouth’s current ratio is 3.1 to 1, its inventory and prepaid expenses must be:
a. $12,400.
b. $24,000.
c. $30,000.
91. Emerald Company has $20,000 in cash, $10,000 in marketable securities, $40,000 in accounts receivables, $45,000 in
inventories, and $50,000 in current liabilities. The company’s quick ratio is closest to:
a. 1.20.
b. 1.40.
c. 2.35.
d. 0.60.
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92. Chromel Company has $36,000 in cash, $12,000 in marketable securities, $40,000 in accounts receivables, $25,000 in
inventories, and $80,000 in current liabilities. The company’s quick ratio is closest to:
a. 1.10.
b. 2.45.
c. 0.25.
d. 3.12.
93. Phillips Company had $300,000 in sales on account last year. The beginning accounts receivable balance was $25,000
and the ending accounts receivable balance was $18,000. The company’s accounts receivable turnover ratio was closest to
a. 16.67.
b. 12.00.
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c. 3.85.
d. 13.95.
94. Last year, Manganese Company’s net sales was $420,000. The beginning accounts receivable balance was $25,000
and the ending accounts receivable balance was $35,000. The company’s accounts receivable turnover ratio was closest to:
a. 10.
b. 28.
c. 14.
d. 31.
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95. Last year, Amber Company’s net sales was $800,000. The beginning accounts receivable balance was $20,000, and the
ending accounts receivable balance was $30,000. The company’s accounts receivable turnover ratio was closest to:
a. 32.
b. 11.
c. 24.
d. 46.
96. Kringle Company, a retailer, had cost of goods sold of $1,400,000 last year. The beginning inventory balance was
$125,000 and the ending inventory balance was $142,000. The company’s inventory turnover ratio was closest to
a. 10.49.
b. 5.24.
c. 11.20.
d. 9.86.
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97. Lost Shoe Company, a retailer, had cost of goods sold of $220,000 last year. The beginning inventory balance was
$30,000 and the ending inventory balance was $21,000. The company’s inventory turnover ratio was closest to
a. 10.48.
b. 7.33.
c. 4.31.
d. 8.63.
98. Jackson Company, a retailer, had cost of goods sold of $140,000 last year. The beginning inventory balance was
$8,000 and the ending inventory balance was $11,000. The company’s inventory turnover ratio was closest to
a. 12.73.
b. 14.74.
c. 7.37.
d. 17.50.
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99. Lisa’s Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was
$13,000 and the ending inventory balance was $18,000. The company’s average inventory turnover in days was closest to
a. 36.50 days.
b. 26.36 days.
c. 31.44 days.
d. 62.86 days.
100. Mike’s Sportswear Company, a retailer, had cost of goods sold of $420,000 last year. The beginning inventory
balance was $31,000 and the ending inventory balance was $28,000. The company’s average inventory turnover in days
was closest to
a. 25.63 days.
b. 51.27 days.
c. 26.94 days.
d. 24.33 days.
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101. The following information pertains to Barkley Company:
Merchandise purchased $1,800,000
Cost of goods sold $2,000,000
Inventory at the end of the year $ 400,000
The inventory turnover ratio for the year was
a. 10.
b. 5.
c. 4.
d. 3.6.
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102. A liquidity ratio measures the
a. income or operating success of an enterprise over a period of time.
b. ability of the enterprise to survive over a long period of time.
c. short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash.
d. number of times interest is earned.
103. Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year. The
Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The
accounts receivables turnover was
a. 7.4 times.
b. 8.7 times.
c. 6.2 times.
d. 8 times.
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104. The current assets of Caitlin Company are $360,000. The current liabilities are $240,000. The current ratio is
a. 1.25.
b. 1.50.
c. 0.67.
d. cannot be determined from the information provided.
105. If a company has an acid-test ratio of 1.2, what respective effects will the borrowing of cash by short-term debt and
the collection of accounts receivable have on the ratio?
Short-term Collection of
Borrowing Receivable
a. Increase No effect
b. Increase Increase
c. Decrease No effect
d. Decrease Decrease
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106. A company has a receivables turnover of 15 times. The average net receivables during the period are $430,000. What
is the amount of net credit sales for the period?
a. $430,000
b. $6,450,000
c. $6,000,000
d. $500,000
107. A company has an average inventory on hand of $100,000 and the days in inventory are 73 days. What is the cost of
goods sold?
a. $500,000
b. $7,300,000
c. $1,000,000
d. $3,650,000
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108. The debt ratio of a company is an example of a _____.
a. turnover ratio
b. liquidity ratio
c. profitability ratio
d. leverage ratio
109. Grant Company reported the following on its income statement:
Income before income taxes $420,000
Income tax expense 120,000
Net income $300,000
An analysis of the income statement revealed that interest expense was $60,000. Grant Company’s times-interest-earned
ratio was
a. 8.
b. 7.
c. 6.
d. 5.
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110. Last year, Nickel Company had a net income of $150,000, income tax expense of $30,000, and interest expense of
$20,000. The company’s times-interest-earned ratio was closest to:
a. 33 times.
b. 17 times.
c. 10 times.
d. 22 times.
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111. Last year, Copper Company had a net income of $500,000, income tax expense of $60,000, and interest expense of
$40,000. The company’s times-interest-earned ratio was closest to:
a. 10 times.
b. 22 times.
c. 15 times.
d. 30 times.
112. Cottle Company has total assets of $180,000 and total liabilities of $54,000. The company’s debt-to-equity ratio is
closest to
a. 0.32.
b. 2.3.
c. 0.30.
d. 0.43.
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113. Opal Company has total assets of $600,000 and total liabilities of $200,000. The company’s debt-to-equity ratio is
closest to:
a. 0.35.
b. 0.15.
c. 0.50.
d. 0.20.
114. Citrine Company reported the following on its income statement:
Income before income taxes $500,000
Income tax expense 100,000
Net income $400,000
An analysis of the income statement revealed that interest expense was $50,000. Citrine Company’s times-interest-earned
ratio was:
a. 11.
b. 5.
c. 18.
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d. 9.
115. Refer to the information from the financial statements of Topaz Corp. for Year 2 and Year 1.
Year 2 Year 1
Net income $200,000 $130,000
Cash dividends paid on preferred stock $20,000 $21,000
Cash dividends paid on common stock $30,000 $28,000
Weighted average number of common shares outstanding $120,000 $100,000
Earnings per share is reported on the Year 2 income statement as:
a. $ 0.32.
b. $ 0.40.
c. $1.50.
d. $1.80.
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116. Presented below are selected data from the financial statements of Korn Corp. for Year 2 and Year 1.
Year 2 Year 1
Net income $100,000 $123,000
Weighted average number of common shares outstanding 105,000 95,000
Market price per share of common stock at the end of the year $12.00 $10.00
Earnings per share $ 2.00 $ 1.83
The price-earnings ratio for Year 2 is
a. 1.09.
b. 5.46.
c. 6.0.
d. 11.0.
117. Refer to the information from the financial statements of DeBruce Corp. for Year 2 and Year 1.
Year 2 Year 1
Net income $110,000 $123,000
Cash dividends paid on common stock 42,000 38,000
Market price per share of common stock at the end of the year 16.00 13.00
Earnings per share 0.84 0.74
Shares of common stock outstanding 140,000 100,000
The dividend payout ratio for Year 2 is:
a. 0.382.
b. 0.05.
c. 0.28.
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d. 0.50.
118. Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in Year 1.
The weighted average number of shares outstanding in Year 1 was 50,000 shares. Starbuck Corporation’s common stock
is selling for $40 per share on the New York Stock Exchange.
Starbuck‘s price-earnings ratio is:
a. 2.
b. 5.
c. 10.
d. 8.