Version 1 1
Student name:__________
1) Excerpts from Candle Corporation’s most recent balance sheet (in thousands of dollars)
appear below:
Year 2 Year 1
Current assets:
Cash $ 170 $ 100
Accounts receivable, net 200 200
Inventory 150 140
Prepaid expenses 100 100
Total current assets $ 620 $ 540
Current liabilities:
Accounts payable $ 210 $ 190
Accrued liabilities 40 40
Notes payable, short term 100 90
Total current liabilities $ 350 $ 320
Sales on account during the year totaled $1,250 thousand. Cost of goods sold was $850
thousand.
Required:
Compute the following for Year 2:
a. Working capital.
b. Current ratio.
c. Acid-test (quick) ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
2) Hyrkas Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
Version 1 2
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 230 $ 350
Accounts receivable, net 380 400
Inventory 350 320
Prepaid expenses 20 20
Total current assets 980 1,090
Plant and equipment, net 1,240 1,380
Total assets $ 2,220 $ 2,470
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 320 $ 350
Accrued liabilities 50 50
Notes payable, short term 40 40
Total current liabilities 410 440
Bonds payable 310 540
Total liabilities 720 980
Stockholders’ equity:
Common stock, $2 par value 200 200
Additional paid-in capital 330 330
Retained earnings 970 960
Total stockholders’ equity 1,500 1,490
Total liabilities & stockholders’ equity $ 2,220 $ 2,470
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,580
Cost of goods sold 1,010
Gross margin 570
Selling and administrative expense 495
Net operating income 75
Interest expense 20
Net income before taxes 55
Income taxes (30%) 17
Net income $ 38
Version 1 3
Dividends on common stock during Year 2 totaled $28 thousand. The market price of common
stock at the end of Year 2 was $8.10 per share.
Required:
Compute the following for Year 2: 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 (quick) ratio.
l. Accounts receivable turnover. m. Average collection period.
n. Inventory turnover. o. Average sale period.
p. Times interest earned ratio. q. Debt-to-equity ratio.
3) Degollado Corporation’s most recent income statement appears below:
Income Statement
For the Year Ended December 31
Sales (all on account) $ 145,000
Cost of goods sold 65,000
Gross margin 80,000
Selling and administrative expenses 36,000
Net operating income 44,000
Interest expense 15,000
Net income before taxes 29,000
Income taxes (30%) 8,700
Net income $ 20,300
The beginning balance of total assets was $205,000 and the ending balance was $225,000.
Required:
Compute the return on total assets.
Version 1 4
4) 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!
5) Gremel Corporation has provided the following financial data:
Current assets:
Cash $ 241,000
Accounts receivable, net $ 234,000
Inventory $ 119,000
Prepaid expenses $ 45,000
Total current assets $ 639,000
Current liabilities:
Accounts payable $ 163,000
Accrued liabilities $ 87,000
Notes payable, short term $ 57,000
Total current liabilities $ 307,000
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?
Version 1 5
6) Steinkraus Corporation has provided the following data:
This Year Last Year
Accounts receivable, net $ 104,000 $ 115,000
Inventory $ 195,000 $ 174,000
Sales on account $ 886,000
Cost of goods sold $ 622,000
Required:
Compute the accounts receivable turnover for this year. Show your work!
7) 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!
8) Wowk Corporation has provided the following financial data:
Assets
Version 1 6
Current assets:
Cash $ 133,000
Accounts receivable, net 157,000
Inventory 215,000
Prepaid expenses 24,000
Total current assets 529,000
Plant and equipment, net 768,000
Total assets $ 1,297,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 95,000
Accrued liabilities 18,000
Notes payable, short term 90,000
Total current liabilities 203,000
Bonds payable 110,000
Total liabilities 313,000
Stockholders’ equity:
Common stock, $4 par value 200,000
Additional paid-in capital 80,000
Retained earnings 704,000
Total stockholders’ equity 984,000
Total liabilities & stockholders’ equity $ 1,297,000
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?
9) Data from Yochem Corporation’s most recent balance sheet appear below:
Cash $ 16,000
Marketable securities $ 24,000
Accounts receivable, net $ 39,000
Inventory $ 53,000
Prepaid expenses $ 11,000
Version 1 7
Current liabilities $ 109,000
Required:
Compute the company’s acid-test (quick) ratio. Show your work!
10) Excerpts from Candle Corporation’s most recent balance sheet (in thousands of dollars)
appear below:
Year 2 Year 1
Current assets:
Cash $ 160 $ 100
Accounts receivable, net 190 190
Inventory 140 130
Prepaid expenses 90 90
Total current assets $ 580 $ 510
Current liabilities:
Accounts payable $ 200 $ 180
Accrued liabilities 30 30
Notes payable, short term 90 80
Total current liabilities $ 320 $ 290
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 (quick) ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
Version 1 8
11) Wegener Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 90 $ 110
Accounts receivable, net 220 270
Inventory 130 150
Prepaid expenses 70 80
Total current assets 510 610
Plant and equipment, net 1,000 920
Total assets $ 1,510 $ 1,530
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 90 $ 110
Accrued liabilities 60 60
Notes payable, short term 50 60
Total current liabilities 200 230
Bonds payable 130 140
Total liabilities 330 370
Stockholders’ equity:
Common stock, $1 par value 400 400
Additional paid-in capital 240 240
Retained earnings 540 520
Total stockholders’ equity 1,180 1,160
Total liabilities & stockholders’ equity $ 1,510 $ 1,530
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,400
Cost of goods sold 860
Gross margin 540
Selling and administrative expense 450
Net operating income 90
Interest expense 19
Net income before taxes 71
Version 1 9
Income taxes (30%) 21
Net income $ 50
Required:
Compute the following for Year 2:
a. Working capital.
b. Current ratio.
c. Acid-test (quick) ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
12) Abdool Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 190,000 $ 190,000
Accounts receivable, net 197,000 200,000
Inventory 232,000 200,000
Prepaid expenses 9,000 10,000
Total current assets 628,000 600,000
Plant and equipment, net 695,000 700,000
Total assets $ 1,323,000 $ 1,300,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 206,000 $ 200,000
Accrued liabilities 104,000 90,000
Notes payable, short term 41,000 50,000
Total current liabilities 351,000 340,000
Bonds payable 130,000 130,000
Total liabilities 481,000 470,000
Version 1 10
Stockholders’ equity:
Common stock, $2 par value 160,000 160,000
Additional paid-in capital 70,000 70,000
Retained earnings 612,000 600,000
Total stockholders’ equity 842,000 830,000
Total liabilities & stockholders’ equity $ 1,323,000 $
1,300,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,330,000
Cost of goods sold 740,000
Gross margin 590,000
Operating expenses 555,000
Net operating income 35,000
Interest expense 11,000
Net income before taxes 24,000
Income taxes (30%) 7,200
Net income $ 16,800
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 for Year 2?
f. What is the company’s inventory turnover for Year 2?
g. What is the company’s average sale period 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?
13) Financial statements for Rardin Corporation appear below:
Rardin Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Version 1 11
Year 2 Year 1
Current assets:
Cash and marketable securities $ 160 $ 160
Accounts receivable, net 180 160
Inventory 160 180
Prepaid expenses 80 70
Total current assets 580 570
Noncurrent assets:
Plant & equipment, net 1,180 1,110
Total assets $ 1,760 $ 1,680
Current liabilities:
Accounts payable $ 130 $ 140
Accrued liabilities 40 60
Notes payable, short term 290 280
Total current liabilities 460 480
Noncurrent liabilities:
Bonds payable 260 300
Total liabilities 720 780
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 250 250
Retained earnings 630 490
Total stockholders’ equity 1,040 900
Total liabilities & stockholders’ equity $ 1,760 $ 1,680
Rardin Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,900
Cost of goods sold 1,330
Gross margin 570
Selling and administrative expense 220
Net operating income 350
Interest expense 30
Net income before taxes 320
Income taxes (30%) 96
Net income $ 224
Version 1 12
Required:
Compute the following for Year 2:
a. Current ratio.
b. Acid-test (quick) ratio.
c. Average collection period.
d. Inventory turnover.
e. Times interest earned ratio.
f. Debt-to-equity ratio.
14) Mondok Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 139,000 $ 140,000
Accounts receivable, net 222,000 230,000
Inventory 109,000 120,000
Prepaid expenses 68,000 70,000
Total current assets 538,000 560,000
Plant and equipment, net 857,000 800,000
Total assets $ 1,395,000 $ 1,360,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 186,000 $ 180,000
Accrued liabilities 34,000 30,000
Notes payable, short term 64,000 60,000
Total current liabilities 284,000 270,000
Bonds payable 130,000 130,000
Total liabilities 414,000 400,000
Stockholders’ equity:
Common stock, $2 par value 100,000 100,000
Additional paid-in capital 90,000 90,000
Version 1 13
Retained earnings 791,000 770,000
Total stockholders’ equity 981,000 960,000
Total liabilities & stockholders’ equity $ 1,395,000 $
1,360,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,280,000
Cost of goods sold 840,000
Gross margin 440,000
Operating expenses 387,231
Net operating income 52,769
Interest expense 12,000
Net income before taxes 40,769
Income taxes (35%) 14,269
Net income $ 26,500
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 for Year 2?
f. What is the company’s inventory turnover for Year 2?
g. What is the company’s average sale period 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?
j. What is the company’s times interest earned ratio 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?
Version 1 14
15) Two-Rivers Incorporated (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 Two-Rivers Incorporated (TRI). To evaluate its financial stability,Two-Rivers
Incorporated(TRI) was requested to provide its latest financial statements and selected financial
ratios. Summary information provided byTwo-Rivers Incorporated(TRI) is presented below.
Two-Rivers Incorporated (TRI)
Statement of Income
For the Year Ended November 30, Year 2
(In thousands)
Sales (net) $ 31,000
Costs and expenses:
Cost of goods sold 17,600
Selling and administrative expense 3,550
Depreciation and amortization expense 1,890
Interest expense 900
Total costs and expenses 23,940
Income before taxes 7,060
Income taxes 2,900
Net income $ 4,160
Two-Rivers Incorporated (TRI)
Balance Sheet
As of November 30
(in thousands)
Year 2 Year 1
Cash $ 400 $ 500
Marketable securities 500 200
Accounts receivable, net 3,200 2,900
Inventory 5,800 5,400
Total current assets 9,900 9,000
Property, plant, & equipment, net 7,100 7,000
Total assets $ 17,000 $ 16,000
Accounts payable $ 3,700 $ 3,400
Income taxes payable 900 800
Accrued expenses 1,700 1,400
Total current liabilities 6,300 5,600
Long-term debt 2,000 1,800
Total liabilities 8,300 7,400
Common stock, $1 par value 2,700 2,700
Additional paid-in capital 1,000 1,000
Retained earnings 5,000 4,900
Total stockholders’ equity 8,700 8,600
Total liabilities and stockholders’ equity $ 17,000 $ 16,000
Selected Financial Ratios
Version 1 15
Two-Rivers Incorporated (TRI) Year 1 Two-Rivers Incorporated
(TRI) Year 0 Industry Average
Current ratio 1.62 1.61 1.63
Acid-test (quick) ratio 0.63 0.64 0.68
Times interest earned ratio 8.50 8.55 8.45
Debt to equity ratio 1.02 0.94 1.03
Inventory turnover 3.21 3.17 3.18
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 Two-Rivers
Incorporated’s(TRI’s) financial stability and operating efficiency.
16) Financial statements for Praeger Corporation appear below:
Praeger Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 100 $ 100
Accounts receivable, net 170 170
Inventory 110 110
Prepaid expenses 60 60
Total current assets 440 440
Noncurrent assets:
Plant & equipment, net 2,020 1,990
Total assets $ 2,460 $ 2,430
Current liabilities:
Accounts payable $ 140 $ 170
Accrued liabilities 70 50
Notes payable, short term 100 120
Total current liabilities 310 340
Noncurrent liabilities:
Bonds payable 500 500
Version 1 16
Total liabilities 810 840
Stockholders’ equity:
Common stock, $5 par 200 200
Additional paid-in capital 300 300
Retained earnings 1,150 1,090
Total stockholders’ equity 1,650 1,590
Total liabilities & stockholders’ equity $ 2,460 $ 2,430
Praeger Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,100
Cost of goods sold 770
Gross margin 330
Selling and administrative expense 130
Net operating income 200
Interest expense 50
Net income before taxes 150
Income taxes (30%) 45
Net income $ 105
Dividends during Year 2 totaled $45 thousand. The market price of a share of common stock on
December 31, Year 2 was $30.
Required:
Compute the following for Year 2:
a. Return on total assets.
b. Working capital.
c. Current ratio.
d. Acid-test (quick) ratio.
e. Accounts receivable turnover.
f. Average collection period.
g. Inventory turnover.
h. Average sale period.
i. Times interest earned ratio.
j. Debt-to-equity ratio.
Version 1 17
17) Kaloi Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 205,000 $ 190,000
Accounts receivable, net 192,000 200,000
Inventory 118,000 130,000
Prepaid expenses 41,000 40,000
Total current assets 556,000 560,000
Plant and equipment, net 813,000 770,000
Total assets $ 1,369,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 115,000 $ 100,000
Accrued liabilities 27,000 30,000
Notes payable, short term 55,000 60,000
Total current liabilities 197,000 190,000
Bonds payable 130,000 130,000
Total liabilities 327,000 320,000
Stockholders’ equity:
Common stock, $2 par value 100,000 100,000
Additional paid-in capital 60,000 60,000
Retained earnings 882,000 850,000
Total stockholders’ equity 1,042,000 1,010,000
Total liabilities & stockholders’ equity $ 1,369,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 830,000
Gross margin 540,000
Operating expenses 478,286
Net operating income 61,714
Interest expense 11,000
Net income before taxes 50,714
Income taxes (30%) 15,214
Net income $ 35,500
Version 1 18
Dividends on common stock during Year 2 totaled $3,500. The market price of common stock at
the end of Year 2 was $7.46 per share.
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 for Year 2?
f. What is the company’s inventory turnover for Year 2?
g. What is the company’s average sale period 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?
j. What is the company’s times interest earned ratio 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?
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?
18) Hyrkas Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 150 $ 190
Accounts receivable, net 220 240
Inventory 190 160
Prepaid expenses 20 20
Total current assets 580 610
Version 1 19
Plant and equipment, net 760 740
Total assets $ 1,340 $ 1,350
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 160 $ 190
Accrued liabilities 50 50
Notes payable, short term 40 40
Total current liabilities 250 280
Bonds payable 150 180
Total liabilities 400 460
Stockholders’ equity:
Common stock, $2 par value 200 200
Additional paid-in capital 330 330
Retained earnings 410 360
Total stockholders’ equity 940 890
Total liabilities & stockholders’ equity $ 1,340 $ 1,350
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,200
Cost of goods sold 730
Gross margin 470
Selling and administrative expense 335
Net operating income 135
Interest expense 21
Net income before taxes 114
Income taxes (30%) 34
Net income $ 80
Version 1 20
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:
Compute the following for Year 2:
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 (quick) ratio.
l. Accounts receivable turnover.
m. Average collection period.
n. Inventory turnover.
o. Average sale period.
p. Times interest earned ratio.
q. Debt-to-equity ratio.
19) Kisselburg Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 243,000 $ 180,000
Accounts receivable, net 123,000 120,000
Inventory 106,000 110,000
Prepaid expenses 41,000 50,000
Total current assets 513,000 460,000
Version 1 21
Plant and equipment, net 663,000 700,000
Total assets $ 1,176,000 $ 1,160,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 96,000 $ 110,000
Accrued liabilities 44,000 50,000
Notes payable, short term 93,000 90,000
Total current liabilities 233,000 250,000
Bonds payable 260,000 260,000
Total liabilities 493,000 510,000
Stockholders’ equity:
Common stock, $2 par value 160,000 160,000
Additional paid-in capital 50,000 50,000
Retained earnings 473,000 440,000
Total stockholders’ equity 683,000 650,000
Total liabilities & stockholders’ equity $ 1,176,000 $
1,160,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,360,000
Cost of goods sold 800,000
Gross margin 560,000
Operating expenses 482,077
Net operating income 77,923
Interest expense 21,000
Net income before taxes 56,923
Income taxes (35%) 19,923
Net income $ 37,000
Version 1 22
Dividends on common stock during Year 2 totaled $4,000. The market price of common stock at
the end of Year 2 was $5.75 per share.
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 for Year 2?
f. What is the company’s inventory turnover for Year 2?
g. What is the company’s average sale period 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?
j. What is the company’s times interest earned ratio 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?
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?
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?
20) M. K. Berry is the managing director of CE Limited. 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:
Average for all companies in the industry
Return on equity 33%
Version 1 23
Return on total assets 29%
Gross margin percentage 30%
Current ratio 1.9:1
Average sale period 37 days
Average collection period 41 days
CE Limited’s latest financial statements are as follows:
CE Limited
Income Statement
for the year ended 31 October
(in thousands)
Sales $ 900
Cost of goods sold 720
Gross margin 180
Selling and administrative expenses 55
Interest 15
Net income $ 110
The country in which the company operates has no corporate income tax. No dividends were
paid during the year. All sales are on account.
CE Limited
Balance Sheets
as of 31 October
(in thousands)
This Year Last Year
Current assets:
Cash $ 5 $ 20
Accounts receivable, net 120 110
Inventories 96 80
Noncurrent assets 500 460
Total assets $ 721 $ 670
Current liabilities:
Accounts payable $ 147 $ 206
Noncurrent liabilities:
Bonds payable 150 150
Common stock 100 100
Retained earnings 324 214
Total liabilities and stockholders’ equity $ 721 $ 670
Version 1 24
Required:
a. Calculate each of the ratios listed in the magazine article for this year for CE, and comment
briefly on CE Limited’s performance in comparison to the industrial averages.
b. Explain why it could be misleading to compare CE Limited’s ratios with those taken from
the article.
21) Neiger Corporation has provided the following financial data:
Balance Sheet
Year 2 Year 1
Assets
Current assets:
Cash $ 216,000 $ 160,000
Accounts receivable, net 131,000 120,000
Inventory 104,000 120,000
Prepaid expenses 12,000 10,000
Total current assets 463,000 410,000
Plant and equipment, net 858,000 870,000
Total assets $ 1,321,000 $ 1,280,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 109,000 $ 100,000
Accrued liabilities 59,000 60,000
Notes payable, short term 58,000 60,000
Total current liabilities 226,000 220,000
Bonds payable 120,000 120,000
Total liabilities 346,000 340,000
Stockholders’ equity:
Common stock, $2 par value 100,000 100,000
Additional paid-in capital 60,000 60,000
Retained earnings 815,000 780,000
Total stockholders’ equity 975,000 940,000
Total liabilities & stockholders’ equity $ 1,321,000 $
1,280,000
Version 1 25
Income Statement
Sales (all on account) $ 1,320,000
Cost of goods sold 750,000
Gross margin 570,000
Operating expenses 507,571
Net operating income 62,429
Interest expense 11,000
Net income before taxes 51,429
Income taxes (30%) 15,429
Net income $ 36,000
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 times interest earned ratio 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?
22) Walker Corporation has provided the following financial data:
Year 2 Year 1
Current assets:
Cash $ 195,000 $ 150,000
Accounts receivable, net 186,000 180,000
Inventory 165,000 170,000
Prepaid expenses 29,000 30,000
Total current assets $ 575,000 $ 530,000
Total current liabilities $ 254,000 $ 270,000
Total liabilities $ 434,000 $ 450,000
Total stockholders’ equity $ 988,000 $ 960,000
Version 1 26
The company’s net operating income for Year 2 was $63,615 and its interest expense was
$15,000.
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 times interest earned ratio 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?
23) Data from Ben Corporation’s most recent balance sheet and income statement appear
below:
This Year Last Year
Accounts receivable, net $ 104,000 $ 124,000
Inventory $ 159,000 $ 188,000
Sales on account $ 825,000
Cost of goods sold $ 660,000
Required:
Compute the average sale period for this year:
24) Dilisio Corporation has provided the following data:
This Year Last Year
Accounts receivable, net $ 126,000 $ 116,000
Inventory $ 226,000 $ 194,000
Sales on account $ 659,000
Version 1 27
Cost of goods sold $ 417,000
Required:
Compute the inventory turnover for this year:
25) Hagle Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 279,000 $ 170,000
Accounts receivable, net 136,000 150,000
Inventory 141,000 150,000
Prepaid expenses 69,000 60,000
Total current assets 625,000 530,000
Plant and equipment, net 789,000 870,000
Total assets $ 1,414,000 $ 1,400,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 186,000 $ 190,000
Accrued liabilities 29,000 30,000
Notes payable, short term 74,000 70,000
Total current liabilities 289,000 290,000
Bonds payable 130,000 130,000
Total liabilities 419,000 420,000
Stockholders’ equity:
Common stock, $4 par value 200,000 200,000
Additional paid-in capital 90,000 90,000
Retained earnings 705,000 690,000
Total stockholders’ equity 995,000 980,000
Total liabilities & stockholders’ equity $ 1,414,000 $
1,400,000
Version 1 28
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,280,000
Cost of goods sold 750,000
Gross margin 530,000
Operating expenses 489,429
Net operating income 40,571
Interest expense 12,000
Net income before taxes 28,571
Income taxes (30%) 8,571
Net income $ 20,000
Required:
a. What is the company’s accounts receivable turnover for Year 2?
b. What is the company’s average collection period for Year 2?
c. What is the company’s inventory turnover for Year 2?
d. What is the company’s average sale period 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?
26) Data from Dalpiaz Corporation’s most recent balance sheet and income statement appear
below:
This Year Last Year
Accounts receivable, net $ 104,000 $ 114,000
Inventory $ 157,000 $ 165,000
Sales on account $ 647,000
Cost of goods sold $ 438,000
Required:
Compute the average collection period for this year:
Version 1 29
27) Kestner Corporation has provided the following financial data:
Year 2 Year 1
Accounts receivable, net $ 195,000 $ 200,000
Inventory $ 97,000 $ 100,000
Total assets $ 1,432,000 $ 1,410,000
Sales (all on account) $ 1,360,000
Cost of goods sold $ 870,000
Required:
a. What is the company’s accounts receivable turnover for Year 2?
b. What is the company’s average collection period for Year 2?
c. What is the company’s inventory turnover for Year 2?
d. What is the company’s average sale period 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?
28) 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:
Compute the following for Year 2:
a. Times interest earned ratio.
b. Debt-to-equity ratio.
Version 1 30
29) Fraction Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,447,000 $ 1,430,000
Total liabilities $ 310,000 $ 310,000
Total stockholders’ equity $ 1,137,000 $ 1,120,000
Net operating income $ 38,571
Interest expense $ 10,000
Required:
a. What is the company’s times interest earned ratio 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?
30) Babbitt Corporation has provided the following data from its most recent income
statement:
Net operating income $ 94,000
Interest expense $ 62,000
Net income before taxes $ 32,000
Income taxes $ 10,000
Net income $ 22,000
Required:
Compute the times interest earned ratio. Show your work!
31) Gambino Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Version 1 31
Assets
Current assets:
Cash $ 139,000 $ 190,000
Accounts receivable, net 206,000 180,000
Inventory 103,000 100,000
Prepaid expenses 95,000 90,000
Total current assets 543,000 560,000
Plant and equipment, net 999,000 970,000
Total assets $ 1,542,000 $ 1,530,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 109,000 $ 120,000
Accrued liabilities 44,000 50,000
Notes payable, short term 65,000 60,000
Total current liabilities 218,000 230,000
Bonds payable 220,000 220,000
Total liabilities 438,000 450,000
Stockholders’ equity:
Common stock, $5 par value 350,000 350,000
Additional paid-in capital 60,000 60,000
Retained earnings 694,000 670,000
Total stockholders’ equity 1,104,000 1,080,000
Total liabilities & stockholders’ equity $ 1,542,000 $
1,530,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 860,000
Gross margin 510,000
Operating expenses 445,308
Net operating income 64,692
Interest expense 17,000
Net income before taxes 47,692
Income taxes (35%) 16,692
Net income $ 31,000
Required:
a. What is the company’s times interest earned ratio 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?
Version 1 32
32) Sidell Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 180 $ 100
Accounts receivable, net 220 200
Inventory 180 200
Prepaid expenses 20 20
Total current assets 600 520
Plant and equipment, net 660 720
Total assets $ 1,260 $ 1,240
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 130
Accrued liabilities 20 20
Notes payable, short term 100 90
Total current liabilities 250 240
Bonds payable 180 200
Total liabilities 430 440
Stockholders’ equity:
Common stock, $1 par value 200 200
Additional paid-in capital 300 300
Retained earnings 330 300
Total stockholders’ equity 830 800
Total liabilities & stockholders’ equity $ 1,260 $ 1,240
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,230
Version 1 33
Cost of goods sold 780
Gross margin 450
Operating expenses 235
Net operating income 215
Interest expense 29
Net income before taxes 186
Income taxes (30%) 56
Net income $ 130
Required:
Compute the following for Year 2:
a. Times interest earned ratio.
b. Debt-to-equity ratio.
33) Lindboe Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 190,000 $ 190,000
Accounts receivable, net 225,000 210,000
Inventory 172,000 190,000
Prepaid expenses 83,000 70,000
Total current assets 670,000 660,000
Plant and equipment, net 877,000 870,000
Total assets $ 1,547,000 $ 1,530,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 176,000 $ 180,000
Accrued liabilities 25,000 30,000
Notes payable, short term 36,000 40,000
Total current liabilities 237,000 250,000
Bonds payable 160,000 160,000
Total liabilities 397,000 410,000
Version 1 34
Stockholders’ equity:
Common stock, $2 par value 160,000 160,000
Additional paid-in capital 100,000 100,000
Retained earnings 890,000 860,000
Total stockholders’ equity 1,150,000 1,120,000
Total liabilities & stockholders’ equity $ 1,547,000 $
1,530,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,220,000
Cost of goods sold 700,000
Gross margin 520,000
Operating expenses 458,286
Net operating income 61,714
Interest expense 12,000
Net income before taxes 49,714
Income taxes (30%) 14,914
Net income $ 34,800
Dividends on common stock during Year 2 totaled $4,800. The market price of common stock at
the end of Year 2 was $5.46 per share.
Required:
a. What is the company’s times interest earned ratio 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?
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?
34) Schepp Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,320,000 $ 1,290,000
Total liabilities $ 468,000 $ 450,000
Total stockholders’ equity $ 852,000 $ 840,000
Income Statement
Version 1 35
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,440,000
Cost of goods sold 880,000
Gross margin 560,000
Operating expenses 527,857
Net operating income 32,143
Interest expense 10,000
Net income before taxes 22,143
Income taxes (30%) 6,643
Net income $ 15,500
Required:
a. What is the company’s times interest earned ratio 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?
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?
35) Brill Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,360,000 $ 1,320,000
Total liabilities $ 601,000 $ 570,000
Common stock, $2 par value $ 140,000 $ 140,000
Total common stockholders’ equity $ 759,000 $ 750,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,300,000
Cost of goods sold 900,000
Gross margin 400,000
Operating expenses 364,143
Net operating income 35,857
Interest expense 20,000
Net income before taxes 15,857
Income taxes (30%) 4,757
Net income $ 11,100
Version 1 36
Dividends on common stock during Year 2 totaled $2,100. The market price of common stock at
the end of Year 2 was $2.32 per share.
Required:
a. What is the company’s times interest earned ratio 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?
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?
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?
36) Jaquez Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,466,000 $ 1,460,000
Total liabilities $ 573,000 $ 590,000
Stockholders’ equity:
Common stock, $3 par value $ 300,000 $ 300,000
Additional paid-in capital 60,000 60,000
Retained earnings 533,000 510,000
Total stockholders’ equity $ 893,000 $ 870,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,450,000
Cost of goods sold 850,000
Gross margin 600,000
Operating expenses 530,231
Net operating income 69,769
Interest expense 19,000
Net income before taxes 50,769
Version 1 37
Income taxes (35%) 17,769
Net income $ 33,000
Dividends on common stock during Year 2 totaled $10,000. The market price of common stock
at the end of Year 2 was $5.45 per share.
Required:
a. What is the company’s times interest earned ratio 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?
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?
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?
37) Medina Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 271,000 $ 190,000
Accounts receivable, net 215,000 190,000
Inventory 117,000 100,000
Prepaid expenses 25,000 30,000
Total current assets 628,000 510,000
Plant and equipment, net 726,000 800,000
Total assets $ 1,354,000 $ 1,310,000
Liabilities and Stockholders’ Equity
Version 1 38
Current liabilities:
Accounts payable $ 198,000 $ 170,000
Accrued liabilities 58,000 60,000
Notes payable, short term 102,000 90,000
Total current liabilities 358,000 320,000
Bonds payable 140,000 140,000
Total liabilities 498,000 460,000
Stockholders’ equity:
Common stock, $5 par value 500,000 500,000
Additional paid-in capital 80,000 80,000
Retained earnings 276,000 270,000
Total stockholders’ equity 856,000 850,000
Total liabilities & stockholders’ equity $ 1,354,000 $
1,310,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,280,000
Cost of goods sold 840,000
Gross margin 440,000
Operating expenses 413,692
Net operating income 26,308
Interest expense 14,000
Net income before taxes 12,308
Income taxes (35%) 4,308
Net income $ 8,000
Dividends on common stock during Year 2 totaled $2,000. The market price of common stock at
the end of Year 2 was $1.49 per share.
Required:
a. What is the company’s times interest earned ratio 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?
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?
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?
Version 1 39
38) Tobia Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 201,000 $ 110,000
Accounts receivable, net 236,000 200,000
Inventory 158,000 190,000
Prepaid expenses 96,000 90,000
Total current assets 691,000 590,000
Plant and equipment, net 842,000 920,000
Total assets $ 1,533,000 $ 1,510,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 173,000 $ 150,000
Accrued liabilities 36,000 40,000
Notes payable, short term 88,000 90,000
Total current liabilities 297,000 280,000
Bonds payable 170,000 170,000
Total liabilities 467,000 450,000
Stockholders’ equity:
Common stock, $3 par value 210,000 210,000
Additional paid-in capital 60,000 60,000
Retained earnings 796,000 790,000
Total stockholders’ equity 1,066,000 1,060,000
Total liabilities & stockholders’ equity $ 1,533,000 $
1,510,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,410,000
Cost of goods sold 850,000
Version 1 40
Gross margin 560,000
Operating expenses 525,077
Net operating income 34,923
Interest expense 16,000
Net income before taxes 18,923
Income taxes (35%) 6,623
Net income $ 12,300
Dividends on common stock during Year 2 totaled $6,300. The market price of common stock at
the end of Year 2 was $1.78 per share.
Required:
a. What is the company’s times interest earned ratio 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?
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?
39) Vogelsberg Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,286,000 $ 1,240,000
Total liabilities $ 356,000 $ 340,000
Stockholders’ equity:
Common stock, $3 par value $ 270,000 $ 270,000
Additional paid-in capital 90,000 90,000
Retained earnings 570,000 540,000
Total stockholders’ equity $ 930,000 $ 900,000
Version 1 41
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:
a. What is the company’s times interest earned ratio 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?
d. What is thecompany’s earnings per share for Year 2?
e. What is the company’s price-earnings ratio for Year 2?
f. What is thecompany’s dividend payout ratio for Year 2?
g. What is thecompany’s dividend yield ratio for Year 2?
h. What is the company’s book value per share at the end of Year 2?
40) Remley Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,441,000 $ 1,390,000
Total liabilities $ 539,000 $ 500,000
Stockholders’ equity:
Common stock, $3 par value $ 180,000 $ 180,000
Additional paid-in capital 90,000 90,000
Retained earnings 632,000 620,000
Total stockholders’ equity $ 902,000 $ 890,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,360,000
Cost of goods sold 840,000
Gross margin 520,000
Operating expenses 480,923
Net operating income 39,077
Interest expense 16,000
Net income before taxes 23,077
Income taxes (35%) 8,077
Net income $ 15,000
Version 1 42
Dividends on common stock during Year 2 totaled $3,000. The market price of common stock at
the end of Year 2 was $2.70 per share.
Required:
a. What is the company’s times interest earned ratio 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?
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?
41) Pribyl Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,476,000 $ 1,450,000
Total stockholders’ equity $ 1,013,000 $ 1,000,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,270,000
Cost of goods sold 720,000
Gross margin 550,000
Operating expenses 506,846
Net operating income 43,154
Interest expense 17,000
Net income before taxes 26,154
Income taxes (35%) 9,154
Net income $ 17,000
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?
Version 1 43
42) Perrett Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,470,000 $ 1,450,000
Total stockholders’ equity $ 954,000 $ 920,000
Sales (all on account) $ 1,200,000
Gross margin $ 430,000
Interest expense $ 22,000
Income taxes (35%) $ 21,269
Net income $ 39,500
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?
43) Jepson Corporation’s most recent income statement appears below:
Sales (all on account) $ 865,000
Cost of goods sold 358,000
Gross margin 507,000
Selling and administrative expense 213,000
Net operating income 294,000
Interest expense 48,000
Net income before taxes 246,000
Income taxes 70,000
Version 1 44
Net income $ 176,000
Required:
Compute the gross margin percentage.
44) Gehlhausen Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 110,000 $ 160,000
Accounts receivable, net 256,000 250,000
Inventory 205,000 200,000
Prepaid expenses 33,000 30,000
Total current assets 604,000 640,000
Plant and equipment, net 784,000 730,000
Total assets $ 1,388,000 $ 1,370,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 124,000 $ 140,000
Accrued liabilities 85,000 80,000
Notes payable, short term 57,000 50,000
Total current liabilities 266,000 270,000
Bonds payable 260,000 260,000
Total liabilities 526,000 530,000
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 100,000 100,000
Retained earnings 362,000 340,000
Total stockholders’ equity 862,000 840,000
Total liabilities & stockholders’ equity $ 1,388,000 $
1,370,000
Income Statement
Version 1 45
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,310,000
Cost of goods sold 710,000
Gross margin 600,000
Operating expenses 538,538
Net operating income 61,462
Interest expense 19,000
Net income before taxes 42,462
Income taxes (35%) 14,862
Net income $ 27,600
Dividends on common stock during Year 2 totaled $5,600. The market price of common stock at
the end of Year 2 was $5.60 per share.
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?
45) Degollado Corporation’s most recent income statement appears below:
Sales (all on account) $ 140,000
Cost of goods sold 60,000
Gross margin 80,000
Selling and administrative expense 30,000
Net operating income 50,000
Interest expense 10,000
Net income before taxes 40,000
Income taxes (30%) 12,000
Net income $ 28,000
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!
Version 1 46
46) Marovich Corporation has provided the following financial data:
Year 2 Year 1
Total assets $ 1,332,000 $ 1,300,000
Common stock, $4 par value $ 200,000 $ 200,000
Total stockholders’ equity $ 1,042,000 $ 1,010,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,230,000
Cost of goods sold 810,000
Gross margin 420,000
Operating expenses 355,615
Net operating income 64,385
Interest expense 9,000
Net income before taxes 55,385
Income taxes (35%) 19,385
Net income $ 36,000
Dividends on common stock during Year 2 totaled $4,000. The market price of common stock at
the end of Year 2 was $6.41 per share.
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?
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?
Version 1 47
47) Straton Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 208,000 $ 200,000
Accounts receivable, net 247,000 290,000
Inventory 165,000 180,000
Prepaid expenses 56,000 50,000
Total current assets 676,000 720,000
Plant and equipment, net 1,000,000 920,000
Total assets $ 1,676,000 $ 1,640,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 115,000 $ 120,000
Accrued liabilities 107,000 90,000
Notes payable, short term 68,000 70,000
Total current liabilities 290,000 280,000
Bonds payable 290,000 290,000
Total liabilities 580,000 570,000
Stockholders’ equity:
Common stock, $2 par value 140,000 140,000
Additional paid-in capital 90,000 90,000
Retained earnings 866,000 840,000
Total stockholders’ equity 1,096,000 1,070,000
Total liabilities & stockholders’ equity $ 1,676,000 $
1,640,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,320,000
Cost of goods sold 860,000
Gross margin 460,000
Operating expenses 394,769
Net operating income 65,231
Interest expense 22,000
Net income before taxes 43,231
Income taxes (35%) 15,131
Version 1 48
Net income $ 28,100
Dividends on common stock during Year 2 totaled $2,100. The market price of common stock at
the end of Year 2 was $5.56 per share.
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?
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?
48) Moselle Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 252,000 $ 200,000
Accounts receivable, net 255,000 260,000
Inventory 133,000 120,000
Prepaid expenses 18,000 20,000
Total current assets 658,000 600,000
Plant and equipment, net 681,000 730,000
Total assets $ 1,339,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 177,000 $ 190,000
Accrued liabilities 25,000 30,000
Notes payable, short term 39,000 40,000
Version 1 49
Total current liabilities 241,000 260,000
Bonds payable 200,000 200,000
Total liabilities 441,000 460,000
Stockholders’ equity:
Common stock, $4 par value 240,000 240,000
Additional paid-in capital 80,000 80,000
Retained earnings 578,000 550,000
Total stockholders’ equity 898,000 870,000
Total liabilities & stockholders’ equity $ 1,339,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,400,000
Cost of goods sold 900,000
Gross margin 500,000
Operating expenses 436,462
Net operating income 63,538
Interest expense 14,000
Net income before taxes 49,538
Income taxes (35%) 17,338
Net income $ 32,200
Dividends on common stock during Year 2 totaled $4,200. The market price of common stock at
the end of Year 2 was $9.72 per share.
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?
49) Mihok Corporation has provided the following financial data:
Year 2 Year 1
Stockholders’ equity:
Common stock, $3 par value $ 300,000 $ 300,000
Version 1 50
Additional paid-in capital 100,000 100,000
Retained earnings 375,000 370,000
Total stockholders’ equity $ 775,000 $ 770,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,380,000
Cost of goods sold 780,000
Gross margin 600,000
Operating expenses 567,714
Net operating income 32,286
Interest expense 18,000
Net income before taxes 14,286
Income taxes (30%) 4,286
Net income $ 10,000
Dividends on common stock during Year 2 totaled $5,000. The market price of common stock at
the end of Year 2 was $0.97 per share.
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 thecompany’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?
50) Sehrt Corporation has provided the following financial data:
Year 2 Year 1
Common stock, $3 par value $ 300,000 $ 300,000
Total stockholders’ equity $ 803,000 $ 770,000
Version 1 51
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:
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?
51) 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.
52) 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.
53) 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?
Acid-Test Ratio Working Capital
Version 1 52
A) decrease decrease
B) decrease no effect
C) no effect decrease
D) no effect no effect
A) Choice A
B) Choice B
C) Choice C
D) Choice D
54) Norton Incorporated 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.
55) The ratio of total cash, marketable securities, and accounts receivable to current liabilities
is:
A) the debt-to-equity ratio.
B) the current ratio.
C) the acid-test ratio.
D) working capital.
56) A company’s current ratio is greater than 1. Purchasing raw materials on credit would:
Version 1 53
A) increase the current ratio.
B) decrease the current ratio.
C) increase working capital.
D) decrease working capital.
57) 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.
58) A company’s current ratio and its 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.
59) Which of the following actions would improve a current ratio of 0.8?
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.
Version 1 54
60) 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.
61) 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
62) Which of the following is not a source of financial leverage?
A) Bonds payable.
B) Accounts payable.
C) Taxes payable.
D) Prepaid rent.
63) Which one of the following statements about book value per share is most correct?
Version 1 55
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.
64) 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.
65) The Seabury Corporation has a current ratio of 4.3 and an acid-test ratio of 3.7. The
corporation’s current assets consist of cash, marketable securities, accounts receivable, and
inventories. Inventory equals $54,000. Seabury Corporation’s current liabilities must be:
(Round your intermediate calculations to 1 decimal place.)
A) $90,000
B) $333,000
C) $54,000
D) $32,400
Version 1 56
66) 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:
(Round your intermediate calculations to 1 decimal place.) Garrison 16e Rechecks 2017-10-
04
A) $70,000
B) $100,000
C) $49,000
D) $125,000
67) Data from Fontecchio Corporation’s most recent balance sheet appear below:
Cash $ 31,000
Marketable securities $ 33,000
Accounts receivable $ 44,000
Inventory $ 72,000
Prepaid expenses $ 26,000
Current liabilities $ 200,000
The corporation’s acid-test ratio is closest to:
A) 0.32
B) 0.17
C) 0.54
D) 0.38
68) Data from Fontecchio Corporation’s most recent balance sheet appear below:
Cash $ 18,000
Marketable securities $ 24,000
Accounts receivable $ 39,000
Inventory $ 60,000
Prepaid expenses $ 14,000
Current liabilities $ 120,000
The corporation’s acid-test ratio is closest to:
Version 1 57
A) 0.35
B) 0.15
C) 0.68
D) 0.79
69) Feiler Corporation has total current assets of $513,000, total current liabilities of
$377,000, total stockholders’ equity of $1,087,000, total plant and equipment (net) of
$1,061,000, total assets of $1,574,000, and total liabilities of $487,000. The company’s current
ratio is closest to:
A) 0.77
B) 1.05
C) 1.36
D) 2.18
70) Feiler Corporation has total current assets of $483,000, total current liabilities of
$347,000, total stockholders’ equity of $1,057,000, total plant and equipment (net) 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
71) Gnas Corporation’s total current assets are $222,000, its noncurrent assets are $602,000,
its total current liabilities are $168,000, its long-term liabilities are $498,000, and its
stockholders’ equity is $158,000. The current ratio is closest to:
Version 1 58
A) 1.32
B) 0.76
C) 1.41
D) 1.06
72) 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
73) Dratif Corporation’s working capital is $41,000 and its current liabilities are $112,000.
The corporation’s current ratio is closest to:
A) 1.37
B) 0.37
C) 2.37
D) 0.73
74) 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
Version 1 59
75) Dennisport Corporation has an acid-test ratio of 2.2. It has current liabilities of $64,000
and noncurrent assets of $95,000. The corporation’s current assets consist of cash, marketable
securities, accounts receivable, prepaid expenses, and inventory. If Dennisport’s current ratio is
3.6, its inventory and prepaid expenses must be:
A) $135,400
B) $89,600
C) $111,600
D) $68,200
76) 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. 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
77) Calin Corporation has total current assets of $647,000, total current liabilities of
$254,000, total stockholders’ equity of $1,215,000, total plant and equipment (net) of $990,000,
total assets of $1,637,000, and total liabilities of $422,000. The company’s working capital is:
A) $422,000
B) $343,000
C) $393,000
D) $479,000
Version 1 60
78) Calin Corporation has total current assets of $615,000, total current liabilities of
$230,000, total stockholders’ equity of $1,183,000, total plant and equipment (net) 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
79) McRae Corporation’s total current assets are $416,000, its noncurrent assets are
$527,000, its total current liabilities are $358,000, its long-term liabilities are $277,000, and its
stockholders’ equity is $308,000. Working capital is:
A) $111,000
B) $58,000
C) $169,000
D) $108,000
80) 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
81) Erastic Corporation has $25,000 in cash, $13,500 in marketable securities, $50,500 in
account receivable, $62,000 in inventories, and $53,000 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:
Version 1 61
A) 1.68
B) 0.95
C) 2.85
D) 1.42
82) 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
83) Windham Corporation has current assets of $640,000 and current liabilities of $800,000.
Windham Corporation’s current ratio would be increased by:
A) the purchase of $340,000 of inventory on account.
B) the payment of $340,000 of accounts payable.
C) the collection of $340,000 of accounts receivable.
D) refinancing a $340,000 long-term loan with short-term debt.
84) Windham Corporation has current assets of $400,000 and current liabilities of $500,000.
Windham Corporation’s current ratio would be increased by:
Version 1 62
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.
85) Stimac Corporation has total cash of $220,000, no marketable securities, total current
receivables of $291,000, total inventory of $155,000, total prepaid expenses of $55,000, total
current assets of $721,000, total current liabilities of $267,000, total stockholders’ equity of
$1,214,000, total assets of $1,715,000, and total liabilities of $501,000. The company’s acid-test
(quick) ratio is closest to:
A) 2.12
B) 1.76
C) 2.70
D) 1.91
86) 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
87) Orem Corporation’s current liabilities are $87,300, its long-term liabilities are $293,700,
and its working capital is $122,200. If the corporation’s debt-to-equity ratio is 0.15, total long-
term assets must equal:
Version 1 63
A) $2,540,000
B) $2,798,800
C) $2,711,500
D) $2,129,500
88) 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
89) Irawaddy Company, a retailer, had cost of goods sold of $175,000 last year. The
beginning inventory balance was $34,000 and the ending inventory balance was $36,000. The
company’s average sale period was closest to:
A) 73.00 days
B) 0.01 days
C) 5.00 days
D) 1.41 days
90) 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:
Version 1 64
A) 36.5 days
B) 73.0 days
C) 38.1 days
D) 34.9 days
91) 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
92) Natcher Corporation’s accounts receivable at the end of Year 2 was $132,000 and its
accounts receivable at the end of Year 1 was $136,000. The company’s inventory at the end of
Year 2 was $134,000 and its inventory at the end of Year 1 was $126,000. Sales, all on account,
amounted to $1,388,000 in Year 2. Cost of goods sold amounted to $804,000 in Year 2. The
company’s operating cycle for Year 2 is closest to: (Round your intermediate calculations to
1 decimal place.)
A) 45.5 days
B) 69.3 days
C) 65.1 days
D) 94.0 days
Version 1 65
93) 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: (Round your intermediate calculations to
2 decimal places.)
A) 44.7 days
B) 17.3 days
C) 62.8 days
D) 90.2 days
94) Kopas Corporation has provided the following data:
This Year Last Year
Accounts receivable $ 89,000 $ 107,000
Inventory $ 160,000 $ 156,000
Sales on account $ 627,000
Cost of goods sold $ 488,000
The inventory turnover for this year is closest to:
A) 3.09
B) 0.98
C) 1.03
D) 3.05
95) Granger Corporation had $198,000 in sales on account last year. The beginning accounts
receivable balance was $14,000 and the ending accounts receivable balance was $22,000. The
corporation’s average collection period was closest to: (Round your intermediate calculations
to 2 decimal places.)
Version 1 66
A) 25.8 days
B) 33.2 days
C) 40.6 days
D) 11.0 days
96) 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: (Round your intermediate calculations
to 2 decimal places.)
A) 20.3 days
B) 28.4 days
C) 36.5 days
D) 56.8 days
97) During the year just ended, the retailer James Corporation purchased $434,000 of
inventory. The inventory balance at the beginning of the year was $186,000. If the cost of goods
sold for the year was $458,000, then the inventory turnover for the year was:
A) 2.63
B) 2.46
C) 2.83
D) 2.49
98) 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:
Version 1 67
A) 2.77
B) 2.57
C) 3.00
D) 2.62
99) Laverde Corporation has provided the following data:
Year 2 Year 1
Inventory $ 185,000 $ 200,000
Total assets $ 1,489,000 $ 1,470,000
Sales $ 1,220,000
The company’s total asset turnover for Year 2 is closest to:
A) 1.22
B) 7.60
C) 0.13
D) 0.82
100) 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
101) 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:
Version 1 68
A) 5.00
B) 13.00
C) 10.00
D) 8.13
102) Data from Keniston Corporation’s most recent balance sheet and income statement appear
below:
This Year Last Year
Accounts receivable $ 128,000 $ 114,000
Inventory $ 228,000 $ 193,000
Sales on account $ 813,000
Cost of goods sold $ 597,000
The average collection period for this year is closest to: (Round your intermediate calculations
to 2 decimal places.)
A) 39.1 days
B) 45.1 days
C) 54.3 days
D) 57.5 days
103) Louie Corporation has provided the following data:
Year 2 Year 1
Accounts receivable $ 269,000 $ 290,000
Inventory $ 190,000 $ 160,000
Sales, on account $ 1,340,000
Cost of goods sold $ 860,000
The company’s operating cycle for Year 2 is closest to: (Round your intermediate calculations
to 2 decimal places.)
Version 1 69
A) 81.0 days
B) 150.5 days
C) 79.2 days
D) 9.7 days
104) 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
105) 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
106) Smay Corporation has provided the following data:
This Year Last Year
Accounts receivable $ 107,000 $ 108,000
Inventory $ 179,000 $ 187,000
Sales on account $ 654,000
Cost of goods sold $ 461,000
The accounts receivable turnover for this year is closest to:
Version 1 70
A) 1.01
B) 0.99
C) 6.08
D) 6.11
107) Rawe Corporation’s accounts receivable at the end of Year 2 was $334,000 and its
accounts receivable at the end of Year 1 was $286,000. Sales, all on account, amounted to
$1,368,000 in Year 2. The company’s average collection period for Year 2 is closest to: (Round
your intermediate calculations to 2 decimal places.)
A) 76.3 days
B) 89.1 days
C) 82.8 days
D) 4.4 days
108) 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 for Year 2 is closest to: (Round
your intermediate calculations to 2 decimal places.)
A) 1.2 days
B) 1.0 days
C) 82.4 days
D) 89.0 days
109) Pascarelli Corporation’s inventory at the end of Year 2 was $136,000 and its inventory at
the end of Year 1 was $164,000. Cost of goods sold amounted to $935,000 in Year 2. The
company’s average sale period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
Version 1 71
A) 52.4 days
B) 53.1 days
C) 58.6 days
D) 64.8 days
110) 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 for Year 2 is closest to: (Round your intermediate calculations
to 2 decimal places.)
A) 230.1 days
B) 51.2 days
C) 57.0 days
D) 32.3 days
111) Deflorio Corporation’s inventory at the end of Year 2 was $169,000 and its inventory at
the end of Year 1 was $154,000. The company’s total assets at the end of Year 2 were
$1,491,000 and its total assets at the end of Year 1 were $1,428,000. Sales amounted to
$1,480,000 in Year 2.The company’s total asset turnover for Year 2 is closest to:
A) 1.01
B) 0.99
C) 9.04
D) 9.16
112) 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:
Version 1 72
A) 0.94
B) 1.06
C) 5.38
D) 0.19
113) Data from Estrin Corporation’s most recent balance sheet and income statement appear
below:
This Year Last Year
Accounts receivable $119,000 $117,000
Inventory $165,000 $194,000
Sales on account $721,000
Cost of goods sold $561,835
The average sale period for this year is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 107.0 days
B) 61.9 days
C) 116.6 days
D) 53.2 days
114) Data from Estrin Corporation’s most recent balance sheet and income statement appear
below:
This Year Last Year
Accounts receivable $109,000 $106,000
Inventory $139,000 $158,000
Sales on account $787,000
Cost of goods sold $501,000
The average sale period for this year is closest to: (Round your intermediate calculations to 2
decimal places.)
Version 1 73
A) 101 days
B) 50 days
C) 108 days
D) 45 days
115) Shipley Corporation has provided the following data from its most recent balance sheet:
Total assets $ 760,000
Total liabilities $ 590,000
Total stockholders’ equity $ 170,000
The debt-to-equity ratio is closest to:
A) 0.29
B) 3.47
C) 0.22
D) 0.78
116) 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
117) 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:
Version 1 74
A) $600,000
B) $1,200,000
C) $800,000
D) $1,280,000
118) Klein Corporation has provided the following data:
Year 2 Year 1
Total assets $ 1,337,000 $ 1,310,000
Total liabilities $ 598,000 $ 580,000
Total stockholders’ equity $ 739,000 $ 730,000
The company’s equity multiplier is closest to:
A) 1.24
B) 0.56
C) 1.80
D) 0.81
119) Last year Javer Corporation had 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
120) 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:
Version 1 75
A) $63,000
B) $25,200
C) $30,000
D) $42,000
121) A portion of Lapore Corporation’s Balance Sheet appears below:
Liabilities and Stockholders’ Equity Year 2 Year 1
Current liabilities:
Accounts payable $ 209,000 $ 200,000
Accrued liabilities 27,000 30,000
Notes payable, short term 94,000 90,000
Total current liabilities 330,000 320,000
Bonds payable 280,000 280,000
Total liabilities 610,000 600,000
Stockholders’ equity:
Common stock, $4 par value 360,000 360,000
Additional paid-in capital 70,000 70,000
Retained earnings 589,000 570,000
Total stockholders’ equity 1,019,000 1,000,000
Total liabilities & stockholders’ equity $ 1,629,000 $ 1,600,000
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
122) Wittels Corporation has provided the following data:
Year 2 Year 1
Total assets $ 1,253,000 $ 1,230,000
Total liabilities $ 586,000 $ 570,000
Total stockholders’ equity $ 667,000 $ 660,000
The company’s equity multiplier is closest to:
Version 1 76
A) 1.14
B) 0.53
C) 0.88
D) 1.87
123) Broch Corporation’s income statement appears below:
Income Statement
Sales (all on account) $ 1,220,000
Cost of goods sold 760,000
Gross margin 460,000
Operating expenses 415,692
Net operating income 44,308
Interest expense 14,000
Net income before taxes 30,308
Income taxes (35%) 10,608
Net income $ 19,700
The company’s times interest earned ratio is closest to:
A) 4.87
B) 1.41
C) 3.16
D) 2.16
124) Cutsinger Corporation has provided the following data from its most recent income
statement:
Net operating income $ 55,000
Interest expense $ 43,000
Net income before taxes $ 12,000
Income taxes $ 4,000
Net income $ 8,000
The times interest earned ratio is closest to:
Version 1 77
A) 1.83
B) 0.28
C) 1.28
D) 0.19
125) 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
126) 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
127) Younis Corporation’s income statement appears below:
Income Statement
Sales (all on account) $ 1,240,000
Cost of goods sold 780,000
Gross margin 460,000
Operating expenses 416,571
Net operating income 43,429
Version 1 78
Interest expense 14,000
Net income before taxes 29,429
Income taxes (30%) 8,829
Net income $ 20,600
The company’s net profit margin percentage is closest to:
A) 37.1%
B) 3.5%
C) 2.4%
D) 1.7%
128) 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%
129) Mars Corporation has provided the following data for Year 2:
Sales $ 1,330,000
Gross margin $ 500,000
Net operating income $ 79,692
Net income before taxes $ 63,692
Net income $ 41,400
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%
Version 1 79
130) Sapien Corporation has provided the following data for the most recent year:
Sales $ 1,340,000
Gross margin $ 460,000
Net operating income $ 54,846
Net income before taxes $ 41,846
Net income $ 27,200
The company’s gross margin percentage is closest to:
A) 52.3%
B) 1691.2%
C) 5.9%
D) 34.3%
131) Mormino Corporation’s income statement appears below:
Income Statement
Sales (all on account) $ 1,240,000
Cost of goods sold 730,000
Gross margin 510,000
Operating expenses 450,462
Net operating income 59,538
Interest expense 18,000
Net income before taxes 41,538
Income taxes (35%) 14,538
Net income $ 27,000
The company’s gross margin percentage is closest to:
A) 1888.9%
B) 5.3%
C) 41.1%
D) 69.9%
132) Jester Corporation’s most recent income statement appears below:
Income Statement
Sales (all on account) $ 230,000
Cost of goods sold 135,000
Version 1 80
Gross margin 95,000
Selling and administrative expense 43,000
Net operating income 52,000
Interest expense 13,000
Net income before taxes 39,000
Income taxes (30%) 11,700
Net income $ 27,300
The beginning balance of total assets was $170,000 and the ending balance was $167,400. The
return on total assets is closest to:
A) 30.8%
B) 23.1%
C) 21.6%
D) 16.2%
133) Jester Corporation’s most recent income statement appears below:
Income Statement
Sales (all on account) $ 610,000
Cost of goods sold 340,000
Gross margin 270,000
Selling and administrative expense 160,000
Net operating income 110,000
Interest expense 20,000
Net income before taxes 90,000
Income taxes (30%) 27,000
Net income $ 63,000
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%
Version 1 81
134) 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%
135) Kienle Corporation’s Year 2 income statement appears below:
Income Statement
Sales $ 1,280,000
Cost of goods sold 800,000
Gross margin 480,000
Operating expenses 419,857
Net operating income 60,143
Interest expense 12,000
Net income before taxes 48,143
Income taxes (30%) 14,443
Net income $ 33,700
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%
136) Valdovinos Corporation has provided the following data:
Sales (all on account) $ 1,150,000
Gross margin $ 440,000
Net operating income $ 40,077
Net income before taxes $ 23,077
Net income $ 15,000
Version 1 82
The company’s net profit margin percentage is closest to:
A) 38.3%
B) 3.5%
C) 1.3%
D) 2.0%
137) 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%
138) Grosvenor Corporation’s most recent income statement appears below:
Sales (all on account) $ 807,000
Cost of goods sold 446,000
Gross margin 361,000
Selling and administrative expense 186,000
Net operating income 175,000
Interest expense 39,000
Net income before taxes 136,000
Income taxes 40,000
Net income $ 96,000
The gross margin percentage is closest to:
A) 80.9%
B) 44.7%
C) 376.0%
D) 26.6%
Version 1 83
139) Fongeallaz Corporation’s income statement for Year 2 appears below:
Income Statement
Sales (all on account) $ 1,360,000
Cost of goods sold 870,000
Gross margin 490,000
Operating expenses 416,286
Net operating income 73,714
Interest expense 18,000
Net income before taxes 55,714
Income taxes (30%) 16,714
Net income $ 39,000
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%
140) 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: (Round your intermediate calculations to 2
decimal places.)
A) 7.14
B) 0.58
C) 5.18
D) 11.00
141) The following information relates to Conejo Corporation for last year:
Version 1 84
Book value per share $ 40
Par value per share $ 12
Dividends per share $ 5
Dividend payout ratio 20%
Dividend yield ratio 10%
What is Conejo’s price-earnings ratio for last year?
A) 1.6
B) 2.4
C) 8.0
D) 2.0
142) Goldsmith Corporation has provided the following data:
Year 2 Year 1
Common stock, $3 par value $ 270,000 $ 270,000
Retained earnings $ 419,000 $ 400,000
Total stockholders’ equity $ 749,000 $ 730,000
Total liabilities & stockholders’ equity $ 1,291,000 $
1,270,000
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
143) Linzey Corporation has provided the following data:
Year 2 Year 1
Common stock, $2 par value $ 120,000 $ 120,000
Retained earnings $ 747,000 $ 720,000
Total stockholders’ equity $ 927,000 $ 900,000
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:
Version 1 85
A) $22.45 per share
B) $12.45 per share
C) $0.55 per share
D) $15.45 per share
144) Tempel Corporation has provided the following data:
Year 2 Year 1
Common stock, $4 par value $ 240,000 $ 240,000
Total stockholders’ equity $ 817,000 $ 810,000
Net operating income $ 36,714
Net income before taxes $ 17,714
Net income $ 12,400
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: (Round your intermediate calculations to 2
decimal places.)
A) 9.23
B) 0.35
C) 4.54
D) 13.40
145) 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. Thecompany’s dividend payout ratio
for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)
Version 1 86
A) 0.8%
B) 1.8%
C) 16.3%
D) 11.4%
146) Rawdon Corporation’s net operating income in Year 2 was $52,429, net income before
taxes was $34,429, and the net income was $24,100. Total common stock was $360,000 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 $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
147) Leflore Corporation has provided the following data:
Year 2 Year 1
Common stock, $5 par value $ 500,000 $ 500,000
Total stockholders’ equity $ 1,016,000 $ 1,010,000
Net operating income $ 35,143
Net income before taxes $ 17,143
Net income $ 12,000
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: (Round your intermediate calculations to 2 decimal places.)
A) 4.3%
B) 1.2%
C) 35.0%
D) 50.0%
Version 1 87
148) 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:
Book value at end of current year $ 70
Market value, beginning of current year $ 85
Market value, end of current year $ 90
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%
149) Hernande Corporation has provided the following data:
Year 2 Year 1
Common stock, $4 par value $ 400,000 $ 400,000
Net operating income $ 75,429
Net income before taxes $ 61,429
Net income $ 43,000
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
150) Delfavero Corporation has provided the following data:
Year 2 Year 1
Common stock, $2 par value $ 140,000 $ 140,000
Total stockholders’ equity $ 953,000 $ 930,000
Net operating income $ 55,462
Net income before taxes $ 36,462
Version 1 88
Net income $ 23,700
The company’s earnings per share for Year 2 is closest to:
A) $10.33 per share
B) $0.52 per share
C) $0.34 per share
D) $0.79 per share
151) Groeneweg Corporation has provided the following data:
Year 2 Year 1
Common stock, $2 par value $ 100,000 $ 100,000
Total stockholders’ equity $ 1,129,000 $ 1,100,000
Net operating income $ 61,538
Net income before taxes $ 51,538
Net income $ 33,500
Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at
the end of Year 2 was $9.45 per share. The company’s dividend payout ratio for Year 2 is closest
to: (Round your intermediate calculations to 2 decimal places.)
A) 8.7%
B) 13.4%
C) 4.5%
D) 1.0%
152) Spincic Corporation has provided the following data:
Year 2 Year 1
Common stock, $2 par value $ 200,000 $ 200,000
Net operating income $ 66,769
Net income before taxes $ 50,769
Net income $ 33,000
Version 1 89
The market price of common stock at the end of Year 2 was $4.13 per share. The company’s
price-earnings ratio for Year 2 is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 0.52
B) 8.10
C) 6.16
D) 12.52
153) Kovack Corporation’s net operating income in Year 2 was $66,571, net income before
taxes was $46,571, and the net income was $32,600. Total common stock was $120,000 at the
end of both Year 2 and Year 1. The par value of common stock is $2 per share. The company’s
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%
154) Uhri Corporation has provided the following data:
Year 2 Year 1
Common stock, $4 par value $ 320,000 $ 320,000
Net operating income $ 71,429
Net income before taxes $ 51,429
Net income $ 36,000
Dividends on common stock during Year 2 totaled $4,000. The market price of common stock at
the end of Year 2 was $6.08 per share. The company’s dividend payout ratio for Year 2 is closest
to: (Round your intermediate calculations to 2 decimal places.)
Version 1 90
A) 7.8%
B) 1.3%
C) 11.1%
D) 0.8%
155) 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
156) Nickolls Corporation has provided the following financial data:
Cash $ 228,000
Accounts receivable, net $ 345,000
Total current assets $ 809,000
Total current liabilities $ 247,000
The company’s working capital is:
A) $1,235,000
B) $562,000
C) $833,000
D) $809,000
157) Nickolls Corporation has provided the following financial data:
Version 1 91
Cash $ 188,000
Accounts receivable, net $ 285,000
Total current assets $ 709,000
Total current liabilities $ 167,000
The company’s working capital is:
A) $1,215,000
B) $542,000
C) $793,000
D) $709,000
158) Nickolls Corporation has provided the following financial data:
Cash $ 208,000
Accounts receivable, net $ 315,000
Total current assets $ 759,000
Total current liabilities $ 207,000
The company’s current ratio is closest to:
A) 0.57
B) 0.42
C) 0.29
D) 3.67
159) Nickolls Corporation has provided the following financial data:
Cash $ 188,000
Accounts receivable, net $ 285,000
Total current assets $ 709,000
Total current liabilities $ 167,000
The company’s current ratio is closest to:
A) 0.47
B) 0.40
C) 0.19
D) 4.25
Version 1 92
160) Nickolls Corporation has provided the following financial data:
Cash $ 196,000
Accounts receivable, net $ 297,000
Total current assets $ 729,000
Total current liabilities $ 183,000
The company’s acid-test (quick) ratio is closest to:
A) 2.51
B) 2.69
C) 3.14
D) 3.98
161) Nickolls Corporation has provided the following financial data:
Cash $ 188,000
Accounts receivable, net $ 285,000
Total current assets $ 709,000
Total current liabilities $ 167,000
The company’s acid-test (quick) ratio is closest to:
A) 2.47
B) 2.83
C) 3.10
D) 4.25
162) Macmillan Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 156,000 $ 120,000
Accounts receivable, net 268,000 280,000
Inventory 146,000 130,000
Prepaid expenses 20,000 20,000
Version 1 93
Total current assets 590,000 550,000
Plant and equipment, net 732,000 760,000
Total assets $ 1,322,000 $ 1,310,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 175,000 $ 180,000
Accrued liabilities 46,000 50,000
Notes payable, short term 80,000 80,000
Total current liabilities 301,000 310,000
Bonds payable 190,000 190,000
Total liabilities 491,000 500,000
Stockholders’ equity:
Common stock, $5 par value 450,000 450,000
Additional paid-in capital 70,000 70,000
Retained earnings 311,000 290,000
Total stockholders’ equity 831,000 810,000
Total liabilities & stockholders’ equity $ 1,322,000 $
1,310,000
Income Statement—Year 2
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,390,000
Cost of goods sold 830,000
Gross margin 560,000
Operating expenses 500,615
Net operating income 59,385
Interest expense 16,000
Net income before taxes 43,385
Income taxes (35%) 15,185
Net income $ 28,200
Dividends on common stock during Year 2 totaled $7,200. The market price of common stock at
the end of Year 2 was $3.69 per share.
The company’s working capital at the end of Year 2 is:
A) $732,000
B) $831,000
C) $289,000
D) $590,000
163) Macmillan Corporation has provided the following financial data:
Version 1 94
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 156,000 $ 120,000
Accounts receivable, net 268,000 280,000
Inventory 146,000 130,000
Prepaid expenses 20,000 20,000
Total current assets 590,000 550,000
Plant and equipment, net 732,000 760,000
Total assets $ 1,322,000 $ 1,310,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 175,000 $ 180,000
Accrued liabilities 46,000 50,000
Notes payable, short term 80,000 80,000
Total current liabilities 301,000 310,000
Bonds payable 190,000 190,000
Total liabilities 491,000 500,000
Stockholders’ equity:
Common stock, $5 par value 450,000 450,000
Additional paid-in capital 70,000 70,000
Retained earnings 311,000 290,000
Total stockholders’ equity 831,000 810,000
Total liabilities & stockholders’ equity $ 1,322,000 $
1,310,000
Income Statement—Year 2
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,390,000
Cost of goods sold 830,000
Gross margin 560,000
Operating expenses 500,615
Net operating income 59,385
Interest expense 16,000
Net income before taxes 43,385
Income taxes (35%) 15,185
Net income $ 28,200
Dividends on common stock during Year 2 totaled $7,200. The market price of common stock at
the end of Year 2 was $3.69 per share.
The company’s current ratio at the end of Year 2 is closest to:
Version 1 95
A) 0.83
B) 1.96
C) 0.45
D) 0.37
164) Macmillan Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 156,000 $ 120,000
Accounts receivable, net 268,000 280,000
Inventory 146,000 130,000
Prepaid expenses 20,000 20,000
Total current assets 590,000 550,000
Plant and equipment, net 732,000 760,000
Total assets $ 1,322,000 $ 1,310,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 175,000 $ 180,000
Accrued liabilities 46,000 50,000
Notes payable, short term 80,000 80,000
Total current liabilities 301,000 310,000
Bonds payable 190,000 190,000
Total liabilities 491,000 500,000
Stockholders’ equity:
Common stock, $5 par value 450,000 450,000
Additional paid-in capital 70,000 70,000
Retained earnings 311,000 290,000
Total stockholders’ equity 831,000 810,000
Total liabilities & stockholders’ equity $ 1,322,000 $
1,310,000
Income Statement—Year 2
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,390,000
Cost of goods sold 830,000
Version 1 96
Gross margin 560,000
Operating expenses 500,615
Net operating income 59,385
Interest expense 16,000
Net income before taxes 43,385
Income taxes (35%) 15,185
Net income $28,200
Dividends on common stock during Year 2 totaled $7,200. The market price of common stock at
the end of Year 2 was $3.69 per share.
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
165) Mayfield Corporation has provided the following financial data:
Assets
Current assets:
Cash $ 223,000
Accounts receivable, net 236,000
Inventory 202,000
Prepaid expenses 10,000
Total current assets 671,000
Plant and equipment, net 665,000
Total assets $ 1,336,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000
Accrued liabilities 52,000
Notes payable, short term 45,000
Total current liabilities 253,000
Bonds payable 100,000
Total liabilities 353,000
Stockholders’ equity:
Common stock, $4 par value 360,000
Additional paid-in capital 80,000
Version 1 97
Retained earnings 543,000
Total stockholders’ equity 983,000
Total liabilities & stockholders’ equity $ 1,336,000
The company’s working capital is:
A) $671,000
B) $665,000
C) $418,000
D) $983,000
166) Mayfield Corporation has provided the following financial data:
Assets
Current assets:
Cash $ 223,000
Accounts receivable, net 236,000
Inventory 202,000
Prepaid expenses 10,000
Total current assets 671,000
Plant and equipment, net 665,000
Total assets $ 1,336,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000
Accrued liabilities 52,000
Notes payable, short term 45,000
Total current liabilities 253,000
Bonds payable 100,000
Total liabilities 353,000
Stockholders’ equity:
Common stock, $4 par value 360,000
Additional paid-in capital 80,000
Retained earnings 543,000
Total stockholders’ equity 983,000
Total liabilities & stockholders’ equity $ 1,336,000
The company’s current ratio is closest to:
Version 1 98
A) 0.26
B) 2.65
C) 0.50
D) 0.53
167) Mayfield Corporation has provided the following financial data:
Balance Sheet
Assets
Current assets:
Cash $ 263,000
Accounts receivable, net 276,000
Inventory 218,000
Prepaid expenses 18,000
Total current assets 775,000
Plant and equipment, net 705,000
Total assets $ 1,480,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 204,000
Accrued liabilities 60,000
Notes payable, short term 53,000
Total current liabilities 317,000
Bonds payable 116,000
Total liabilities 433,000
Stockholders’ equity:
Common stock, $4 par value 376,000
Additional paid-in capital 88,000
Retained earnings 583,000
Total stockholders’ equity 1,047,000
Total liabilities & stockholders’ equity $ 1,480,000
The company’s acid-test (quick) ratio is closest to:
Version 1 99
A) 1.81
B) 1.76
C) 2.44
D) 1.70
168) Mayfield Corporation has provided the following financial data:
Balance Sheet
Assets
Current assets:
Cash $ 223,000
Accounts receivable, net 236,000
Inventory 202,000
Prepaid expenses 10,000
Total current assets 671,000
Plant and equipment, net 665,000
Total assets $ 1,336,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000
Accrued liabilities 52,000
Notes payable, short term 45,000
Total current liabilities 253,000
Bonds payable 100,000
Total liabilities 353,000
Stockholders’ equity:
Common stock, $4 par value 360,000
Additional paid-in capital 80,000
Retained earnings 543,000
Total stockholders’ equity 983,000
Total liabilities & stockholders’ equity $ 1,336,000
The company’s acid-test (quick) ratio is closest to:
Version 1 100
A) 1.90
B) 1.85
C) 2.65
D) 1.81
169) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 91 $ 121
Accounts receivable, net 102 112
Inventory 173 163
Prepaid expenses 41 41
Total current assets 407 437
Total current liabilities $ 324 $ 295
Sales on account in Year 2 amounted to $1,235 and the cost of goods sold was $735.
The working capital at the end of Year 2 is:
A) $407
B) $784
C) $539
D) $83
170) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 90 $ 120
Accounts receivable, net 100 110
Inventory 170 160
Prepaid expenses 40 40
Total current assets 400 430
Total current liabilities $ 320 $ 290
Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720.
The working capital at the end of Year 2 is:
Version 1 101
A) $850
B) $770
C) $400
D) $80
171) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 102 $ 132
Accounts receivable, net 124 134
Inventory 206 196
Prepaid expenses 52 52
Total current assets 484 514
Total current liabilities $ 368 $ 350
Sales on account in Year 2 amounted to $1,510 and the cost of goods sold was $900.
The current ratio at the end of Year 2 is closest to:
A) 0.56
B) 0.62
C) 1.32
D) 1.27
172) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 90 $ 120
Accounts receivable, net 100 110
Inventory 170 160
Prepaid expenses 40 40
Total current assets 400 430
Total current liabilities $ 320 $ 290
Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720.
The current ratio at the end of Year 2 is closest to:
Version 1 102
A) 0.32
B) 0.38
C) 1.25
D) 1.20
173) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 93 $ 123
Accounts receivable, net 106 116
Inventory 179 169
Prepaid expenses 43 43
Total current assets 421 451
Total current liabilities $ 332 $ 305
Sales on account in Year 2 amounted to $1,285 and the cost of goods sold was $765.
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 0.73
B) 0.86
C) 0.60
D) 1.27
174) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 90 $ 120
Accounts receivable, net 100 110
Inventory 170 160
Prepaid expenses 40 40
Total current assets 400 430
Total current liabilities $ 320 $ 290
Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720.
The acid-test (quick) ratio at the end of Year 2 is closest to:
Version 1 103
A) 0.72
B) 0.83
C) 0.59
D) 1.25
175) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 90 $ 120
Accounts receivable, net 100 110
Inventory 170 160
Prepaid expenses 40 40
Total current assets 400 430
Total current liabilities $ 320 $ 290
Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720.
The accounts receivable turnover for Year 2 is closest to:
A) 1.10
B) 0.91
C) 11.52
D) 12.10
176) Excerpts from Colter Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 90 $ 120
Accounts receivable, net 100 110
Inventory 170 160
Prepaid expenses 40 40
Total current assets 400 430
Total current liabilities $ 320 $ 290
Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720.
The inventory turnover for Year 2 is closest to:
Version 1 104
A) 1.06
B) 0.94
C) 4.36
D) 4.24
177) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 198 $ 158
Accounts receivable, net 315 335
Inventory 158 168
Prepaid expenses 59 59
Total current assets 730 720
Plant and equipment, net 890 890
Total assets $ 1,620 $ 1,610
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 168 $ 188
Accrued liabilities 109 109
Notes payable, short term 79 89
Total current liabilities 356 386
Bonds payable 337 347
Total liabilities 693 733
Stockholders’ equity:
Common stock, $2 par value 138 138
Additional paid-in capital 295 295
Retained earnings 494 444
Total stockholders’ equity 927 877
Total liabilities & stockholders’ equity $ 1,620 $ 1,610
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 2,070
Version 1 105
Cost of goods sold 1,160
Gross margin 910
Selling and administrative expenses 454
Net operating income 456
Interest expense 73
Net income before taxes 383
Income taxes (30%) 115
Net income $ 268
The working capital at the end of Year 2 is:
A) $374 thousand
B) $908 thousand
C) $890 thousand
D) $730 thousand
178) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Total liabilities 560 600
Stockholders’ equity:
Version 1 106
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,310
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The working capital at the end of Year 2 is:
A) $260 thousand
B) $680 thousand
C) $700 thousand
D) $540 thousand
179) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 192 $ 152
Accounts receivable, net 300 320
Inventory 152 162
Prepaid expenses 56 56
Total current assets 700 690
Plant and equipment, net 860 860
Total assets $ 1,560 $ 1,550
Liabilities and Stockholders’ Equity
Version 1 107
Current liabilities:
Accounts payable $ 162 $ 182
Accrued liabilities 106 106
Notes payable, short term 76 86
Total current liabilities 344 374
Bonds payable 328 338
Total liabilities 672 712
Stockholders’ equity:
Common stock, $2 par value 132 132
Additional paid-in capital 280 280
Retained earnings 476 426
Total stockholders’ equity 888 838
Total liabilities & stockholders’ equity $ 1,560 $ 1,550
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,950
Cost of goods sold 1,100
Gross margin 850
Selling and administrative expenses 439
Net operating income 411
Interest expense 67
Net income before taxes 344
Income taxes (30%) 103
Net income $ 241
The current ratio at the end of Year 2 is closest to:
A) 0.61
B) 2.03
C) 0.60
D) 1.20
180) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Version 1 108
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Total liabilities 560 600
Stockholders’ equity:
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,310
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The current ratio at the end of Year 2 is closest to:
A) 0.45
B) 1.93
C) 0.44
D) 1.04
Version 1 109
181) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 168 $ 128
Accounts receivable, net 240 260
Inventory 128 138
Prepaid expenses 44 44
Total current assets 580 570
Plant and equipment, net 740 740
Total assets $ 1,320 $ 1,310
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 138 $ 158
Accrued liabilities 94 94
Notes payable, short term 64 74
Total current liabilities 296 326
Bonds payable 292 302
Total liabilities 588 628
Stockholders’ equity:
Common stock, $2 par value 108 108
Additional paid-in capital 220 220
Retained earnings 404 354
Total stockholders’ equity 732 682
Total liabilities & stockholders’ equity $ 1,320 $ 1,310
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,470
Cost of goods sold 860
Gross margin 610
Selling and administrative expenses 379
Net operating income 231
Interest expense 43
Net income before taxes 188
Income taxes (30%) 56
Version 1 110
Net income $ 132
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 1.00
B) 1.38
C) 1.54
D) 1.97
182) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Total liabilities 560 600
Stockholders’ equity:
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
Version 1 111
(in thousands of dollars)
Sales (all on account) $ 1,310
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 0.96
B) 1.36
C) 1.50
D) 1.93
183) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Version 1 112
Total liabilities 560 600
Stockholders’ equity:
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,310
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The accounts receivable turnover for Year 2 is closest to:
A) 5.95
B) 5.70
C) 1.09
D) 0.92
184) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Version 1 113
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Total liabilities 560 600
Stockholders’ equity:
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,310
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The average collection period for Year 2 is closest to: (Round your intermediate calculations
to 2 decimal places.)
A) 64.0 days
B) 0.9 days
C) 61.3 days
D) 1.1 days
185) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Version 1 114
Year 2 Year 1
Assets
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Total liabilities 560 600
Stockholders’ equity:
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,310
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The inventory turnover for Year 2 is closest to:
Version 1 115
A) 0.92
B) 6.50
C) 1.08
D) 6.24
186) Freiman Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 160 $ 120
Accounts receivable, net 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equipment, net 700 700
Total assets $ 1,240 $ 1,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bonds payable 280 290
Total liabilities 560 600
Stockholders’ equity:
Common stock, $2 par value 100 100
Additional paid-in capital 200 200
Retained earnings 380 330
Total stockholders’ equity 680 630
Total liabilities & stockholders’ equity $ 1,240 $ 1,230
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,310
Version 1 116
Cost of goods sold 780
Gross margin 530
Selling and administrative expenses 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income $ 95
The inventory turnover for Year 2 is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 58.5 days
B) 33.4 days
C) 217.3 days
D) 56.2 days
187) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 147 $ 117
Accounts receivable, net 304 324
Inventory 141 161
Prepaid expenses 27 27
Total current assets $ 619 $ 629
Total current liabilities $ 298 $ 305
Sales on account in Year 2 amounted to $1,595 and the cost of goods sold was $985.
The working capital at the end of Year 2 is:
A) $321
B) $619
C) $1,008
D) $893
188) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Version 1 117
Cash $ 130 $ 100
Accounts receivable, net 270 290
Inventory 90 110
Prepaid expenses 10 10
Total current assets $ 500 $ 510
Total current liabilities $ 230 $ 220
Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730.
The working capital at the end of Year 2 is:
A) $270
B) $500
C) $770
D) $740
189) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 136 $ 106
Accounts receivable, net 282 302
Inventory 108 128
Prepaid expenses 16 16
Total current assets $ 542 $ 552
Total current liabilities $ 254 $ 250
Sales on account in Year 2 amounted to $1,320 and the cost of goods sold was $820.
The current ratio at the end of Year 2 is closest to:
A) 0.50
B) 2.13
C) 1.00
D) 0.52
190) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 130 $ 100
Accounts receivable, net 270 290
Version 1 118
Inventory 90 110
Prepaid expenses 10 10
Total current assets $ 500 $ 510
Total current liabilities $ 230 $ 220
Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730.
The current ratio at the end of Year 2 is closest to:
A) 0.38
B) 2.17
C) 0.94
D) 0.40
191) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 110
Accounts receivable, net 290 310
Inventory 120 140
Prepaid expenses 20 20
Total current assets $ 570 $ 580
Total current liabilities $ 270 $ 270
Sales on account in Year 2 amounted to $1,420 and the cost of goods sold was $880.
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 2.11
B) 1.67
C) 1.59
D) 1.16
192) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 130 $ 100
Accounts receivable, net 270 290
Inventory 90 110
Prepaid expenses 10 10
Version 1 119
Total current assets $ 500 $ 510
Total current liabilities $ 230 $ 220
Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730.
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 2.17
B) 1.78
C) 1.74
D) 1.06
193) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 130 $ 100
Accounts receivable, net 270 290
Inventory 90 110
Prepaid expenses 10 10
Total current assets $ 500 $ 510
Total current liabilities $ 230 $ 220
Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730.
The average collection period for Year 2 is closest to: (Round your intermediate calculations
to 2 decimal places.)
A) 1.1 days
B) 0.9 days
C) 84.3 days
D) 87.3 days
194) Data from Dunshee Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 130 $ 100
Accounts receivable, net 270 290
Inventory 90 110
Prepaid expenses 10 10
Total current assets $ 500 $ 510
Version 1 120
Total current liabilities $ 230 $ 220
Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730.
The average sale period for Year 2 is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 28.1 days
B) 45.0 days
C) 50.0 days
D) 227.7 days
195) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Version 1 121
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
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
196) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Version 1 122
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
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
197) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Version 1 123
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
Maraby Corporation’s acid-test (quick) ratio at the end of Year 2 was closest to:
Version 1 124
A) 0.51
B) 0.47
C) 1.14
D) 1.95
198) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
Version 1 125
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
Maraby Corporation’s accounts receivable turnover for Year 2 was closest to:
A) 13.5
B) 7.8
C) 11.2
D) 9.4
199) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Version 1 126
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
Maraby Corporation’s average collection period for Year 2 was closest to: (Round your
intermediate calculations to 1 decimal place.)
A) 38.6 days
B) 46.6 days
C) 32.6 days
D) 27.0 days
200) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Version 1 127
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
Maraby Corporation’s inventory turnover for Year 2 was closest to:
A) 11.2
B) 7.8
C) 9.4
D) 13.5
Version 1 128
201) Financial statements for Maraby Corporation appear below:
Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 220 $ 190
Accounts receivable, net 190 160
Inventory 140 150
Prepaid expenses 70 80
Total current assets 620 580
Noncurrent assets:
Plant & equipment, net 1,180 1,150
Total assets $ 1,800 $ 1,730
Current liabilities:
Accounts payable $ 100 $ 120
Accrued liabilities 100 70
Notes payable, short term 160 160
Total current liabilities 360 350
Noncurrent liabilities:
Bonds payable 450 500
Total liabilities 810 850
Stockholders’ equity:
Common stock, $5 par 160 160
Additional paid-in capital 200 200
Retained earnings 630 520
Total stockholders’ equity 990 880
Total liabilities & stockholders’ equity $ 1,800 $ 1,730
Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,960
Cost of goods sold 1,370
Gross margin 590
Selling and administrative expense 230
Net operating income 360
Interest expense 50
Version 1 129
Net income before taxes 310
Income taxes (30%) 93
Net income $ 217
Maraby Corporation’s average sale period for Year 2 was closest to: (Round your
intermediate calculations to 1 decimal place.)
A) 38.8 days
B) 32.6 days
C) 46.6 days
D) 27.0 days
202) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 176 $ 178
Accounts receivable, net 246 266
Inventory 312 254
Prepaid expenses 28 28
Total current assets $ 762 $ 726
Total current liabilities $ 432 $ 420
Sales on account in Year 2 amounted to $1,840 and the cost of goods sold was $1,170.
The working capital at the end of Year 2 is:
A) $762
B) $1,306
C) $1,060
D) $330
203) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Version 1 130
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
The working capital at the end of Year 2 is:
A) $600
B) $1,000
C) $880
D) $240
204) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 148 $ 164
Accounts receivable, net 218 238
Inventory 256 212
Prepaid expenses 14 14
Total current assets $ 636 $ 628
Total current liabilities $ 376 $ 350
Sales on account in Year 2 amounted to $1,490 and the cost of goods sold was $960.
The current ratio at the end of Year 2 is closest to:
A) 1.69
B) 0.40
C) 0.84
D) 0.49
205) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Version 1 131
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
The current ratio at the end of Year 2 is closest to:
A) 1.67
B) 0.32
C) 0.80
D) 0.41
206) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 146 $ 163
Accounts receivable, net 216 236
Inventory 252 209
Prepaid expenses 13 13
Total current assets $ 627 $ 621
Total current liabilities $ 372 $ 345
Sales on account in Year 2 amounted to $1,465 and the cost of goods sold was $945.
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 1.69
B) 1.01
C) 0.97
D) 1.28
207) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Version 1 132
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
The acid-test (quick) ratio at the end of Year 2 is closest to:
A) 1.67
B) 1.00
C) 0.97
D) 1.25
208) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
The accounts receivable turnover for Year 2 is closest to:
A) 6.62
B) 1.10
C) 6.32
D) 0.91
209) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Version 1 133
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. (Round
your intermediate calculations to 2 decimal places.)
The average collection period for Year 2 is closest to:
A) 55.1 days
B) 0.9 days
C) 1.1 days
D) 57.8 days
210) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
The inventory turnover for Year 2 is closest to:
A) 3.75
B) 1.20
C) 4.09
D) 0.83
211) Excerpts from Sydner Corporation’s most recent balance sheet appear below:
Year 2 Year 1
Current assets:
Cash $ 140 $ 160
Accounts receivable, net 210 230
Inventory 240 200
Prepaid expenses 10 10
Total current assets $ 600 $ 600
Total current liabilities $ 360 $ 330
Version 1 134
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
The average sale period for Year 2 is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 63.0 days
B) 89.2 days
C) 236.3 days
D) 97.3 days
212) Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Cash $ 74,000 $ 130,000
Accounts receivable, net $ 255,000 $ 240,000
Inventory $ 173,000 $ 180,000
Total current assets $ 564,000 $ 610,000
Total assets $ 1,350,000 $ 1,330,000
Accounts payable $ 170,000 $ 160,000
Total liabilities $ 633,000 $ 620,000
Total stockholders’ equity $ 717,000 $ 710,000
Sales (all on account) $ 1,290,000
Cost of goods sold $ 700,000
The company’s accounts receivable turnover for Year 2 is closest to:
A) 1.06
B) 5.06
C) 5.21
D) 0.94
213) Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Cash $ 74,000 $ 130,000
Accounts receivable, net $ 255,000 $ 240,000
Inventory $ 173,000 $ 180,000
Version 1 135
Total current assets $ 564,000 $ 610,000
Total assets $ 1,350,000 $ 1,330,000
Accounts payable $ 170,000 $ 160,000
Total liabilities $ 633,000 $ 620,000
Total stockholders’ equity $ 717,000 $ 710,000
Sales (all on account) $ 1,290,000
Cost of goods sold $ 700,000
The company’s average collection period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 70.1 days
B) 1.1 days
C) 72.1 days
D) 1.0 days
214) Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Cash $ 74,000 $ 130,000
Accounts receivable, net $ 255,000 $ 240,000
Inventory $ 173,000 $ 180,000
Total current assets $ 564,000 $ 610,000
Total assets $ 1,350,000 $ 1,330,000
Accounts payable $ 170,000 $ 160,000
Total liabilities $ 633,000 $ 620,000
Total stockholders’ equity $ 717,000 $ 710,000
Sales (all on account) $ 1,290,000
Cost of goods sold $ 700,000
The company’s inventory turnover for Year 2 is closest to:
A) 3.89
B) 1.04
C) 3.97
D) 4.05
Version 1 136
215) Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Cash $ 74,000 $ 130,000
Accounts receivable, net $ 255,000 $ 240,000
Inventory $ 173,000 $ 180,000
Total current assets $ 564,000 $ 610,000
Total assets $ 1,350,000 $ 1,330,000
Accounts payable $ 170,000 $ 160,000
Total liabilities $ 633,000 $ 620,000
Total stockholders’ equity $ 717,000 $ 710,000
Sales (all on account) $ 1,290,000
Cost of goods sold $ 700,000
The company’s average sale period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 91.9 days
B) 48.9 days
C) 90.1 days
D) 198.1 days
216) Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Cash $ 74,000 $ 130,000
Accounts receivable, net $ 255,000 $ 240,000
Inventory $ 173,000 $ 180,000
Total current assets $ 564,000 $ 610,000
Total assets $ 1,350,000 $ 1,330,000
Accounts payable $ 170,000 $ 160,000
Total liabilities $ 633,000 $ 620,000
Total stockholders’ equity $ 717,000 $ 710,000
Sales (all on account) $ 1,290,000
Cost of goods sold $ 700,000
Version 1 137
The company’s operating cycle for Year 2 is closest to: (Round your intermediate calculations
to 2 decimal places.)
A) 95.9 days
B) 75.3 days
C) 162.0 days
D) 9.2 days
217) Ribaudo Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Cash $ 74,000 $ 130,000
Accounts receivable, net $ 255,000 $ 240,000
Inventory $ 173,000 $ 180,000
Total current assets $ 564,000 $ 610,000
Total assets $ 1,350,000 $ 1,330,000
Accounts payable $ 170,000 $ 160,000
Total liabilities $ 633,000 $ 620,000
Total stockholders’ equity $ 717,000 $ 710,000
Sales (all on account) $ 1,290,000
Cost of goods sold $ 700,000
The company’s total asset turnover for Year 2 is closest to:
A) 5.29
B) 0.19
C) 1.04
D) 0.96
218) Dahn Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Version 1 138
Cash $ 227,000 $ 150,000
Accounts receivable, net 134,000 130,000
Inventory 150,000 130,000
Prepaid expenses 83,000 80,000
Total current assets 594,000 490,000
Plant & equipment, net 769,000 840,000
Total assets $ 1,363,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 200,000 $ 180,000
Accrued liabilities 63,000 70,000
Notes payable, short term 71,000 60,000
Total current liabilities 334,000 310,000
Bonds payable 290,000 290,000
Total liabilities 624,000 600,000
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 50,000 50,000
Retained earnings 289,000 280,000
Total stockholders’ equity 739,000 730,000
Total liabilities & stockholders’ equity $ 1,363,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 850,000
Gross margin 520,000
Operating expenses 482,692
Net operating income 37,308
Interest expense 21,000
Net income before taxes 16,308
Income taxes (35%) 5,708
Net income $ 10,600
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at
the end of Year 2 was $2.37 per share. The company’s accounts receivable turnover for Year 2 is
closest to:
Version 1 139
A) 0.97
B) 10.38
C) 1.03
D) 10.22
219) Dahn Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 227,000 $ 150,000
Accounts receivable, net 134,000 130,000
Inventory 150,000 130,000
Prepaid expenses 83,000 80,000
Total current assets 594,000 490,000
Plant & equipment, net 769,000 840,000
Total assets $ 1,363,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 200,000 $ 180,000
Accrued liabilities 63,000 70,000
Notes payable, short term 71,000 60,000
Total current liabilities 334,000 310,000
Bonds payable 290,000 290,000
Total liabilities 624,000 600,000
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 50,000 50,000
Retained earnings 289,000 280,000
Total stockholders’ equity 739,000 730,000
Total liabilities & stockholders’ equity $ 1,363,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 850,000
Version 1 140
Gross margin 520,000
Operating expenses 482,692
Net operating income 37,308
Interest expense 21,000
Net income before taxes 16,308
Income taxes (35%) 5,708
Net income $ 10,600
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at
the end of Year 2 was $2.37 per share.
The company’s average collection period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 35.7 days
B) 1.1 days
C) 1.0 days
D) 35.2 days
220) Dahn Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 227,000 $ 150,000
Accounts receivable, net 134,000 130,000
Inventory 150,000 130,000
Prepaid expenses 83,000 80,000
Total current assets 594,000 490,000
Plant & equipment, net 769,000 840,000
Total assets $ 1,363,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 200,000 $ 180,000
Accrued liabilities 63,000 70,000
Notes payable, short term 71,000 60,000
Total current liabilities 334,000 310,000
Bonds payable 290,000 290,000
Total liabilities 624,000 600,000
Version 1 141
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 50,000 50,000
Retained earnings 289,000 280,000
Total stockholders’ equity 739,000 730,000
Total liabilities & stockholders’ equity $ 1,363,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 850,000
Gross margin 520,000
Operating expenses 482,692
Net operating income 37,308
Interest expense 21,000
Net income before taxes 16,308
Income taxes (35%) 5,708
Net income $ 10,600
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at
the end of Year 2 was $2.37 per share.
Thecompany’s inventory turnover for Year 2 is closest to:
A) 6.54
B) 5.67
C) 6.07
D) 0.87
221) Dahn Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 227,000 $ 150,000
Accounts receivable, net 134,000 130,000
Inventory 150,000 130,000
Prepaid expenses 83,000 80,000
Total current assets 594,000 490,000
Plant & equipment, net 769,000 840,000
Version 1 142
Total assets $ 1,363,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 200,000 $ 180,000
Accrued liabilities 63,000 70,000
Notes payable, short term 71,000 60,000
Total current liabilities 334,000 310,000
Bonds payable 290,000 290,000
Total liabilities 624,000 600,000
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 50,000 50,000
Retained earnings 289,000 280,000
Total stockholders’ equity 739,000 730,000
Total liabilities & stockholders’ equity $ 1,363,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 850,000
Gross margin 520,000
Operating expenses 482,692
Net operating income 37,308
Interest expense 21,000
Net income before taxes 16,308
Income taxes (35%) 5,708
Net income $ 10,600
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at
the end of Year 2 was $2.37 per share.
The company’s average sale period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 226.5 days
B) 60.1 days
C) 40.0 days
D) 64.4 days
222) Dahn Corporation has provided the following financial data:
Balance Sheet
Version 1 143
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 227,000 $ 150,000
Accounts receivable, net 134,000 130,000
Inventory 150,000 130,000
Prepaid expenses 83,000 80,000
Total current assets 594,000 490,000
Plant & equipment, net 769,000 840,000
Total assets $ 1,363,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 200,000 $ 180,000
Accrued liabilities 63,000 70,000
Notes payable, short term 71,000 60,000
Total current liabilities 334,000 310,000
Bonds payable 290,000 290,000
Total liabilities 624,000 600,000
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 50,000 50,000
Retained earnings 289,000 280,000
Total stockholders’ equity 739,000 730,000
Total liabilities & stockholders’ equity $ 1,363,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 850,000
Gross margin 520,000
Operating expenses 482,692
Net operating income 37,308
Interest expense 21,000
Net income before taxes 16,308
Income taxes (35%) 5,708
Net income $ 10,600
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at
the end of Year 2 was $2.37 per share.
The company’s operating cycle for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
Version 1 144
A) 66.2 days
B) 16.5 days
C) 95.3 days
D) 45.6 days
223) Dahn Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 227,000 $ 150,000
Accounts receivable, net 134,000 130,000
Inventory 150,000 130,000
Prepaid expenses 83,000 80,000
Total current assets 594,000 490,000
Plant & equipment, net 769,000 840,000
Total assets $ 1,363,000 $ 1,330,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 200,000 $ 180,000
Accrued liabilities 63,000 70,000
Notes payable, short term 71,000 60,000
Total current liabilities 334,000 310,000
Bonds payable 290,000 290,000
Total liabilities 624,000 600,000
Stockholders’ equity:
Common stock, $5 par value 400,000 400,000
Additional paid-in capital 50,000 50,000
Retained earnings 289,000 280,000
Total stockholders’ equity 739,000 730,000
Total liabilities & stockholders’ equity $ 1,363,000 $
1,330,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,370,000
Cost of goods sold 850,000
Version 1 145
Gross margin 520,000
Operating expenses 482,692
Net operating income 37,308
Interest expense 21,000
Net income before taxes 16,308
Income taxes (35%) 5,708
Net income $ 10,600
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at
the end of Year 2 was $2.37 per share.
The company’s total asset turnover for Year 2 is closest to:
A) 10.17
B) 0.10
C) 1.02
D) 0.98
224) Guttery Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 112,000 $ 110,000
Inventory $ 174,000 $ 150,000
Total assets $ 1,236,000 $ 1,250,000
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
The company’s accounts receivable turnover for Year 2 is closest to:
A) 12.95
B) 1.02
C) 0.98
D) 13.06
225) Guttery Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 112,000 $ 110,000
Inventory $ 174,000 $ 150,000
Total assets $ 1,236,000 $ 1,250,000
Version 1 146
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
The company’s average collection period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 1.1 days
B) 28.2 days
C) 1.0 days
D) 27.9 days
226) Guttery Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 112,000 $ 110,000
Inventory $ 174,000 $ 150,000
Total assets $ 1,236,000 $ 1,250,000
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
The company’s inventory turnover for Year 2 is closest to:
A) 5.17
B) 5.56
C) 6.00
D) 0.86
227) Guttery Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 112,000 $ 110,000
Inventory $ 174,000 $ 150,000
Total assets $ 1,236,000 $ 1,250,000
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
The company’s average sale period for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 65.6 days
B) 226.6 days
C) 43.8 days
D) 70.6 days
Version 1 147
228) Guttery Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 112,000 $ 110,000
Inventory $ 174,000 $ 150,000
Total assets $ 1,236,000 $ 1,250,000
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
The company’s operating cycle for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 71.2 days
B) 93.5 days
C) 18.6 days
D) 41.0 days
229) Guttery Corporation has provided the following financial data from its balance sheet:
Product X Product Y
Accounts receivable, net $ 112,000 $ 110,000
Inventory $ 174,000 $ 150,000
Total assets $ 1,236,000 $ 1,250,000
Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.
The company’s total asset turnover for Year 2 is closest to:
A) 1.17
B) 11.04
C) 0.09
D) 0.85
230) Mahoe Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Version 1 148
Cash $ 105,000 $ 190,000
Accounts receivable, net 255,000 220,000
Inventory 206,000 200,000
Prepaid expenses 44,000 50,000
Total current assets 610,000 660,000
Plant and equipment, net 1,065,000 970,000
Total assets $ 1,675,000 $ 1,630,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 119,000 $ 110,000
Accrued liabilities 88,000 80,000
Notes payable, short term 53,000 50,000
Total current liabilities 260,000 240,000
Bonds payable 110,000 110,000
Total liabilities 370,000 350,000
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 985,000 960,000
Total stockholders’ equity 1,305,000 1,280,000
Total liabilities & stockholders’ equity $ 1,675,000 $
1,630,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,330,000
Cost of goods sold 890,000
Gross margin 440,000
Operating expenses 393,571
Net operating income 46,429
Interest expense 10,000
Net income before taxes 36,429
Income taxes (30%) 10,929
Net income $ 25,500
Dividends on common stock during Year 2 totaled $500. The market price of common stock at
the end of Year 2 was $8.06 per share.
The company’s operating cycle for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
Version 1 149
A) 70.8 days
B) 10.0 days
C) 87.7 days
D) 148.5 days
231) Mahoe Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 105,000 $ 190,000
Accounts receivable, net 255,000 220,000
Inventory 206,000 200,000
Prepaid expenses 44,000 50,000
Total current assets 610,000 660,000
Plant and equipment, net 1,065,000 970,000
Total assets $ 1,675,000 $ 1,630,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 119,000 $ 110,000
Accrued liabilities 88,000 80,000
Notes payable, short term 53,000 50,000
Total current liabilities 260,000 240,000
Bonds payable 110,000 110,000
Total liabilities 370,000 350,000
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 985,000 960,000
Total stockholders’ equity 1,305,000 1,280,000
Total liabilities & stockholders’ equity $ 1,675,000 $
1,630,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,330,000
Cost of goods sold 890,000
Version 1 150
Gross margin 440,000
Operating expenses 393,571
Net operating income 46,429
Interest expense 10,000
Net income before taxes 36,429
Income taxes (30%) 10,929
Net income $ 25,500
Dividends on common stock during Year 2 totaled $500. The market price of common stock at
the end of Year 2 was $8.06 per share.
The company’s total asset turnover for Year 2 is closest to:
A) 1.25
B) 0.80
C) 6.57
D) 0.15
232) Mahoe Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 105,000 $ 190,000
Accounts receivable, net 255,000 220,000
Inventory 206,000 200,000
Prepaid expenses 44,000 50,000
Total current assets 610,000 660,000
Plant and equipment, net 1,065,000 970,000
Total assets $ 1,675,000 $ 1,630,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 119,000 $ 110,000
Accrued liabilities 88,000 80,000
Notes payable, short term 53,000 50,000
Total current liabilities 260,000 240,000
Bonds payable 110,000 110,000
Total liabilities 370,000 350,000
Stockholders’ equity:
Version 1 151
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 985,000 960,000
Total stockholders’ equity 1,305,000 1,280,000
Total liabilities & stockholders’ equity $ 1,675,000 $
1,630,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,330,000
Cost of goods sold 890,000
Gross margin 440,000
Operating expenses 393,571
Net operating income 46,429
Interest expense 10,000
Net income before taxes 36,429
Income taxes (30%) 10,929
Net income $ 25,500
Dividends on common stock during Year 2 totaled $500. The market price of common stock at
the end of Year 2 was $8.06 per share.
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
233) Burdick Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 266,000 $ 250,000
Inventory $ 162,000 $ 190,000
Total assets $ 1,415,000 $ 1,390,000
Total stockholders’ equity $ 991,000 $ 970,000
Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was
$860,000.
The company’s operating cycle for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
Version 1 152
A) 10.4 days
B) 79.5 days
C) 141.3 days
D) 72.2 days
234) Burdick Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 266,000 $ 250,000
Inventory $ 162,000 $ 190,000
Total assets $ 1,415,000 $ 1,390,000
Total stockholders’ equity $ 991,000 $ 970,000
Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was
$860,000.
The company’s total asset turnover for Year 2 is closest to:
A) 0.99
B) 0.19
C) 5.32
D) 1.01
235) Burdick Corporation has provided the following financial data from its balance sheet:
Year 2 Year 1
Accounts receivable, net $ 266,000 $ 250,000
Inventory $ 162,000 $ 190,000
Total assets $ 1,415,000 $ 1,390,000
Total stockholders’ equity $ 991,000 $ 970,000
Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was
$860,000.
The company’s equity multiplier at the end of Year 2 is closest to:
A) 0.70
B) 1.43
C) 2.34
D) 0.43
Version 1 153
236) Financial statements for Narstad Corporation appear below:
Narstad Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 100 $ 100
Accounts receivable, net 220 190
Inventory 190 180
Prepaid expenses 10 20
Total current assets 520 490
Plant & equipment, net 1,940 1,940
Total assets $ 2,460 $ 2,430
Current liabilities:
Accounts payable $ 150 $ 150
Accrued liabilities 90 70
Notes payable, short term 100 150
Total current liabilities 340 370
Bonds payable 310 300
Total liabilities 650 670
Stockholders’ equity:
Common stock, $2 par 180 180
Additional paid-in capital 330 330
Retained earnings 1,300 1,250
Total stockholders’ equity 1,810 1,760
Total liabilities & stockholders’ equity $ 2,460 $ 2,430
Narstad Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,770
Cost of goods sold 1,230
Gross margin 540
Selling and administrative expense 210
Net operating income 330
Interest expense 30
Net income before taxes 300
Income taxes (30%) 90
Net income $ 210
Version 1 154
Narstad Corporation’s times interest earned ratio for Year 2 was closest to:
A) 11.0
B) 10.0
C) 18.0
D) 7.0
237) Financial statements for Narstad Corporation appear below:
Narstad Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities $ 100 $ 100
Accounts receivable, net 220 190
Inventory 190 180
Prepaid expenses 10 20
Total current assets 520 490
Plant & equipment, net 1,940 1,940
Total assets $ 2,460 $ 2,430
Current liabilities:
Accounts payable $ 150 $ 150
Accrued liabilities 90 70
Notes payable, short term 100 150
Total current liabilities 340 370
Bonds payable 310 300
Total liabilities 650 670
Stockholders’ equity:
Common stock, $2 par 180 180
Additional paid-in capital 330 330
Retained earnings 1,300 1,250
Total stockholders’ equity 1,810 1,760
Total liabilities & stockholders’ equity $ 2,460 $ 2,430
Narstad Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $ 1,770
Version 1 155
Cost of goods sold 1,230
Gross margin 540
Selling and administrative expense 210
Net operating income 330
Interest expense 30
Net income before taxes 300
Income taxes (30%) 90
Net income $ 210
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
238) Lasch Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,333,000 $ 1,320,000
Accounts payable $ 158,000 $ 160,000
Accrued liabilities $ 43,000 $ 40,000
Notes payable, short term $ 47,000 $ 50,000
Bonds payable $ 250,000 $ 250,000
Total liabilities $ 498,000 $ 500,000
Total stockholders’ equity $ 835,000 $ 820,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,250,000
Cost of goods sold 840,000
Gross margin 410,000
Operating expenses 366,286
Net operating income 43,714
Interest expense 18,000
Net income before taxes 25,714
Income taxes (30%) 7,714
Net income $ 18,000
The company’s times interest earned ratio for Year 2 is closest to:
Version 1 156
A) 1.43
B) 3.47
C) 2.43
D) 1.00
239) Lasch Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,333,000 $ 1,320,000
Accounts payable $ 158,000 $ 160,000
Accrued liabilities $ 43,000 $ 40,000
Notes payable, short term $ 47,000 $ 50,000
Bonds payable $ 250,000 $ 250,000
Total liabilities $ 498,000 $ 500,000
Total stockholders’ equity $ 835,000 $ 820,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,250,000
Cost of goods sold 840,000
Gross margin 410,000
Operating expenses 366,286
Net operating income 43,714
Interest expense 18,000
Net income before taxes 25,714
Income taxes (30%) 7,714
Net income $ 18,000
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
240) Lasch Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Version 1 157
Total assets $ 1,333,000 $ 1,320,000
Accounts payable $ 158,000 $ 160,000
Accrued liabilities $ 43,000 $ 40,000
Notes payable, short term $ 47,000 $ 50,000
Bonds payable $ 250,000 $ 250,000
Total liabilities $ 498,000 $ 500,000
Total stockholders’ equity $ 835,000 $ 820,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,250,000
Cost of goods sold 840,000
Gross margin 410,000
Operating expenses 366,286
Net operating income 43,714
Interest expense 18,000
Net income before taxes 25,714
Income taxes (30%) 7,714
Net income $ 18,000
The company’s equity multiplier at the end of Year 2 is closest to:
A) 1.60
B) 1.68
C) 0.63
D) 0.60
241) Deacon Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,232,000 $ 1,194,000
Total liabilities $ 482,000 $ 478,000
Total stockholders’ equity $ 750,000 $ 716,000
Net operating income (income before interest and taxes) $ 69,321
Interest expense $ 29,000
The company’s times interest earned ratio for Year 2 is closest to:
Version 1 158
A) 3.39
B) 1.39
C) 2.39
D) 0.67
242) Deacon Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,198,000 $ 1,160,000
Total liabilities $ 466,000 $ 460,000
Total stockholders’ equity $ 732,000 $ 700,000
Net operating income (income before interest and taxes) $ 67,769
Interest expense $ 13,000
The company’s times interest earned ratio for Year 2 is closest to:
A) 2.74
B) 8.02
C) 5.21
D) 4.21
243) Deacon Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,344,400 $ 1,354,100
Total liabilities $ 610,000 $ 462,100
Total stockholders’ equity $ 734,400 $ 892,000
Net operating income (income before interest and taxes) $ 69,903
Interest expense $ 35,000
The company’s debt-to-equity ratio at the end of Year 2 is closest to:
Version 1 159
A) 0.45
B) 0.50
C) 0.66
D) 0.83
244) Deacon Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,198,000 $ 1,160,000
Total liabilities $ 466,000 $ 460,000
Total stockholders’ equity $ 732,000 $ 700,000
Net operating income (income before interest and taxes) $ 67,769
Interest expense $ 13,000
The company’s debt-to-equity ratio at the end of Year 2 is closest to:
A) 0.29
B) 0.38
C) 0.23
D) 0.64
245) Deacon Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,198,000 $ 1,160,000
Total liabilities $ 466,000 $ 460,000
Total stockholders’ equity $ 732,000 $ 700,000
Net operating income (income before interest and taxes) $ 67,769
Interest expense $ 13,000
The company’s equity multiplier at the end of Year 2 is closest to:
Version 1 160
A) 0.64
B) 1.65
C) 1.57
D) 0.61
246) Fayer Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 161,000 $ 180,000
Accounts receivable, net 110,000 130,000
Inventory 181,000 160,000
Prepaid expenses 57,000 70,000
Total current assets 509,000 540,000
Plant and equipment, net 1,044,000 960,000
Total assets $ 1,553,000 $ 1,500,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 188,000 $ 160,000
Accrued liabilities 57,000 60,000
Notes payable, short term 36,000 40,000
Total current liabilities 281,000 260,000
Bonds payable 200,000 200,000
Total liabilities 481,000 460,000
Stockholders’ equity:
Common stock, $4 par value 200,000 200,000
Additional paid-in capital 80,000 80,000
Retained earnings 792,000 760,000
Total stockholders’ equity 1,072,000 1,040,000
Total liabilities & stockholders’ equity $ 1,553,000 $
1,500,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,220,000
Cost of goods sold 760,000
Version 1 161
Gross margin 460,000
Operating expenses 389,846
Net operating income 70,154
Interest expense 14,000
Net income before taxes 56,154
Income taxes (35%) 19,654
Net income $ 36,500
Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at
the end of Year 2 was $10.88 per share.
The company’s times interest earned ratio for Year 2 is closest to:
A) 7.71
B) 2.61
C) 5.01
D) 4.01
247) Fayer Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 161,000 $ 180,000
Accounts receivable, net 110,000 130,000
Inventory 181,000 160,000
Prepaid expenses 57,000 70,000
Total current assets 509,000 540,000
Plant and equipment, net 1,044,000 960,000
Total assets $ 1,553,000 $ 1,500,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 188,000 $ 160,000
Accrued liabilities 57,000 60,000
Notes payable, short term 36,000 40,000
Total current liabilities 281,000 260,000
Bonds payable 200,000 200,000
Total liabilities 481,000 460,000
Stockholders’ equity:
Version 1 162
Common stock, $4 par value 200,000 200,000
Additional paid-in capital 80,000 80,000
Retained earnings 792,000 760,000
Total stockholders’ equity 1,072,000 1,040,000
Total liabilities & stockholders’ equity $ 1,553,000 $
1,500,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,220,000
Cost of goods sold 760,000
Gross margin 460,000
Operating expenses 389,846
Net operating income 70,154
Interest expense 14,000
Net income before taxes 56,154
Income taxes (35%) 19,654
Net income $ 36,500
Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at
the end of Year 2 was $10.88 per share.
The company’s debt-to-equity ratio at the end of Year 2 is closest to:
A) 0.22
B) 0.27
C) 0.45
D) 0.19
248) Fayer Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 161,000 $ 180,000
Accounts receivable, net 110,000 130,000
Inventory 181,000 160,000
Prepaid expenses 57,000 70,000
Total current assets 509,000 540,000
Plant and equipment, net 1,044,000 960,000
Total assets $ 1,553,000 $ 1,500,000
Version 1 163
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 188,000 $ 160,000
Accrued liabilities 57,000 60,000
Notes payable, short term 36,000 40,000
Total current liabilities 281,000 260,000
Bonds payable 200,000 200,000
Total liabilities 481,000 460,000
Stockholders’ equity:
Common stock, $4 par value 200,000 200,000
Additional paid-in capital 80,000 80,000
Retained earnings 792,000 760,000
Total stockholders’ equity 1,072,000 1,040,000
Total liabilities & stockholders’ equity $ 1,553,000 $
1,500,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,220,000
Cost of goods sold 760,000
Gross margin 460,000
Operating expenses 389,846
Net operating income 70,154
Interest expense 14,000
Net income before taxes 56,154
Income taxes (35%) 19,654
Net income $ 36,500
Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at
the end of Year 2 was $10.88 per share.
The company’s equity multiplier at the end of Year 2 is closest to:
A) 0.69
B) 2.23
C) 0.45
D) 1.45
249) Tweedle Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Version 1 164
Year 2 Year 1
Assets
Current assets:
Cash $ 140 $ 130
Accounts receivable, net 200 210
Inventory 150 180
Prepaid expenses 20 20
Total current assets 510 540
Plant and equipment, net 950 910
Total assets $ 1,460 $ 1,450
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 70 70
Notes payable, short term 70 60
Total current liabilities 270 280
Bonds payable 170 190
Total liabilities 440 470
Stockholders’ equity:
Common stock, $1 par value 200 200
Additional paid-in capital 320 320
Retained earnings 500 460
Total stockholders’ equity 1,020 980
Total liabilities & stockholders’ equity $ 1,460 $ 1,450
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,190
Cost of goods sold 710
Gross margin 480
Selling and administrative expense 226
Net operating income 254
Interest expense 25
Net income before taxes 229
Income taxes (30%) 69
Net income $ 160
The times interest earned ratio for Year 2 is closest to:
Version 1 165
A) 6.40
B) 9.16
C) 14.51
D) 10.16
250) Tweedle Corporation’s most recent balance sheet and income statement appear below:
Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 140 $ 130
Accounts receivable, net 200 210
Inventory 150 180
Prepaid expenses 20 20
Total current assets 510 540
Plant and equipment, net 950 910
Total assets $ 1,460 $ 1,450
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 130 $ 150
Accrued liabilities 70 70
Notes payable, short term 70 60
Total current liabilities 270 280
Bonds payable 170 190
Total liabilities 440 470
Stockholders’ equity:
Common stock, $1 par value 200 200
Additional paid-in capital 320 320
Retained earnings 500 460
Total stockholders’ equity 1,020 980
Total liabilities & stockholders’ equity $ 1,460 $ 1,450
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,190
Version 1 166
Cost of goods sold 710
Gross margin 480
Selling and administrative expense 226
Net operating income 254
Interest expense 25
Net income before taxes 229
Income taxes (30%) 69
Net income $ 160
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
251) Data from Lheureux Corporation’s most recent balance sheet and the company’s income
statement appear below:
Year 2 Year 1
Total assets $ 1,440 $ 1,480
Total liabilities $ 400 $ 450
Total stockholders’ equity $ 1,040 $ 1,030
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,280
Cost of goods sold 850
Gross margin 430
Selling and administrative expense 355
Net operating income 75
Interest expense 18
Net income before taxes 57
Income taxes (30%) 17
Net income $ 40
The times interest earned ratio for Year 2 is closest to:
A) 2.22
B) 4.17
C) 3.17
D) 5.95
Version 1 167
252) Data from Lheureux Corporation’s most recent balance sheet and the company’s income
statement appear below:
Year 2 Year 1
Total assets $ 1,440 $ 1,480
Total liabilities $ 400 $ 450
Total stockholders’ equity $ 1,040 $ 1,030
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,280
Cost of goods sold 850
Gross margin 430
Selling and administrative expense 355
Net operating income 75
Interest expense 18
Net income before taxes 57
Income taxes (30%) 17
Net income $ 40
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
253) Neef Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,302,000 $ 1,330,000
Total stockholders’ equity $ 885,000 $ 880,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,420,000
Cost of goods sold 890,000
Gross margin 530,000
Operating expenses 493,000
Net operating income 37,000
Interest expense 17,000
Net income before taxes 20,000
Version 1 168
Income taxes (35%) 7,000
Net income $ 13,000
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%
254) Neef Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,302,000 $ 1,330,000
Total stockholders’ equity $ 885,000 $ 880,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,420,000
Cost of goods sold 890,000
Gross margin 530,000
Operating expenses 493,000
Net operating income 37,000
Interest expense 17,000
Net income before taxes 20,000
Income taxes (35%) 7,000
Net income $ 13,000
The company’s gross margin percentage for Year 2 is closest to:
A) 59.6%
B) 2.5%
C) 37.3%
D) 4076.9%
255) Neef Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,302,000 $ 1,330,000
Total stockholders’ equity $ 885,000 $ 880,000
Version 1 169
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,420,000
Cost of goods sold 890,000
Gross margin 530,000
Operating expenses 493,000
Net operating income 37,000
Interest expense 17,000
Net income before taxes 20,000
Income taxes (35%) 7,000
Net income $ 13,000
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%
256) Neef Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,302,000 $ 1,330,000
Total stockholders’ equity $ 885,000 $ 880,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,420,000
Cost of goods sold 890,000
Gross margin 530,000
Operating expenses 493,000
Net operating income 37,000
Interest expense 17,000
Net income before taxes 20,000
Income taxes (35%) 7,000
Net income $ 13,000
The company’s return on equity for Year 2 is closest to:
Version 1 170
A) 67.25%
B) 2.27%
C) 1.47%
D) 4.19%
257) 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.
The company’s net profit margin percentage for Year 2 is closest to:
A) 1.9%
B) 2.7%
C) 3.3%
D) 38.1%
258) 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.
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,340,000
Cost of goods sold 830,000
Gross margin 510,000
Operating expenses 465,143
Net operating income 44,857
Interest expense 9,000
Net income before taxes 35,857
Income taxes (30%) 10,757
Net income $ 25,100
The company’s gross margin percentage for Year 2 is closest to:
Version 1 171
A) 4.9%
B) 61.4%
C) 38.1%
D) 2031.9%
259) 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.
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,340,000
Cost of goods sold 830,000
Gross margin 510,000
Operating expenses 465,143
Net operating income 44,857
Interest expense 9,000
Net income before taxes 35,857
Income taxes (30%) 10,757
Net income $ 25,100
The company’s return on total assets for Year 2 is closest to:
A) 2.09%
B) 2.08%
C) 1.67%
D) 1.66%
260) 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.
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,340,000
Cost of goods sold 830,000
Gross margin 510,000
Operating expenses 465,143
Net operating income 44,857
Version 1 172
Interest expense 9,000
Net income before taxes 35,857
Income taxes (30%) 10,757
Net income $ 25,100
The company’s return on equity for Year 2 is closest to:
A) 3.02%
B) 3.77%
C) 2.11%
D) 79.14%
261) Kearin Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 33,000 $ 100,000
Accounts receivable, net 281,000 250,000
Inventory 122,000 130,000
Prepaid expenses 68,000 80,000
Total current assets 504,000 560,000
Plant and equipment, net 1,016,000 980,000
Total assets $ 1,520,000 $ 1,540,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 80,000 $ 100,000
Accrued liabilities 31,000 30,000
Notes payable, short term 56,000 70,000
Total current liabilities 167,000 200,000
Bonds payable 260,000 260,000
Total liabilities 427,000 460,000
Stockholders’ equity:
Common stock, $5 par value 500,000 500,000
Additional paid-in capital 70,000 70,000
Retained earnings 523,000 510,000
Total stockholders’ equity 1,093,000 1,080,000
Version 1 173
Total liabilities & stockholders’ equity $ 1,520,000 $
1,540,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,300,000
Cost of goods sold 800,000
Gross margin 500,000
Operating expenses 448,692
Net operating income 51,308
Interest expense 19,000
Net income before taxes 32,308
Income taxes (35%) 11,308
Net income $ 21,000
Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at
the end of Year 2 was $2.02 per share.
The company’s net profit margin percentage for Year 2 is closest to:
A) 3.9%
B) 38.5%
C) 2.5%
D) 1.6%
262) Kearin Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 33,000 $ 100,000
Accounts receivable, net 281,000 250,000
Inventory 122,000 130,000
Prepaid expenses 68,000 80,000
Total current assets 504,000 560,000
Plant and equipment, net 1,016,000 980,000
Total assets $ 1,520,000 $ 1,540,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 80,000 $ 100,000
Version 1 174
Accrued liabilities 31,000 30,000
Notes payable, short term 56,000 70,000
Total current liabilities 167,000 200,000
Bonds payable 260,000 260,000
Total liabilities 427,000 460,000
Stockholders’ equity:
Common stock, $5 par value 500,000 500,000
Additional paid-in capital 70,000 70,000
Retained earnings 523,000 510,000
Total stockholders’ equity 1,093,000 1,080,000
Total liabilities & stockholders’ equity $ 1,520,000 $
1,540,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,300,000
Cost of goods sold 800,000
Gross margin 500,000
Operating expenses 448,692
Net operating income 51,308
Interest expense 19,000
Net income before taxes 32,308
Income taxes (35%) 11,308
Net income $ 21,000
Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at
the end of Year 2 was $2.02 per share.
The company’s gross margin percentage for Year 2 is closest to:
A) 62.5%
B) 4.2%
C) 38.5%
D) 2381.0%
263) Kearin Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Version 1 175
Cash $ 33,000 $ 100,000
Accounts receivable, net 281,000 250,000
Inventory 122,000 130,000
Prepaid expenses 68,000 80,000
Total current assets 504,000 560,000
Plant and equipment, net 1,016,000 980,000
Total assets $ 1,520,000 $ 1,540,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 80,000 $ 100,000
Accrued liabilities 31,000 30,000
Notes payable, short term 56,000 70,000
Total current liabilities 167,000 200,000
Bonds payable 260,000 260,000
Total liabilities 427,000 460,000
Stockholders’ equity:
Common stock, $5 par value 500,000 500,000
Additional paid-in capital 70,000 70,000
Retained earnings 523,000 510,000
Total stockholders’ equity 1,093,000 1,080,000
Total liabilities & stockholders’ equity $ 1,520,000 $
1,540,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,300,000
Cost of goods sold 800,000
Gross margin 500,000
Operating expenses 448,692
Net operating income 51,308
Interest expense 19,000
Net income before taxes 32,308
Income taxes (35%) 11,308
Net income $ 21,000
Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at
the end of Year 2 was $2.02 per share.
The company’s return on total assets for Year 2 is closest to:
A) 1.38%
B) 2.18%
C) 1.37%
D) 2.19%
Version 1 176
264) Kearin Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 33,000 $ 100,000
Accounts receivable, net 281,000 250,000
Inventory 122,000 130,000
Prepaid expenses 68,000 80,000
Total current assets 504,000 560,000
Plant and equipment, net 1,016,000 980,000
Total assets $ 1,520,000 $ 1,540,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 80,000 $ 100,000
Accrued liabilities 31,000 30,000
Notes payable, short term 56,000 70,000
Total current liabilities 167,000 200,000
Bonds payable 260,000 260,000
Total liabilities 427,000 460,000
Stockholders’ equity:
Common stock, $5 par value 500,000 500,000
Additional paid-in capital 70,000 70,000
Retained earnings 523,000 510,000
Total stockholders’ equity 1,093,000 1,080,000
Total liabilities & stockholders’ equity $ 1,520,000 $
1,540,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,300,000
Cost of goods sold 800,000
Gross margin 500,000
Operating expenses 448,692
Net operating income 51,308
Interest expense 19,000
Net income before taxes 32,308
Income taxes (35%) 11,308
Net income $ 21,000
Version 1 177
Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at
the end of Year 2 was $2.02 per share.
The company’s return on equity for Year 2 is closest to:
A) 71.44%
B) 4.72%
C) 2.97%
D) 1.93%
265) Doonan Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,489,000 $ 1,440,000
Stockholders’ equity:
Common stock, $4 par value $ 360,000 $ 360,000
Additional paid-in capital $ 70,000 $ 70,000
Retained earnings $ 570,000 $ 550,000
Total stockholders’ equity $ 1,000,000 $ 980,000
Interest expense $ 15,000
Income taxes (35%) $ 14,162
Net income $ 26,300
The market price of common stock at the end of Year 2 was $4.79 per share.
The company’s return on total assets for Year 2 is closest to:
A) 1.77%
B) 2.46%
C) 1.80%
D) 2.42%
266) Doonan Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,489,000 $ 1,440,000
Stockholders’ equity:
Version 1 178
Common stock, $4 par value $ 360,000 $ 360,000
Additional paid-in capital $ 70,000 $ 70,000
Retained earnings $ 570,000 $ 550,000
Total stockholders’ equity $ 1,000,000 $ 980,000
Interest expense $ 15,000
Income taxes (35%) $ 14,162
Net income $ 26,300
The market price of common stock at the end of Year 2 was $4.79 per share.
The company’s return on equity for Year 2 is closest to:
A) 5.60%
B) 4.09%
C) 2.66%
D) 68.28%
267) Doonan Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,489,000 $ 1,440,000
Stockholders’ equity:
Common stock, $4 par value $ 360,000 $ 360,000
Additional paid-in capital $ 70,000 $ 70,000
Retained earnings $ 570,000 $ 550,000
Total stockholders’ equity $ 1,000,000 $ 980,000
Interest expense $ 15,000
Income taxes (35%) $ 14,162
Net income $ 26,300
The market price of common stock at the end of Year 2 was $4.79 per share.
The company’s earnings per share for Year 2 is closest to:
Version 1 179
A) $6.33 per share
B) $0.29 per share
C) $0.45 per share
D) $0.62 per share
268) Doonan Corporation has provided the following financial data from its balance sheet and
income statement:
Year 2 Year 1
Total assets $ 1,489,000 $ 1,440,000
Stockholders’ equity:
Common stock, $4 par value $ 360,000 $ 360,000
Additional paid-in capital $ 70,000 $ 70,000
Retained earnings $ 570,000 $ 550,000
Total stockholders’ equity $ 1,000,000 $ 980,000
Interest expense $ 15,000
Income taxes (35%) $ 14,162
Net income $ 26,300
The market price of common stock at the end of Year 2 was $4.79 per share.
The company’s price-earnings ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 0.76
B) 10.64
C) 16.52
D) 7.73
269) Settles Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Version 1 180
Cash $ 142,000 $ 110,000
Accounts receivable, net 104,000 120,000
Inventory 119,000 120,000
Prepaid expenses 37,000 40,000
Total current assets 402,000 390,000
Plant and equipment, net 717,000 720,000
Total assets $ 1,119,000 $ 1,110,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000 $ 180,000
Accrued liabilities 84,000 70,000
Notes payable, short term 66,000 60,000
Total current liabilities 306,000 310,000
Bonds payable 250,000 250,000
Total liabilities 556,000 560,000
Stockholders’ equity:
Common stock, $4 par value 240,000 240,000
Additional paid-in capital 90,000 90,000
Retained earnings 233,000 220,000
Total stockholders’ equity 563,000 550,000
Total liabilities & stockholders’ equity $ 1,119,000 $
1,110,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,360,000
Cost of goods sold 850,000
Gross margin 510,000
Operating expenses 462,692
Net operating income 47,308
Interest expense 19,000
Net income before taxes 28,308
Income taxes (35%) 9,908
Net income $ 18,400
Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at
the end of Year 2 was $5.89 per share.
The company’s return on total assets for Year 2 is closest to:
A) 2.75%
B) 1.64%
C) 1.65%
D) 2.76%
Version 1 181
270) Settles Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 142,000 $ 110,000
Accounts receivable, net 104,000 120,000
Inventory 119,000 120,000
Prepaid expenses 37,000 40,000
Total current assets 402,000 390,000
Plant and equipment, net 717,000 720,000
Total assets $ 1,119,000 $ 1,110,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000 $ 180,000
Accrued liabilities 84,000 70,000
Notes payable, short term 66,000 60,000
Total current liabilities 306,000 310,000
Bonds payable 250,000 250,000
Total liabilities 556,000 560,000
Stockholders’ equity:
Common stock, $4 par value 240,000 240,000
Additional paid-in capital 90,000 90,000
Retained earnings 233,000 220,000
Total stockholders’ equity 563,000 550,000
Total liabilities & stockholders’ equity $ 1,119,000 $
1,110,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,360,000
Cost of goods sold 850,000
Gross margin 510,000
Operating expenses 462,692
Net operating income 47,308
Interest expense 19,000
Net income before taxes 28,308
Income taxes (35%) 9,908
Net income $ 18,400
Version 1 182
Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at
the end of Year 2 was $5.89 per share.
The company’s return on equity for Year 2 is closest to:
A) 3.31%
B) 8.50%
C) 5.09%
D) 50.52%
271) Settles Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 142,000 $ 110,000
Accounts receivable, net 104,000 120,000
Inventory 119,000 120,000
Prepaid expenses 37,000 40,000
Total current assets 402,000 390,000
Plant and equipment, net 717,000 720,000
Total assets $ 1,119,000 $ 1,110,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000 $ 180,000
Accrued liabilities 84,000 70,000
Notes payable, short term 66,000 60,000
Total current liabilities 306,000 310,000
Bonds payable 250,000 250,000
Total liabilities 556,000 560,000
Stockholders’ equity:
Common stock, $4 par value 240,000 240,000
Additional paid-in capital 90,000 90,000
Retained earnings 233,000 220,000
Total stockholders’ equity 563,000 550,000
Total liabilities & stockholders’ equity $ 1,119,000 $
1,110,000
Version 1 183
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,360,000
Cost of goods sold 850,000
Gross margin 510,000
Operating expenses 462,692
Net operating income 47,308
Interest expense 19,000
Net income before taxes 28,308
Income taxes (35%) 9,908
Net income $ 18,400
Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at
the end of Year 2 was $5.89 per share.
The company’s earnings per share for Year 2 is closest to:
A) $0.31 per share
B) $0.47 per share
C) $0.79 per share
D) $3.88 per share
272) Settles Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 142,000 $ 110,000
Accounts receivable, net 104,000 120,000
Inventory 119,000 120,000
Prepaid expenses 37,000 40,000
Total current assets 402,000 390,000
Plant and equipment, net 717,000 720,000
Total assets $ 1,119,000 $ 1,110,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 156,000 $ 180,000
Accrued liabilities 84,000 70,000
Notes payable, short term 66,000 60,000
Version 1 184
Total current liabilities 306,000 310,000
Bonds payable 250,000 250,000
Total liabilities 556,000 560,000
Stockholders’ equity:
Common stock, $4 par value 240,000 240,000
Additional paid-in capital 90,000 90,000
Retained earnings 233,000 220,000
Total stockholders’ equity 563,000 550,000
Total liabilities & stockholders’ equity $ 1,119,000 $
1,110,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,360,000
Cost of goods sold 850,000
Gross margin 510,000
Operating expenses 462,692
Net operating income 47,308
Interest expense 19,000
Net income before taxes 28,308
Income taxes (35%) 9,908
Net income $ 18,400
Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at
the end of Year 2 was $5.89 per share.
The company’s price-earnings ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 19.00
B) 12.53
C) 7.46
D) 1.52
273) 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.
The company’s earnings per share is closest to:
Version 1 185
A) $7.37 per share
B) $0.45 per share
C) $0.30 per share
D) $0.19 per share
274) 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.
The company’s price-earnings ratio is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 19.79
B) 0.51
C) 8.36
D) 12.53
275) 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.
The company’s dividend payout ratio is closest to: (Round your intermediate calculations to
2 decimal places.)
A) 1.3%
B) 1.7%
C) 17.1%
D) 26.3%
Version 1 186
276) 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.
The company’s dividend yield ratio is closest to: (Round your intermediate calculations to 2
decimal places.)
A) 1.7%
B) 17.1%
C) 1.3%
D) 26.3%
277) 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.
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
278) Sperle Corporation has provided the following data concerning its stockholders’ equity
accounts:
Year 2 Year 1
Stockholders’ equity:
Common stock, $5 par value $ 400,000 $ 400,000
Additional paid-in capital 60,000 60,000
Retained earnings 654,000 630,000
Total stockholders’ equity $ 1,114,000 $ 1,090,000
Version 1 187
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.
The company’s earnings per share for Year 2 is closest to:
A) $8.18 per share
B) $0.38 per share
C) $0.54 per share
D) $0.68 per share
279) Sperle Corporation has provided the following data concerning its stockholders’ equity
accounts:
Year 2 Year 1
Stockholders’ equity:
Common stock, $5 par value $ 400,000 $ 400,000
Additional paid-in capital 60,000 60,000
Retained earnings 654,000 630,000
Total stockholders’ equity $ 1,114,000 $ 1,090,000
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.
The company’s price-earnings ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 0.38
B) 4.53
C) 5.70
D) 8.11
280) Sperle Corporation has provided the following data concerning its stockholders’ equity
accounts:
Year 2 Year 1
Stockholders’ equity:
Common stock, $5 par value $ 400,000 $ 400,000
Additional paid-in capital 60,000 60,000
Retained earnings 654,000 630,000
Total stockholders’ equity $ 1,114,000 $ 1,090,000
Version 1 188
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.
The company’s dividend payout ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 1.6%
B) 21.1%
C) 2.6%
D) 14.7%
281) Sperle Corporation has provided the following data concerning its stockholders’ equity
accounts:
Year 2 Year 1
Stockholders’ equity:
Common stock, $5 par value $ 400,000 $ 400,000
Additional paid-in capital 60,000 60,000
Retained earnings 654,000 630,000
Total stockholders’ equity $ 1,114,000 $ 1,090,000
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.
The company’s dividend yield ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 21.1%
B) 2.6%
C) 1.6%
D) 14.7%
282) Sperle Corporation has provided the following data concerning its stockholders’ equity
accounts:
Year 2 Year 1
Stockholders’ equity:
Common stock, $5 par value $ 400,000 $ 400,000
Additional paid-in capital 60,000 60,000
Retained earnings 654,000 630,000
Version 1 189
Total stockholders’ equity $ 1,114,000 $ 1,090,000
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.
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
283) Symons Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 225,000 $ 160,000
Accounts receivable, net 191,000 180,000
Inventory 96,000 110,000
Prepaid expenses 91,000 80,000
Total current assets 603,000 530,000
Plant and equipment, net 810,000 840,000
Total assets $ 1,413,000 $ 1,370,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 226,000 $ 190,000
Accrued liabilities 66,000 70,000
Notes payable, short term 54,000 50,000
Total current liabilities 346,000 310,000
Bonds payable 170,000 170,000
Total liabilities 516,000 480,000
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 577,000 570,000
Total stockholders’ equity 897,000 890,000
Version 1 190
Total liabilities & stockholders’ equity $ 1,413,000 $
1,370,000
Income Statement
For the Year Ended December 31
Sales (all on account) $ 1,260,000
Cost of goods sold 760,000
Gross margin 500,000
Operating expenses 473,429
Net operating income 26,571
Interest expense 13,000
Net income before taxes 13,571
Income taxes (30%) 4,071
Net income $ 9,500
Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at
the end of Year 2 was $2.01 per share.
The company’s earnings per share for Year 2 is closest to:
A) $0.53 per share
B) $11.54 per share
C) $0.19 per share
D) $0.27 per share
284) Symons Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 225,000 $ 160,000
Accounts receivable, net 191,000 180,000
Inventory 96,000 110,000
Prepaid expenses 91,000 80,000
Total current assets 603,000 530,000
Plant and equipment, net 810,000 840,000
Total assets $ 1,413,000 $ 1,370,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 226,000 $ 190,000
Version 1 191
Accrued liabilities 66,000 70,000
Notes payable, short term 54,000 50,000
Total current liabilities 346,000 310,000
Bonds payable 170,000 170,000
Total liabilities 516,000 480,000
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 577,000 570,000
Total stockholders’ equity 897,000 890,000
Total liabilities & stockholders’ equity $ 1,413,000 $
1,370,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,260,000
Cost of goods sold 760,000
Gross margin 500,000
Operating expenses 473,429
Net operating income 26,571
Interest expense 13,000
Net income before taxes 13,571
Income taxes (30%) 4,071
Net income $ 9,500
Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at
the end of Year 2 was $2.01 per share.
The company’s price-earnings ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 3.79
B) 10.58
C) 0.17
D) 7.44
285) Symons Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Version 1 192
Cash $ 225,000 $ 160,000
Accounts receivable, net 191,000 180,000
Inventory 96,000 110,000
Prepaid expenses 91,000 80,000
Total current assets 603,000 530,000
Plant and equipment, net 810,000 840,000
Total assets $ 1,413,000 $ 1,370,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 226,000 $ 190,000
Accrued liabilities 66,000 70,000
Notes payable, short term 54,000 50,000
Total current liabilities 346,000 310,000
Bonds payable 170,000 170,000
Total liabilities 516,000 480,000
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 577,000 570,000
Total stockholders’ equity 897,000 890,000
Total liabilities & stockholders’ equity $ 1,413,000 $
1,370,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,260,000
Cost of goods sold 760,000
Gross margin 500,000
Operating expenses 473,429
Net operating income 26,571
Interest expense 13,000
Net income before taxes 13,571
Income taxes (30%) 4,071
Net income $ 9,500
Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at
the end of Year 2 was $2.01 per share.
The company’s dividend payout ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
Version 1 193
A) 26.3%
B) 2.5%
C) 18.4%
D) 1.0%
286) Symons Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 225,000 $ 160,000
Accounts receivable, net 191,000 180,000
Inventory 96,000 110,000
Prepaid expenses 91,000 80,000
Total current assets 603,000 530,000
Plant and equipment, net 810,000 840,000
Total assets $ 1,413,000 $ 1,370,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 226,000 $ 190,000
Accrued liabilities 66,000 70,000
Notes payable, short term 54,000 50,000
Total current liabilities 346,000 310,000
Bonds payable 170,000 170,000
Total liabilities 516,000 480,000
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 577,000 570,000
Total stockholders’ equity 897,000 890,000
Total liabilities & stockholders’ equity $ 1,413,000 $
1,370,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,260,000
Cost of goods sold 760,000
Version 1 194
Gross margin 500,000
Operating expenses 473,429
Net operating income 26,571
Interest expense 13,000
Net income before taxes 13,571
Income taxes (30%) 4,071
Net income $ 9,500
Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at
the end of Year 2 was $2.01 per share.
The company’s dividend yield ratio for Year 2 is closest to: (Round your intermediate
calculations to 2 decimal places.)
A) 1.0%
B) 18.4%
C) 26.3%
D) 2.5%
287) Symons Corporation has provided the following financial data:
Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash $ 225,000 $ 160,000
Accounts receivable, net 191,000 180,000
Inventory 96,000 110,000
Prepaid expenses 91,000 80,000
Total current assets 603,000 530,000
Plant and equipment, net 810,000 840,000
Total assets $ 1,413,000 $ 1,370,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 226,000 $ 190,000
Accrued liabilities 66,000 70,000
Notes payable, short term 54,000 50,000
Total current liabilities 346,000 310,000
Bonds payable 170,000 170,000
Total liabilities 516,000 480,000
Version 1 195
Stockholders’ equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital 70,000 70,000
Retained earnings 577,000 570,000
Total stockholders’ equity 897,000 890,000
Total liabilities & stockholders’ equity $ 1,413,000 $
1,370,000
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account) $ 1,260,000
Cost of goods sold 760,000
Gross margin 500,000
Operating expenses 473,429
Net operating income 26,571
Interest expense 13,000
Net income before taxes 13,571
Income taxes (30%) 4,071
Net income $ 9,500
Dividends on common stock during Year 2 totaled $2,500. The market price of common stock at
the end of Year 2 was $2.01 per share.
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
288) Vertical analysis of financial statements is accomplished by preparing common-size
statements.
⊚ true
⊚ false
289) 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
Version 1 196
290) A common-size financial statement is a vertical analysis in which each financial
statement account is expressed as a percentage.
⊚ true
⊚ false
291) The acid-test ratio is usually greater than the current ratio.
⊚ true
⊚ false
292) Liquidity refers to how quickly an asset can be converted into cash.
⊚ true
⊚ false
293) 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
294) A company could improve its acid-test ratio by selling some equipment it no longer needs
for cash.
⊚ true
⊚ false
295) Acquiring land by taking out a long-term mortgage will not affect the current ratio.
⊚ true
⊚ false
Version 1 197
296) Purchasing marketable securities with cash will have no effect on a company’s acid-test
ratio.
⊚ true
⊚ false
297) As the accounts receivable turnover ratio decreases, the average collection period
increases.
⊚ true
⊚ false
298) 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
299) All other things the same, purchasing inventory would decrease the inventory turnover
ratio.
⊚ true
⊚ false
300) Buying inventory in large lots to take advantage of quantity discounts can be responsible
for a high inventory turnover ratio.
⊚ true
⊚ false
301) 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.
Version 1 198
⊚ true
⊚ false
302) All other things the same, purchasing merchandise inventory would have no effect on the
accounts receivable turnover ratio at a retailer.
⊚ true
⊚ false
303) All other things the same, when a customer purchases an item for cash, the accounts
receivable turnover ratio increases.
⊚ true
⊚ false
304) As the inventory turnover increases, the average sales period decreases.
⊚ true
⊚ false
305) To increase total asset turnover, management must either increase sales or reduce total
stockholders’ equity.
⊚ true
⊚ false
306) The formula for the average sale period is: Average sale period = Accounts receivable
turnover ÷ Inventory turnover.
⊚ true
⊚ false
Version 1 199
307) The formula for total asset turnover is: Total asset turnover = Total assets ÷ Total
stockholders’ equity.
⊚ true
⊚ false
308) 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
309) 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
310) 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
311) 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
312) Issuing common stock will decrease a company’s financial leverage.
⊚ true
⊚ false
Version 1 200
313) The formula for the times interest earned ratio is: Times interest earned = Earnings before
interest expense and income taxes ÷ Interest expense.
⊚ true
⊚ false
314) 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
315) The formula for the return on equity is: Return on equity = Net income ÷ Average total
stockholders’ equity.
⊚ true
⊚ false
316) When computing the return on equity, retained earnings should be excluded from the
average total stockholders’ equity.
⊚ true
⊚ false
317) 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
Version 1 201
318) When a company sells used equipment for a loss, the net profit margin percentage is
unaffected.
⊚ true
⊚ false
319) 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
320) 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
321) The gross margin percentage is computed by dividing the gross margin by net income
before interest and taxes.
⊚ true
⊚ false
322) The formula for the net profit margin percentage is: Net profit margin percentage = Net
income ÷ Sales.
⊚ true
⊚ false
323) When fixed costs are included in the cost of goods sold, the gross margin percentage
should increase and decrease with sales volume.
⊚ true
⊚ false
Version 1 202
324) The gross margin percentage is computed by dividing sales by the gross margin.
⊚ true
⊚ false
325) A high price-earnings ratio means that investors are willing to pay a premium for the
company’s stock.
⊚ true
⊚ false
326) 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
327) The dividend payout ratio is equal to the dividend per share divided by the earnings per
share.
⊚ true
⊚ false
328) 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
329) Purchasing inventory on credit increases the book value per share of a retailer.
⊚ true
⊚ false
Version 1 203
330) The price-earnings ratio is determined by dividing market price per share of stock by the
earnings per share.
⊚ true
⊚ false
331) Earnings per share is computed by multiplying net income by the average number of
common shares outstanding.
⊚ true
⊚ false
Version 1 204
Answer Key
Test name: chapter 16
Version 1 205
Version 1 206
Version 1 207
Version 1 208
Version 1 209
Version 1 210
Version 1 211
Version 1 212
Version 1 213