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Chapter 9
42. Basic analytical method in which all items are expressed only in relative terms (percentages of a common base) and
are often useful for comparing one company with another or for comparing a company with industry averages are:
a.
profitability analysis.
b.
percentage statements.
c.
horizontal analysis.
d.
common-sized statements.
43. Which of the following is the formula to calculate current ratio?
a.
Cost of goods sold / Average inventory
b.
Quick assets / Current liabilities
c.
Sales / Average accounts receivable
d.
Current assets / Current liabilities
Chapter 9
44. Which of the following focuses on the ability of a company to earn profits?
a.
The return on total assets
b.
The inventory turnover
c.
The quick ratio
d.
The fixed charge coverage ratio
45. A company with working capital of $600,000 and a current ratio of 3.25 pays a $200,000 short-term liability. The
amount of working capital immediately after payment is:
a.
$400,000.
b.
$800,000.
c.
$600,000.
d.
$200,000.
Chapter 9
46. A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result
of this transaction, the current ratio and working capital will:
a.
remain the same and decrease, respectively.
b.
increase and remain the same, respectively.
c.
both increase.
d.
both decrease.
47. A company's ability to pay its current liabilities is called:
a.
trend analysis.
b.
global analysis.
c.
current position analysis.
d.
inventory analysis.
Chapter 9
48. Which of the following is included in the computation of the quick ratio?
a.
Accounts receivable
b.
Supplies
c.
Prepaid rent
d.
Inventory
49. Working capital is calculated as:
a.
cost of goods sold minus total assets.
b.
average daily sales plus quick assets.
c.
net sales minus current assets.
d.
current assets minus current liabilities.
Chapter 9
50. Transic Corporation has the following financial data for 2016 and 2017.
2017
2016
ASSETS
Current Assets:
Cash
$ 48,000
$ 14,000
Marketable Securities
9,000
13,000
Accounts Receivable
35,000
24,000
Other Current Assets
15,000
18,000
Total Current Assets
107,000
69,000
Fixed Assets (net)
140,000
130,000
Total Assets
$247,000
$199,000
LIABILITIES
Current Liabilities
$ 72,000
$ 52,000
Long-term Liabilities
50,000
37,000
Total Liabilities
$122,000
$ 89,000
Total Stockholders' Equity
$125,000
$110,000
Total Liabilities And Stockholders' Equity
$247,000
$199,000
What is Transic's working capital for 2017?
a.
$35,000
b.
$125,000
c.
$90,000
d.
$18,000
Chapter 9
51. Transic Corporation has the following financial data for 2016 and 2017.
2017
2016
ASSETS
Current Assets:
Cash
$ 48,000
$ 14,000
Marketable Securities
9,000
13,000
Accounts Receivable
35,000
24,000
Other Current Assets
15,000
18,000
Total Current Assets
107,000
69,000
Fixed Assets (net)
140,000
130,000
Total Assets
$247,000
$199,000
LIABILITIES
Current Liabilities
$ 72,000
$ 52,000
Long-term Liabilities
50,000
37,000
Total Liabilities
$122,000
$ 89,000
Total Stockholders' Equity
$125,000
$110,000
Total Liabilities And Stockholders' Equity
$247,000
$199,000
What is Transic's current ratio for 2017?
a.
1.49
b.
2.14
c.
0.21
d.
0.88
Chapter 9
52. Transic Corporation has the following financial data for 2016 and 2017.
2017
2016
ASSETS
Current Assets:
Cash
$ 48,000
$ 14,000
Marketable Securities
9,000
13,000
Accounts Receivable
35,000
24,000
Other Current Assets
15,000
18,000
Total Current Assets
107,000
69,000
Fixed Assets (net)
140,000
130,000
Total Assets
$247,000
$199,000
LIABILITIES
Current Liabilities
$ 72,000
$ 52,000
Long-term Liabilities
50,000
37,000
Total Liabilities
$122,000
$ 89,000
Total Stockholders' Equity
$125,000
$110,000
Total Liabilities And Stockholders' Equity
$247,000
$199,000
Based on Transic's current ratio, which of the following statements is true regarding the company?
a.
Transic's current ratio has decreased, indicating that the company is in a more favorable position to obtain
short-term credit than in 2016.
b.
Transic's current ratio has increased, indicating that the company is in a more favorable position to obtain
short-term credit than in 2016.
c.
Transic's current ratio has increased, indicating that the company is in a less favorable position to obtain short-
term credit than in 2016.
d.
Transic's current ratio has decreased, indicating that the company is in a less favorable position to obtain short-
term credit than in 2016.
Chapter 9
53. Using the following data for the current year, determine the accounts receivable turnover.
Net sales on account during the year
$ 457,065
Cost of merchandise sold during the year
461,280
Accounts receivable, beginning of year
75,290
Accounts receivable, end of year
26,280
Inventory, beginning of year
185,000
Inventory, end of year
169,570
a.
7
b.
8
c.
10
d.
9
54. Based on the following data for the current year, determine the accounts receivable turnover.
Net sales on account during the year
$ 550,000
Cost of merchandise sold during the year
350,000
Accounts receivable, beginning of year
35,000
Accounts receivable, end of year
25,000
Inventory, beginning of year
80,000
Inventory, end of year
125,000
a.
9.2
b.
11.7
c.
18.3
Chapter 9
d.
7.5
55. From the following data for the current year, compute the average accounts receivable.
Net sales on account during the year
$ 420,500
Cost of merchandise sold during the year
362,000
Accounts receivable at the beginning of the year
36,120
Accounts receivable at the end of the year
33,200
Inventory at the beginning of the year
63,000
Inventory at the end of the year
92,000
a.
31,140
b.
28,250
c.
34,660
d.
25,200
Chapter 9
56. Based on the following data for the current year, determine the days' sales in accounts receivable.
Net sales on account during the year
$1,080,000
Cost of merchandise sold during the year
750,000
Accounts receivable, beginning of year
46,500
Accounts receivable, end of year
36,500
Inventory, beginning of year
170,000
Inventory, end of year
232,000
a.
14.03
b.
11.3
c.
13.79
d.
12.5
57. From the given data for the current year, determine the inventory turnover.
Net sales on account during the year
$ 316,780
Cost of merchandise sold during the year
688,500
Accounts receivable, beginning of year
47,000
Accounts receivable, end of year
62,000
Inventory, beginning of year
157,000
Inventory, end of year
149,000
a.
3.8
b.
5.1
c.
4.5
d.
2.7
Chapter 9
58. Based on the following data for the current year, compute the inventory turnover.
Net sales on account during the year
$ 585,000
Cost of merchandise sold during the year
380,000
Accounts receivable, beginning of year
47,000
Accounts receivable, end of year
36,000
Inventory, beginning of year
92,000
Inventory, end of year
113,000
a.
1.1
b.
1.9
c.
3.7
d.
2.9
59. An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to:
a.
decrease.
Chapter 9
b.
neither increase nor decrease.
c.
increase.
d.
remain the same.
60. Based on the following data for the current year, what is the days' sales in inventory (rounded to the next whole day)?
Net sales on account during the year
$1,204,000
Cost of merchandise sold during the year
630,000
Accounts receivable, beginning of year
75,000
Accounts receivable, end of year
85,000
Inventory, beginning of year
81,600
Inventory, end of year
98,600
a.
58
b.
30
c.
48
d.
53
Chapter 9
61. Based on the following data, calculate the amount of quick assets.
Accounts payable
$ 68,000
Accounts receivable
89,000
Accrued liabilities
12,000
Cash
58,500
Intangible assets
38,000
Inventory
61,000
Long-term investments
250,000
Long-term liabilities
66,000
Marketable securities
59,000
Notes payable (short-term)
47,000
Property, plant, and equipment
637,000
Supplies
17,000
a.
$205,600
b.
$208,400
c.
$206,500
d.
$204,200
62. From the following data, calculate the amount of working capital.
Accounts payable
$ 58,000
Accounts receivable
47,000
Accrued liabilities
3,000
Cash
29,560
Intangible assets
57,000
Inventory
48,000
Chapter 9
Long-term investments
127,000
Long-term liabilities
41,000
Marketable securities
32,000
Notes payable (short-term)
28,000
Property, plant, and equipment
784,000
Prepaid expenses
7,500
a.
$98,060
b.
$72,000
c.
$75,060
d.
$77,060
63. Based on the following data, what is the quick ratio, rounded to one decimal place?
Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
25,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
2.1
b.
1.9
c.
1.4
d.
3.2
