50) What was the percentage of change in Accounts Receivable if the balance was $80,000 in
2013 and $60,000 in 2014?
A) -25.00%.
B) +25.00%.
C) -33.33%.
D) +33.33%.
51) The sales of Dogs ‘R Us for the years 2012, 2013, and 2014 are $40,000, $60,000 and
$80,000, respectively. If 2012 is the base year, the trend percentage for 2013 is:
A) 0%.
B) 150%.
C) 200%.
D) 133%.
52) The revenue of Systems Design, Inc. for the years 2012, 2013, and 2014 are $75,000,
$100,000 and $200,000, respectively. If 2012 is the base year, the trend percentage for 2013 is:
A) 33%.
B) 100%.
C) 133%.
D) (62.5%).
53) Native Nursery has cost of goods sold for the years 2014, 2013 and 2012 respectively of
$28,600, $26,900 and $25,600. If 2012 is the base year, the trend percentage for 2014 is:
A) 111.72%.
B) 11.72%.
C) 105.08%.
D) 5.08%.
54) Salty’s Surfshop reported Net Sales of $258,000, Cost of Goods Sold of $110,500, Operating
Expenses of $62,400, and Income Tax Expense of 21,600. Salty’s gross profit margin percentage
was:
A) 32.98.
B) 42.83.
C) 57.17.
D) 24.61.
55) Island Industries reported Net Sales of $306,000, Cost of Goods Sold of $192,600, Operating
Expenses of $58,900, and Income Tax Expense of 12,300. Island Industries’ gross profit margin
percentage was:
A) 37.06.
B) 13.79.
C) 62.94.
D) 17.81.
56) Salty’s Surfshop reported Net Sales of $258,000, Cost of Goods Sold of $110,500, Operating
Expenses of $62,400, and Income Tax Expense of 21,600. Salty’s net income percentage was:
A) 32.98.
B) 42.83.
C) 57.17.
D) 24.61.
57) Island Industries, Inc. reported Net Sales of $306,000, Cost of Goods Sold of $192,600,
Operating Expenses of $58,900, and Income Tax Expense of 12,300. Island Industries’ net
income percentage was:
A) 37.06.
B) 13.79.
C) 62.94.
D) 17.81.
58) Moore Masonry has current assets of $52,100, long-term assets of $263,700, current
liabilities of $39,600, and long-term debt of $156,700. Moore’s debt ratio is:
A) 74.4%.
B) 49.6%.
C) 62.2%.
D) 59.4%.
59) Woods Weatherproofing, Inc. has current assets of $43,600, long-term assets of $252,900,
current liabilities of $41,400, and long-term debt of $129,800. Woods Weatherproofing, Inc.’s
debt ratio is:
A) 51.3%.
B) 57.7%.
C) 43.8%.
D) 67.7%.
60) Coulter Company’s operating income for the year was $104,000. The interest expense was
$13,600 and the income tax expense was $8,300. Coulter Company’s interest coverage ratio for
the year is:
A) 7.65.
B) 0.13.
C) 12.53.
D) 4.75.
61) Illusions, Inc. has net sales of $980,000, net income of $72,000, average current assets of
$42,000, average fixed assets of $168,000, and average total assets of $210,000. Illusions, Inc.’s
fixed asset turnover ratio is:
A) 5.83.
B) 4.67.
C) 23.33.
D) 0.17.
62) Illusions, Inc. has net sales of $980,000, net income of $72,000, average current assets of
$42,000, average fixed assets of $168,000, and average total assets of $210,000. Illusions, Inc.’s
total asset turnover ratio is:
A) 0.21.
B) 4.67.
C) 5.83.
D) 23.33.
63) Illusions, Inc. has net sales of $980,000, net income of $72,000, average current assets of
$42,000, average fixed assets of $168,000, and average total assets of $210,000. Illusions, Inc.’s
return on assets is:
A) 42.9%.
B) 171.4%.
C) 7.3%.
D) 34.3%.
64) Industrial Medical Supply has net sales of $1,200,000, net income of $85,000, average
current assets of $53,000, average fixed assets of $184,000, and average total assets of $237,000.
Industrial Medical Supply’s fixed asset turnover ratio is:
A) 5.06.
B) 0.15.
C) 6.52.
D) 22.64.
65) Industrial Medical Supply has net sales of $1,200,000, net income of $85,000, average
current assets of $53,000, average fixed assets of $184,000, and average total assets of $237,000.
Industrial Medical Supply’s total asset turnover ratio is:
A) 22.64.
B) 0.20.
C) 6.52.
D) 5.06.
66) Industrial Medical Supply has net sales of $1,200,000, net income of $85,000, average
current assets of $53,000, average fixed assets of $184,000, and average total assets of $237,000.
Industrial Medical Supply’s return on assets is:
A) 35.9%.
B) 7.1%.
C) 46.2%.
D) 160.4%.
67) For vertical analysis purposes, the base item on the Balance Sheet is:
A) total assets.
B) total equity.
C) total liabilities.
D) net equity.
68) For vertical analysis purposes, the base item on the Income Statement is:
A) net income.
B) net sales.
C) total expenses.
D) gross profit.
69) If Net Sales at Baskin’s Bakery increased from $40,000 to $60,000 and its cost of goods sold
increased from $20,000 to $40,000, the vertical analysis based on net sales would show the
following percentages for cost of goods sold (rounded to nearest %):
A) 40% and 20%.
B) 10% and 30%.
C) 50% and 67%.
D) 67% and 40%.
70) If Shore Legal Supply’s net sales increased from $40,000 to $80,000 and its operating
expenses increased from $30,000 to $50,000, the vertical analysis based on net sales would show
the following for operating expenses for the two periods (to the nearest tenth of a percent):
A) 75.0% and 62.5%.
B) 62.5% and 75.0%.
C) 133.3% and 160.0%.
D) 160.0% and 133.3%.
71) If Island Coffee’s net sales decreased from $90,000 in year 1 to $45,000 in year 2 and its cost
of goods sold decreased from $30,000 in year 1 to $20,000 in year 2, the vertical analysis based
on sales would show the following for cost of goods sold for the two periods (rounded to nearest
tenth of a percent):
A) 33.3% and 44.4%.
B) 44.4% and 33.3%.
C) 300% and 225%.
D) 225% and 300%.
72) Comparative reports in which each item is expressed as a percentage of a base amount
without dollar amounts are called:
A) comparative financial statements.
B) common-size statements.
C) cash flow analysis.
D) horizontal analysis.
73) Statements that are often used to compare different size businesses are called:
A) comparative analysis.
B) cash flow analysis.
C) common-size statements.
D) horizontal analysis.
74) A common-size comparative statement shows:
A) dollars and percents.
B) dollars only.
C) percents only.
D) dollar increases and decreases.
75) If total assets are $6,000, what is the common-size figure of Cash, assuming that Cash has a
balance of $2,400?
A) 120.0%
B) 100.0%
C) 40.0%
D) 60.0%
76) In a common-size Income Statement, selling expenses are 55%. This means that they are
55% of:
A) net income.
B) net sales.
C) gross profit.
D) net profit.
77) The following is a common-sized Income Statement for Sigma and Chi Companies.
(in thousands)
Sigma %
Chi %
Net Sales
100.0%
100.0%
Cost of Goods Sold
64.6%
60.8%
Gross Profit
35.4%
39.2%
Operating Expenses
Selling, General and Adm.
15.4%
15.3%
Other
1.4%
1.5%
Income Before Income Tax
18.7%
22.4%
Income Tax Expense
2.7%
3.1%
Net Income
16.0%
19.3%
Which company has the biggest sales increase from 2010 to 2011?
A) Not enough information is given to assess the question.
B) Sigma Company
C) Chi Company
D) Too close to make a solid determination.
78) The following is a common-sized Income Statement for Sigma and Chi Companies.
(in thousands)
Sigma %
Chi %
Net Sales
100.0%
100.0%
Cost of Goods Sold
64.6%
60.8%
Gross Profit
35.4%
39.2%
Operating Expenses
Selling, General and Adm.
15.4%
15.3%
Other
1.4%
1.5%
Income Before Income Tax
18.7%
22.4%
Income Tax Expense
2.7%
3.1%
Net Income
16.0%
19.3%
Which company has the best cost of goods sold percentage?
A) Not enough information is given to assess the question.
B) Sigma Company
C) Chi Company
D) Too close to make a solid determination.
79) The following is a common-sized Income Statement for Sigma and Chi Companies.
(in thousands)
Sigma %
Chi %
Net Sales
100.0%
100.0%
Cost of Goods Sold
64.6%
60.8%
Gross Profit
35.4%
39.2%
Operating Expenses
Selling, General and Adm.
15.4%
15.3%
Other
1.4%
1.5%
Income Before Income Tax
18.7%
22.4%
Income Tax Expense
2.7%
3.1%
Net Income
16.0%
19.3%
Which company has better control of their overall operating expenses?
A) Not enough information is given to assess the question.
B) Sigma Company
C) Chi Company
D) Too close to make a solid determination.
80) The current ratio for a company with current assets of $70,000, quick assets of $30,000, total
assets of $150,000, current liabilities of $50,000, and net sales of $80,000 would be:
A) 0.20.
B) 1.40.
C) 3.00.
D) 1.00.
81) A company has $56,000 in cash; $12,000 in Accounts Receivable; $25,000 in short-term
investments and $100,000 in merchandise inventory. The company also has $60,000 in current
liabilities. The company’s quick ratio is:
A) 3.217.
B) 1.550.
C) 1.133.
D) 0.933.
82) An acid test (quick ratio) of 0.75 would indicate:
A) a ratio that would allow a company to pay off current liabilities with quick assets.
B) that for every $1 of quick assets, there are $0.75 in liabilities.
C) that for every $1 of liabilities, there are $0.75 in quick assets.
D) a ratio that would allow a company to pay off current liabilities with current assets.
83) The debt ratio is the relationship between:
A) current assets and current liabilities.
B) current assets and total liabilities.
C) total assets and total liabilities.
D) total assets and current liabilities.
84) The lower the interest coverage ratio, the more likely:
A) a default in payment will occur.
B) a business needs to borrow money.
C) a business will suffer a loss.
D) interest payments can be made.
85) Which of the following measures how efficiently a company utilizes its operating assets?
A) current ratio and quick ratio
B) return on equity and earnings per share
C) debt ratio and interest coverage ratio
D) Accounts Receivable turnover and inventory turnover
86) If management wishes to evaluate the delinquency of charge customers, they could use the:
A) rate of return on total assets.
B) rate of return on equity.
C) Accounts Receivable turnover.
D) quick ratio.
87) A company with an Accounts Receivable turnover of four means that the company collects
its receivables approximately every ________ days.
A) 30
B) 60
C) 90
D) 120
88) If Accounts Receivable turnover is 10.4, this means that from the date of:
A) purchase to the date of payment is approximately 35 days.
B) sale to the date of receipt of payment is approximately 35 days.
C) discount to the date of receipt of payment is approximately 35 days.
D) invoice to the date of payment is approximately 35 days.
89) With a beginning Accounts Receivable balance of $80,000; an ending Accounts Receivable
balance of $120,000; and Sales of $900,000, the Accounts Receivable turnover is:
A) 9.00.
B) 8.89.
C) 22.22.
D) 13.33.
90) Inventory turnover measures the relationship between:
A) merchandise inventory and current liabilities.
B) total assets and merchandise inventory.
C) cost of goods sold and merchandise inventory.
D) cost of goods sold and total liabilities.
91) Inventory turnover would most likely be highest for which of the following?
A) Home builder
B) Grocery store
C) Car dealership
D) Heavy equipment dealer
92) Which of the following ratios measures the earnings of a company on each dollar of assets
invested?
A) Return on assets
B) Return on sales
C) Return on equity
D) Current ratio