Assess the firms long-term debt-paying ability

Question

Problem 1: Konstanz Company paid $1,200 in sales commissions expense. What impact will this transaction have on working capital?

• Increase it
• Decrease it
• No impact
• Not enough information is provided to answer the question.

Problem 2. The following balance sheet information was provided by Oleg Company:

Assuming net credit sales totaled $120,000, what was the company's average days to collect receivables?

• 18.3 days
• 21.5 days
• 60 days
• 52.1 days

Problem 3. You are considering an investment in a company's stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing. All of the following ratios can be used to assess solvency except:

• Number of times interest is earned
• Net margin
• Debt to equity ratio
• Debt to assets ratio

Problem 4. The following partial balance sheet is provided for Templeton Company:

What is the company's debt to assets ratio?

• 33%
• 50%
• 67%
• 41%

Problem 5. The Walter Wilson Company reported the following income for 2007:

What is the company's net margin?

• 73%
• 40%
• 27%
• 18%

Problem 6. The Yarbrough Company reported net income of $14,400 on gross sales of $80,000. The company has average total assets of $115,200, of which $100,000 is property, plant and equipment. What is the company's return on investment?

• 69.4%
• 18.0%
• 14.5%
• 12.5%

Problem 7. The Aloysius Company provided the following information from its financial records:

What is the amount of the company's earnings per share?

• $0.72
• $0.76
• $0.80
• $25.00

Problem 8. The Zintrozak Company reported net income of $50,000 on sales of $300,000. The company has total assets of $500,000 and total liabilities of $100,000. What is the company's return on equity ratio?

• 10.0%
• 12.5%
• 16.7%
• 50.0%

Problem 9. The Ulysses Company reported the following income for 2007:

What is the company's number of times interest is earned?

• 4 times
• 6 times
• 7 times
• 10 times

Problem 10. Which of the following is an objective of ratio analysis?

• Assessing past performance
• Assessing the prospects for future performance
• Determining whether a company is likely to be able to pay its debts on time.
• All of the above are objectives.