1. Inventory turnover is calculated by dividing:
average inventory by cost of goods sold.
cost of goods sold by the ending inventory.
cost of goods sold by the beginning inventory.
cost of goods sold by the average inventory.
2. If equal amounts are added to the numerator and the denominator of the current ratio, the ratio will always
increase.
decrease.
stay the same.
equal zero.
3. Donner Corporation had net income of $400,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Donner Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Donner Corporation's payout ratio for 2012 is $8 per share.
20%.
10%.
12.5%.
4. If the average collection period is 60 days, what is the receivables turnover?
6.0 times
6.1 times
12.2 times
None of these.
5. A company has a receivables turnover of 10 times. The average receivables during the period are $500,000. What is the amount of net credit sales for the period?
Cannot be determined from the information given
$50,000
$5,000,000
$500,000
6. Ratios are used as tools in financial analysis:
because they are prescribed by GAAP.
instead of horizontal and vertical analyses.
because even single ratios by themselves are quite meaningful.
because they may provide information that is not apparent from inspection of the individual components of the ratio.
7. Ratios that measure the short-term ability of the company to pay its maturing obligations are
profitability ratios.
solvency ratios.
trend ratios.
liquidity ratios.
8. If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?
Short-term Borrowing Collection of Receivable
Increase No effect
Decrease No effect
Increase Increase
Decrease Decrease
9. When performing vertical analysis, the base amount for administrative expense is generally
administrative expense in a previous year.
fixed assets.
net sales.
gross profit.
10. Each of the following is a liquidity ratio except the
acid-test ratio.
debt to total assets ratio.
inventory turnover.
current ratio.
11. A measure of the percentage of each dollar of sales that results in net income is
return on assets.
profit margin.
return on common stockholders' equity.
earnings per share.
12. A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is
ratio analysis.
vertical analysis.
common size analysis.
horizontal analysis.
13. The following information pertains to Eura Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 215,000
Total Assets $310,000
Liabilities and Stockholders' Equity
Current liabilities $ 60,000
Long-term liabilities 75,000
Stockholders' equity-common 175,000
Total Liabilities and Stockholders' Equity $310,000
Income Statement
Sales $90,000
Cost of goods sold 45,000
Gross profit 45,000
Operating expenses 25,000
Net income $ 20,000
Number of shares of common stock 5,000
Market price of common stock $22
Dividends per share 1.00
What is the return on assets for Eura?
12.9%
9.7%
4.8%
6.5%
14. Stout Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Stout Corporation's common stock is selling for $75 per share on the New York Stock Exchange. Stout Corporation's price-earnings ratio is
15 times.
18.8 times.
3.8 times.
12 times.
15. The following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments $ 45,000
Accounts receivable (net) 35,000
Inventory 20,000
Property, plant and equipment 210,000
Total Assets $310,000
Liabilities and Stockholders' Equity
Current liabilities $ 60,000
Long-term liabilities 90,000
Stockholders' equity-common 160,000
Total Liabilities and Stockholders' Equity $310,000
Income Statement
Sales $105,000
Cost of goods sold 66,000
Gross profit 39,000
Operating expenses 30,000
Net income $ 9,000
Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share .50
What is the receivables turnover for Sampson?
1.5 times
3.0 times
3.0 times
12.9 times