ACG 3024 ch 9 quiz

The Miller Company reported gross sales of $830,000, sales returns and allowances of $6,200 and sales discounts of $6,200. The company has average total assets of $480,000, of which $240,000 is property, plant, and equipment. What is the company's asset turnover ratio?

1.70 times Asset turnover = Net credit sales ÷ Average assets Asset turnover = ($830,000 − $6,200 − $6,200) ÷ $480,000 = $817,600 ÷ $480,000 = 1.70 times

The Martin Company reported net income of $16,000 on gross sales of $88,000. The company has average total assets of $123,200, of which $108,000 is property, plant and equipment. What is the company's return on investment?

13.0% Return on investment = Net income ÷ Average total assets Return on investment = $16,000 ÷ $123,200 = 13.0%

The Dennis Company reported net income of $61,000 on sales of $410,000. The company has average total assets of $665,000 and average total liabilities of $210,000. What is the company's return on equity ratio?

13.4% Return on equity = Net income ÷ Average stockholders' equity Return on equity = Net income ÷ (Average total assets − Average total liabilities) Return on equity = $61,000 ÷ ($665,000 − $210,000) = 13.4%

The Crestar Company reported net income of $150,400 on 27,000 average outstanding common shares. Preferred dividends total $12,700. On the most recent trading day, the preferred shares sold at $57 and the common shares sold at $87. What is this company's current price-earnings ratio?

17.06 Earnings per share = (Net income − Preferred stock dividends) ÷ Average shares outstanding Earnings per share = ($150,400 − $12,700) ÷ 27,000 shares = $137,700 ÷ 27,000 shares = $5.1 per share Price-earnings ratio = Market price per share ÷ Earnings per share Price-earnings ratio = $87 per share ÷ $5.1 per share = 17.06

The following balance sheet information was provided by O'Connor Company: Assets Year 2 Year 1 Cash $3,100 $2,100 Accounts receivable $8,100 $6,100 Inventory $31,000 $32,000 Assuming that net credit sales for Year 2 totaled $156,000, what is the company's most recent accounts receivable turnover?

21.97 times Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2]Accounts receivable turnover = $156,000 ÷ [($6,100 + $8,100) ÷ 2] = $156,000 ÷ $7,100 = 21.97 times

The following balance sheet information is provided for Gaynor Company: Assets Year 2 Year 1 Cash $2,250 $1,500 Accounts receivable 15,000 13,000 Inventory $24,500 $32,000 Assuming Year 2 cost of goods sold is $110,000, what is the company's inventory turnover?

3.89 times Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2]Inventory turnover = $110,000 ÷ [($32,000 + $24,500) ÷ 2] = $110,000 ÷ $28,250 = 3.89 times

The following balance sheet information is provided for Patton Company: Assets Year 2 Year 1 Cash $3,700 $3,300 Accounts receivable$13,200 $15,200 Inventory $33,500 $40,500 Assuming Year 2 cost of goods sold is $377,000, what is the company's average days to sell inventory?

35.82 days Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2]Inventory turnover = $377,000 ÷ [($40,500 + $33,500) ÷ 2] = 377,000 ÷ $37,000 = 10.19 times Average days to sell inventory = 365 days ÷ Inventory turnover Average days to sell inventory = 365 days ÷ 10.19 times = 35.82 days

The Phibbs Company paid total cash dividends of $158,400 on 33,000 outstanding common shares. On the most recent trading day, the common shares sold at $88. What is this company's dividend yield?

5.45% Dividend yield = Dividends per share ÷ Market price per share Dividend yield = ($158,400 ÷ 33,000 shares) ÷ $88 per share = $4.8 per share ÷ $88 per share = 5.45%

The following balance sheet information was provided by Western Company: Assets Year 2 Year 1 Cash$3,200 $2,700 Accounts receivable $21,000 $19,000 Inventory $36,000 $42,000 Assuming Year 2 net credit sales totaled $132,000, what was the company's average days to collect receivables?

55.3 days Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2]Accounts receivable turnover = $132,000 ÷ [($19,000 + $21,000) ÷ 2] = $132,000 ÷ $20,000 = 6.60 times Average days to collect receivables = 365 days ÷ 6.60 = 55.3 days

Financial ratios can be used to assess which of the following aspects of a firm's performance?

All of these answers are correct. Liquidity Solvency Profitability

Knoell Company paid its sales employees $15,000 in sales commissions. What impact will this transaction have on the firm's working capital?

Decrease it

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Earnings per share.

The study of an individual financial statement item over several accounting periods is called:

Horizontal analysis.

Common methods of financial statement analysis include all of the following except:

Incremental analysis.

Solvency ratios are used to assess a company's:

Long-term debt-paying ability.

You are considering an investment in IBM 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:

Net margin.

Which of the following statements regarding the quick ratio is incorrect?

The quick ratio equals quick assets divided by total liabilities. The quick ratio is calculated by dividing quick assets by current liabilities.

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

Vertical analysis.

Working capital is defined as:

current assets less current liabilities