Chapter 4 SB

_______ is (are) intended to help lenders assess a borrower's default risk. Multiple choice question. Asset turnover ratios Credit analysis Activity ratios Profitability ratios

Credit analysis

Jefferson Beach Marina included the following information in its financial statements. Sales in the current year of $575,000 and $400,000 in the previous year. Operating income of $75,000 in the current year and $25,000 in the previous year. In comparison to the previous year, the effect of sales growth on operating income was Multiple choice question. $7,609 $22,826 $10,938 $3,125

$10,938

Samson Corporation has $200,000 of outstanding long-term debt, $400,000 in total liabilities, and $1,000,000 of total assets of which $75,000 is goodwill. It's long-term debt to tangible assets would be - 21.6%Reason: $200,000/ (1,000,000 - $75,000) = 21.6% Jolar Corporation has annual credit sales of $1,000,000, Cost of goods sold of $350,000, Beginning accounts receivable of $200,000, Ending accounts receivable of $300,000, and beginning and ending inventory of $80,000 and $100,000 respectively. Its days inventory held is closest to

- 94 days.Reason: $350,000 / ($80,000 + $100,000) / 2 = 3.9365 / 3.9 = 93.59 days.

Jolar Corporation has annual credit sales of $1,000,000, Cost of goods sold of $350,000, Beginning accounts receivable of $200,000, Ending accounts receivable of $300,000, and beginning and ending inventory of $80,000 and $100,000 respectively. Its accounts receivable turnover is Multiple choice question. 1.67 11.1 1.4 4.0

4.0

Stockers Market shows sales of $25,000 and gross profit of $15,000 for the current year on its common-size income statement. For the previous year, it had sales of $22,000 and gross profit of $12,100. This means that, Multiple choice question. the current year percentage for gross profit is 124% the current year percentage for gross profit is 60% the current year percentage for gross profit is 55% the current year percentage for gross profit is 40%

60

Samson Corporation has $200,000 of outstanding long-term debt, $400,000 in total liabilities, and $1,000,000 of total assets of which $75,000 is goodwill. Its long-term debt to tangible assets would be Multiple choice question.

Answer Mode Multiple Choice QuestionYour Answer correct Samson Corporation has $200,000 of outstanding long-term debt, $400,000 in total liabilities, and $1,000,000 of total assets of which $75,000 is goodwill. Its long-term debt to tangible assets would be Multiple choice question. 20%. $200,000/($1,000,000 - $75,000) = 21.6% 21.6%. Correct Answer 21.6

______ continually works to drive down the rate of return on assets toward the competitive floor. Multiple choice question. Competition Production ROA GAAP

Competition

Adjustments to earnings before interest (EBI) includes which of the following? Multiple choice question. Recurring items, interest, and distortions related to quality concerns Nonrecurring items, after-tax interest, and distortions related to quality concerns Nonrecurring items, interest, and distortions related to quality concerns Operating items, after-tax interest, and distortions related to quality concerns

Nonrecurring items, after-tax interest, and distortions related to quality concerns

Jolar Corporation has annual credit sales of $1,000,000, Cost of goods sold of $350,000, Beginning accounts receivable of $200,000, Ending accounts receivable of $300,000, and beginning and ending inventory of $80,000 and $100,000 respectively. Its days inventory held is closest to

Reason: $350,000/($80,000 + $100,000)/2 = 3.9 365/3.9 = 93.59 days

Blackwell Corporation has the following items in its financial statements: Sales $850,000, Net income $157,500, Common Dividends $10,000, Preferred Dividends $7,500, Beginning Shareholders' Equity of $775,000, and Ending Shareholders' Equity of $875,000. Blackwell's ROCE is Multiple choice question. 17%. 103%. 18.2%. 19.1%.

Reason: ($157,500 - $7,500)/($775,000 + $875,000)/2 = 18.2%

Riley Corporation has the following items in its financial statements: Sales $750,000, Net Income $25,500, Interest expense $8,500, Beginning assets of $1,250,000, Ending assets of $1,500,000. Assuming Riley's tax rate is 30%, its return on assets (ROA) is Multiple choice question. 2.5% 54.5% 2.3% 1.8% Need help? Review t

Reason: [$25,500 + ($8,500 x 70%)]/$1,375,000 = 2.3%

Trend income statements show each statement item as a percentage of Multiple choice question. sales. net income. a base year amount. gross profit.

a base year amount.

More timely payment of accounts payable would lead to Multiple choice question. a higher accounts payable turnover ratio. changes in customer payment patterns. a lower inventory turnover ratio. a higher average payable balance.

a higher accounts payable turnover ratio.

Cash flow from investing activities includes Multiple choice question. capital expenditures. long-term notes payable. payment of interest and dividends. issuance of common stock.

capital expenditures.

The numerator in the quick ratio is Multiple choice question. cash + accounts receivable + inventory. cash + short-term investments + accounts receivable. cash + short-term investments + accounts receivable + inventory. cash + short-term investments + accounts payable.

cash + short-term investments + accounts receivable.

The ability to generate cash from ongoing core business activities is called Multiple choice question. cash flow from investing activities. cash flow from operating activities. cash flow from financing activities.

cash flow from operating activities.

A way to quantify components of change is Multiple choice question. profitability analysis financial statement analysis cause-of-change analysis market analysis

cause-of-change analysis

The is the rate of return that would be earned in the economist's "perfectly competitive" industry.

competitive floor

Identifying similarities and differences across companies or business units at a single point in time is referred to as Multiple choice question. cross-sectional analysis benchmark comparison time-series analysis cause-of-change analysis

cross-sectional analysis

Current assets divided by current liabilities is the calculation for Multiple choice question. the current ratio. the quick ratio. working capital. accounts receivable turnover.

curretn ratio

Return on assets is calculated as Multiple choice question. earnings before interest divided by average assets. average net income divided by average assets. sales divided by average assets. earnings before interest divided by ending assets.

earnings before interest divided by average assets.

An increase in inventory can signal unfavorable business conditions such as Multiple choice question. escalating merchandise costs. expanded credit card use. product line decreases. more lenient credit policies.

escalating merchandise costs.

The company's short-term ability to generate cash for working capital needs and immediate debt repayment needs is its Multiple choice question. profitability. liquidity. quality of earnings. solvency.

liquidity.

Long-term solvency ratios include Multiple select question. long-term debt to tangible assets. long-term asset turnover. current ratio. interest coverage.

long-term debt to tangible assets. interest coverage.

Financial reports don't always include the data needed for a complete and faithful picture of a company's activities and operations because that data is filtered by Multiple select question. the Internal Revenue Service. management's accounting discretion. generally accepted accounting principles. creditors.

management's accounting discretion. generally accepted accounting principles.

These types of companies have capital expenditures limited to the amount needed to sustain current levels of operations, usually at a time when operating cash flows are significantly positive. Multiple choice question. emerging companies established growth companies mature companies

mature companies

These types of companies have capital expenditures limited to the amount needed to sustain current levels of operations, usually at a time when operating cash flows are significantly positive. Multiple choice question. mature companies emerging companies established growth companies

mature companies

Return on Common Equity (ROCE) is calculated as Multiple choice question. sales divided by average common shareholders' equity. net income less common and preferred dividends divided by average common shareholders' equity. net income less preferred dividends divided by ending common shareholders' equity. net income less preferred dividends divided by average common shareholders' equity.

net income less preferred dividends divided by average common shareholders' equity.

Common-size income statements show each statement item as a percentage of Multiple choice question. sales. a base year amount. net income. gross profit.

sales.

Days inventory held Multiple choice question. can be used to identify changing customer payment patterns. is the same for a merchandising firm or a manufacturing firm. is calculated using cost of goods sold and average accounts receivable. tells us how many days it takes for inventory to move from the company to its customers.

tells us how many days it takes for inventory to move from the company to its customers.

Cash plus marketable securities plus receivables divided by current liabilities is the calculation for Multiple choice question. inventory turnover. the current ratio. working capital. the quick ratio

the quick ratio

Cash plus marketable securities plus receivables divided by current liabilities is the calculation for Multiple choice question. the quick ratio. inventory turnover. the current ratio. working capital.

the quick ratio.

Short-term liquidity ratios include Multiple select question. the quick ratio. return on assets. the current ratio. interest coverage. accounts receivable turnover.

the quick ratio. the current ratio. accounts receivable turnover.

Debt financing may be preferred over equity financing because Multiple choice question. unlike dividends, interest on debt is tax deductible. it is less risky than equity financing and therefore less costly. like dividends, interest on debt is tax deductible.

unlike dividends, interest on debt is tax deductible.