No
The current ratio is calculated as current assets (+ - x /) current liabilities.
/
A firm's liquidity refers to Blank______.
its ability to meet its current obligations as they become due
Calculate working capital, assuming that cash = $6,000, land = $105,000, accounts receivable = $19,000, merchandise inventory = $20,000, accounts payable = $15,000, long-term debt = $80,000, and retained earnings = $55,000.
$30,000
Working capital is calculated as current assets (+ - x /) current liabilities.
-
Calculate the current ratio assuming that cash = $6,000, land = $105,000, accounts receivable = $19,000, merchandise inventory = $20,000, accounts payable = $15,000, long-term debt = $80,000, and retained earnings = $55,000. (Round your answer to one decimal place, if necessary.)
3.0
What are reasons why a well-managed company sometimes attempts to reduce its current ratio? (Choose every correct answer.)
A high current ratio may be a sign that the company has not made the most productive use of its assets. Assets like accounts receivable and merchandise inventory do not earn a high ROI. Funds freed up by reducing the current ratio can be invested in new production equipment or marketing efforts.
stockholders' equity for the year is normally calculated by adding the beginning stockholders' equity and the ending stockholders' equity and dividing the total by 2.
Average
If net income = $10,000, ROE = 20 percent, and stockholders' equity at the end of the year = $55,000, then which of the following is true
Average stockholders' equity = $50,000 and stockholders' equity at the beginning of the year = $45,000. Reason: Average stockholders' equity = $10,000 / 20% = $50,000 Stockholders' equity at the beginning of the year = $50,000 x 2 = $100,000 - $55,000 = $45,000
Common expressions of return on investment (ROI) calculation include which of the following? (Choose every correct answer.)
Operating income / Average operating assets Net income / Average total assets
What do you need to know to calculate the amount of interest earned on an investment? (Choose every correct answer.)
The principal amount invested The interest rate per year The length of time the funds are invested
With a semilogarithmic graph, the. scale is arithmetic.
horizontal
Return on investment (ROI) is calculated by dividing net Unavailable for the year
income, profit, profits, earning, or earnings Blank 2: assets
Trend analysis of ratios Blank______.
is a meaningful comparison despite the use of different financial accounting alternatives to develop the data used in the ratios
The numerator of the acid-test ratio includes most current assets but specifically excludes .
merchandise inventory
If margin = 5 percent, average total assets = $600,000, and ROI = 25 percent, then Blank______.
net income = $150,000, turnover = 5.0, and sales = $3,000,000
Which of the following would represent a correct calculation of interest earned on a six month, $100 investment?
$100 principal x 10% rate x 6/12 = $5 interest
Which of the following are normally included in a credit application?
- information about bank accounts - information about other credit relationships - information about liabilities
Which of the following statements are true regarding the current ratio and the acid-test ratio? (Choose every correct answer.)
Both the current ratio and the acid-test ratio use current liabilities as the denominator. The acid-test ratio is a more conservative measure of a firm's liquidity.
What are reasons why a well-managed company sometimes attempts to reduce its current ratio? (Choose every correct answer.)
Funds freed up by reducing the current ratio can be invested in new production equipment or marketing efforts. Assets like accounts receivable and merchandise inventory do not earn a high ROI. A high current ratio may be a sign that the company has not made the most productive use of its assets.
Which of the following statements are true regarding a semilogarithmic graph? (Choose every correct answer.)
If the data increases at a constant rate over the period of time shown on the horizontal scale, the plot will be a straight line. Semilogarithmic graphs are frequently used to plot data that is expected to change significantly over time, such as a company's sales data.
Which of the following are normally included in a credit application? (Choose every correct answer.)
Information about salary Information about employment Information about bank accounts
Which statement about trend analysis is correct?
It generally leads to a more meaningful analysis when conducted over several years than does the observation of a single year's ratio result.
True or false: The distance between values shown on the vertical axis will always be uniform with arithmetic vertical scale.
True
Many well-managed companies attempt to reduce their current ratio because Blank______.
an overly high current ratio sometimes can be a sign that the company is not making the most productive use of its assets
If the rate of return on an investment was 10 percent __.
and $500 was invested for one year, then the return on the investment would have been $50
Which statements correctly describe return on investment (ROI)? (Choose every correct answer
- it is normally calculated using average total assets as the measure of the investment - it is sometimes referred to as return on assets (ROA) - it is normally calculated using net income as the measure of the return.
Which of the following statements are true regarding the working capital calculation? (Choose every correct answer.)
- merchandise inventory is part of current assets - cash is part of current assets
Calculate the acid-test ratio, assuming that cash = $6,000, land = $105,000, accounts receivable = $19,000, merchandise inventory = $20,000, accounts payable = $15,000, long-term debt = $80,000, and retained earnings = $55,000. (Round your answer to one decimal place, if necessary.)
1.7
If margin is 9 percent and turnover is 2.0 times per year, then ROI is percent.
18%
Calculate the acid-test ratio, assuming that cash + accounts receivable = $50,000, merchandise inventory = $10,000, noncurrent assets = $40,000, current liabilities = $20,000, noncurrent liabilities = $50,000, and stockholders' equity = $30,000. (Round your answer to one decimal place, if necessary.)
2.5
The annual rate of return on a six-month investment of $1,000 that earns a return of $100 is Blank______.
20%
If margin is 4 percent and ROI is 12 percent, then turnover is times per year.
3
Calculate the current ratio, assuming that cash + accounts receivable = $50,000, merchandise inventory = $10,000, noncurrent assets = $40,000, current liabilities = $20,000, noncurrent liabilities = $50,000, and stockholders' equity = $30,000. (Round your answer to one decimal place, if necessary.)
3.0
The annual rate of return on a two-year investment of $1,000 that earns a total return of $100 is Blank______.
5%
Working capital refers to the excess of a firm's Blank______.
current assets over its current liabilities
Return on equity (ROE) is normally calculated using Blank______.
net income in the numerator and average stockholders' equity in the denominator
The wider the range of possible outcomes for an investment, the greater the .
risk
Which statements about working capital are correct? (Choose every correct answer.)
It is the excess of a firm's current assets over its current liabilities. It is expressed as a dollar amount, rather than as a financial ratio.
Which statements correctly describe liquidity?
It is measured by relating current assets and current liabilities as reported on the balance sheet. It is a firm's ability to meet its current obligations as they become due.
Return on investment (ROI) Blank______.
is normally calculated using net income as the measure of the return
Which of the following statements are true regarding the acid-test ratio? (Choose every correct answer.)
Temporary cash investments are included in the numerator of the acid-test ratio. The acid-test ratio can be calculated as (Cash (including temporary cash investments) + accounts receivable) divided by current liabilities. The acid-test ratio is sometimes called the quick ratio.
Which statements about working capital are correct? (Choose every correct answer.)
It is expressed as a dollar amount, rather than as a financial ratio. It is the excess of a firm's current assets over its current liabilities.
Which of the following statements are true regarding arithmetic vertical scales? (Choose every correct answer.)
It may be helpful to truncate the non relevant portion of the vertical scale to highlight the key data ranges being depicted. The distance between values shown on the vertical axis will always be uniform.
If stockholders' equity at the beginning of the year = $50,000, stockholders' equity at the end of the year = $70,000, and ROE = 25 percent, then Blank______.
average stockholders' equity = $60,000 and net income = $15,000
If stockholders' equity at the beginning of the year = $480,000, stockholders' equity at the end of the year = $520,000, and net income = $80,000, then Blank______.
Average stockholders' equity = $500,000, and ROE = 16%
Which statements about turnover are correct? (Choose every correct answer.)
It is calculated by dividing sales by average total assets. It relates to the efficiency with which a firm's assets are used in the revenue-generating process
In general, the higher the expected ______ on an investment, the greater the ______ associated with the investment.
Return Risk
In the DuPont model for analyzing ROI, turnover is calculated as divided by average total .
Sales Assets
Which of the following statements are true regarding the current ratio? (Choose every correct answer.)
Accounts payable are included in the denominator. Cash is included in the numerator.
The DuPont model for ROI expresses __.
turnover as sales / average total assets
With a semilogarithmic graph, the scale is logarithmic.
vertical
If a company had a current ratio of 2.0 and a short-term bank loan was to be repaid just before the balance sheet date, its Blank______.
working capital would not change, but the current ratio would increase
What is the impact of repayment of a short-term bank loan just before the balance sheet date?
working capital would not change, but the current ration would change
Which of the following statements are true regarding the acid-test ratio? (Choose every correct answer.)
The acid-test ratio is a more conservative measure of liquidity than the current ratio. The acid-test ratio excludes merchandise inventory from the numerator. The acid-test ratio uses the same denominator as does the current ratio.
How is the amount of interest earned on an investment calculated?
Principal ($) x Rate (%) x Time (in years)
If margin = 5 percent, net income = $100,000, and turnover = 4.0, then Blank______.
ROI = 20%, average total assets = $500,000, and sales = $2,000,000
Which of the following statements are true regarding the relationship between the current ratio and the acid-test ratio? (Choose every correct answer.)
The acid-test ratio demonstrates the extent to which a firm can meet its current obligations even if none of its inventory can be sold. For any given company, the current ratio will generally be higher than the acid-test ratio.
Which statements about margin are correct? (Choose every correct answer.)
It emphasizes that for a firm to be profitable, some portion of every sales dollar must work its way to the bottom line (net income). It is calculated by dividing net income by sales. In the context of the DuPont model of ROI, it refers to the firm's net profit margin, not its gross margin.
Return on investment (ROI) is commonly expressed in each of the following ways, except Blank______.
ROI = Net income / Average stockholders' equity
