acct ch 13 ls

Ace Electric's income statement reports Sales of $100,000; Cost of goods sold of $46,000; Operating expenses of $34,000; Interest expense of $15,000; Income tax expense of $2,000; and Net income of $3,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by ______

$100,000 when performing a vertical analysis, divide each item by sales

If Currants & Jams, Inc.'s current ratio equals 2.0, current liabilities are $10,000, and long-term liabilities are $30,000, then its current assets equal ______

$20,000

Last year, Ace Electronics had Net Fixed Assets of $110,000 and Total Assets of $150,000. This year, Ace Electronics had Net Fixed Assets of $140,000 and Total Assets of $200,000. This year's Net Revenue was $20,000. The fixed asset turnover for this year is ______

0.16 Divide Net Revenue of $20,000 by the Average Net Fixed Assets of $125,000 (=(($110,000 + 140,000)/2)) not by one year's Net Fixed Assets

Puffin Pastry, Inc. had Net Sales Revenue of $90,000 and Net income of $10,000 during 2019. At December 31, 2018, its total assets were $100,000, and its net fixed assets were $40,000. At December 31, 2019, its total assets were $200,000, and its fixed assets were $80,000. Puffin's asset turnover ratio equals ______

0.6 Asset turnover ratio=$90,000/(($100,000 + $200,000)/2) = 0.60

Puffin Pastry, Inc. had Net Revenue of $90,000 and Net Income of $10,000 during 2019. At December 31, 2018, its Total Assets were $100,000, and its Net Fixed Assets were $40,000. At December 31, 2019, its Total Assets were $200,000, and its Net Fixed Assets were $80,000. Puffin's fixed asset turnover ratio equals ______

1.5

Recipes, Inc. had Net credit sales of $120,000 and Cost of goods sold of $80,000 for the year. Accounts receivable was $10,000 at the beginning of the year and $14,000 at the end. Inventory was $18,000 at the beginning of the year and $22,000 at the end. Recipes' receivable turnover ratio equals ______.

10.0 $120,000/(($10,000 + $14,000)/2) = 10.0

Ace Electronics had sales of $1,000,000 in 2018 and sales of $1,040,000 in 2019. The percentage increase in sales was ______.

4%

Inventors, Inc.'s Sales were $200,000, Cost of Goods Sold was $150,000, and its Inventory was $23,000 at the beginning of the year and $27,000 at the end. Its Accounts Payable was $20,000 at the end of the year. Its inventory turnover equals ______ times

6.0

Inventors, Inc.'s Sales were $200,000, Cost of goods sold was $150,000, and its Inventory was $23,000 at the beginning of the year and $27,000 at the end. Its Accounts payable was $15,000 at the beginning of the year and $25,000 at the end of the year. Its accounts payable turnover ratio equals ______ times

7.5

Puffin Turnovers, Inc.'s fixed asset turnover was 0.9 while Muffin Tops, Inc.'s fixed asset turnover was 0.6. Which of the following is true about Puffin compared with Muffin?

Puffin generated more sales per dollar of fixed assets

Puffin Turnovers, Inc.'s total asset turnover was 1.5 while Muffin Tops, Inc.'s asset turnover was 0.9. Which of the following are true about Puffin compared with Muffin?

Puffin had more sales for each dollar of assets. generated more sales efficiently

Profitability ratios indicate a company's

ability to generate income in the current period

ratio analysis ____

allows you to evaluate how well a company has performed relative to other different-sized companies within the same industry

Which of the following are solvency ratios?

cash coverage, times interest earned, debt-to-equity ratios

Liquidity ratios indicate a company's ______.

chances for short-term survival, especially its ability to pay its currently maturing obligations

If a company's receivable turnover ratio increased, which of the following is true?

collects receivables faster

Ratio analysis is useful for ______

comparing a company's performance with itself over time comparing 2 companies of different size in the same industry evaluating a company's performance given the level of its other resources

The accounts payable turnover ratio equals ______

cost of goods sold / average accounts payable

Which of the following factors would typically be considered an unfavorable industry-specific factor for the home-improvement industry?

decrease in housing turnover

Asset turnover ratios focus on capturing how ______

efficiently a company uses its resources

The gross profit percentage equals

gross profit percentage = GP / net sales revenue

A product differentiation strategy differs from a cost differentiation strategy in that the focus of the former is on providing ______ products

high-quality, high-priced

It is better to have better to have a ______ Fixed Asset Turnover Ratio

higher

Selling stock based solely on insider information is ______

illegal

Insider information refers to the information ______

info that has not yet been made public

Which balance sheet line item has the highest percentage increase from 2018 to 2019? 2019 2018 Cash: $ 30,000. $ 20,000 Accounts Receivable: 10,000. 40,000 Inventory: 60,000. 30,000 Prepaid Insurance: 10,000. 15,000 Property, Plant & Equipment: 140,000. 100,000

inventory: Inventory increased by 100% (=$(60,000 - 30,000)/$30,000) which is the highest percentage increase.

A total asset turnover will improve if it ______

it generates more sales with fewer assets

A cost differentiation strategy differs from a product differentiation strategy in that the focus of the former is on providing ______ products

low-cost

Price/earnings ratio and dividend yield ratio are referred to as ______ ratios

market

Financial ratios ______

may be calculated differently by financial analysts, thus caution must be taken in making comparisons

Receivable turnover ratio equals ______

net credit sales / average net receivables

The Gross Profit Percentage equal Gross Profit divided by ______

net sales revenue

Is it always safe to conclude that the higher the current ratio, the better?

no, because too high of a ratio may indicate an unprofitable use of resources.

Which of the following are useful in evaluating whether to invest in Home Depot stock?

press releases from The Home Depot overall health of the economy events affecting the home-improvement industry

which of the following are market ratios

price/earnings ratio dividend yield ratio

Which type of ratio indicates a company's ability to generate income in the current period?

profitability ratios

Which of these ratios measure liquidity?

quick, cash, and current ratios

Which of the following are asset turnover ratios?

receivable turnover inventory turnover

The average days to collect receivables equals 365 days divided by ______

receivables turnover ratio

Which type of ratios indicate a company's chances for long-term survival based on its ability to pay interest and to repay principal?

solvency

Inventors, Inc. had Cost of Goods Sold of $1,800,000 for the year. Inventory was $280,000 at the beginning of the year and $320,000 at the end. Inventors' inventory turnover equals ______ times

6.00

______ equals 365 divided by ______.

Average Days to Collect Receivables; Receivable Turnover Ratio

Company A has an accounts receivable turnover ratio of 8.0. Company B has a receivable turnover ratio of 10.0. Which of the following is true?

Company B collects its receivables faster than Company A. accounts receivable turnover ratio measures how fast a company collects its receivables. It does not indicate the amount of the sales or accounts receivable

The Total Asset Turnover equals ______

Net Sales Revenue/Average Total Assets

current ratio equals ______.

current assets divided by current liabilities