CHPT 9
If a company has net income of $8,500,000, average shares of common stock outstanding of 2,000,000, average total stockholders' equity of $154,400,000, and annual preferred stock dividends of $1,500,000, what is its EPS?
$3.50 Reason: $8,500,000 - $1,500,000 ÷ 2,000,000 = $3.5. The preferred stock dividend is subtracted from net income, and is not available to the common stockholder.
If a company has current assets of $178,000, total assets of $928,000, current liabilities of $132,000, and total liabilities of $643,000, working capital equals ______.
$46,000 Reason: $178,000 - $132,000 = $46,000.
Book value per share = ______.
(Stockholders equity - preferred stock) ÷ average shares of common stock outstanding
If a company has average current assets of $900,000, average total assets of $4,400,000, sales of $6,000,000, cost of goods sold of $4,600,000, and net income of $450,000, what is its assets turnover ratio?
1.36 Reason: $6,000,000 ÷ $4,400,000 = 1.36 (every $1 of assets produced $1.36 in sales)
A company has current liabilities of $176,000, total liabilities of $1,065,000, current assets of $220,000, and total assets of $1,500,000. The current ratio is ______.
1.41 to 1 Reason: $220,000 ÷ $176,000 = 1.25 to 1
If a company has total assets of $2,200,000, current liabilities of $175,000, total liabilities of $1,300,000, common stock of $140,000 and total stockholders' equity of $900,000, its debt to equity ratio is ______.
1.44 to 1
A company has current assets of $145,000, total assets of $1,200,000, current liabilities of $100,000, and total liabilities of $660,000. The current ratio is ______.
1.45 to 1 Reason: $145,000 ÷ $100,000 = 1.45 to 1
Fill in the Blank Question Fill in the blank question. If a company has earnings per share of $1.46, book value per share of $18.50, dividends per share of $0.52, and common stock with a current market price of $26.88 per share, its dividend yield is %. (Round your answer to two decimal places.)
1.93
If a company has average long-term assets of $3,800,000, average total assets of $4,100,000, sales of $5,800,000, cost of goods sold of $4,300,000, and net income of $460,000, what is its return on investment ratio?
11.2
Given total assets of $7,500,000, average inventory of $720,000, current assets of $1,200,000, sales of $12,000,000, cost of goods sold of $8,800,000, and net income of $480,000 the inventory turnover ratio is ______.
12.2
If a company has average total assets of $8,500,000, average total common stock of $1,100,000, average total stockholders' equity of $4,400,000, sales of $10,500,000, and net income of $860,000, what is its return on equity ratio?
19.5 Reason: $860,000 ÷ $4,400,000 = 19.5%
If a company has total assets of $1,700,000, current liabilities of $300,000, total liabilities of $1,200,000, common stock of $150,000 and total stockholders' equity of $500,000, its debt to equity ratio is ______.
2.40 to 1 Reason: $1,200,000 ÷ $500,000 = 2.4 (there is $2.40 of debt for every $1 of equity).
If a company has net income of $5,700,000, average shares of common stock of 1,500,000, average shares of preferred stock of 200,000, retained earnings of $37,900,000, and annual preferred stock dividends of $800,000, what is its EPS?
3.27
If a company has net income of $150,000, gross profit of $1,100,000, net sales of $4,050,000, and total assets of $2,500,000, what is its net margin ratio?
3.70% Reason: $150,000 ÷ $4,050,000 = 3.7% the company retained 3.7% of the assets earned.
Given current assets of $700,000, ending accounts receivable of $150,000, average accounts receivable of $140,000, and credit sales of $1,600,000, the average days to collect receivables is ______ days.
31.9 Reason: $1,600,000 ÷ $140,000 = 11.43 accounts receivable turnover ratio; 365 ÷ 11.43 = 31.9 days.
The average days to sell inventory is calculated as ______.
365 ÷ inventory turnover ratio
Given current assets of $400,000, ending accounts receivable of $90,000, average accounts receivable of $80,000, and credit sales of $700,000, the average days to collect receivables is ______ days.
41.7 Reason: $700,000 ÷ $80,000 = 8.75 account receivable ratio; 365 ÷ 8.75 = 41.7 days.
A company has sales of $500,000, total assets of $1,000,000, gross margin of $350,000, selling expenses of $210,000, and net income of $21,000. When performing vertical analysis, the percentage assigned to selling expenses is ______.
42% Reason: $210,000 ÷ $500,000 = 42%.
If a company has current assets of $145,000, total assets of $1,200,000, current liabilities of $100,000, total liabilities of $660,000, and total stockholders' equity of $540,000, its debt to asset ratio is ______.
55% Reason: $660,000 ÷ $1,200,000 = 55%
If a company has total assets of $2,750,000, net sales of $3,750,000, gross profit of $1,300,000,and net income of $250,000, what is its net margin ratio?
6.67
If a company has earnings before interest and taxes of $780,000, interest expense of $105,000, income tax expense of $230,000, and net income of $445,000, ts number of times interest is earned is ______ times.
7.43 Reason: $780,000 ÷ $105,000 = 7.428 (the company has $7.43 of earnings for every $1 of interest owed).
If a company has total assets of $1,500,000, current assets of $220,000, total liabilities of $1,100,000, current liabilities of $176,000, and total stockholders' equity of $400,000, its debt to asset ratio is ______.
73.3% Reason: $1,100,000 ÷ $1,,500,000 = 73.3%
A company has total assets of $750,000, sales of $470,000, gross margin of $350,000, income before taxes of 55,000, and net income of $40,000. When performing vertical analysis, the percentage assigned to net income is:
8.5% Reason: $40,000 ÷ $470,000 = 8.5%.
Given current assets of $700,000, average accounts receivable of $160,000, credit sales of $1,500,000, cost of goods sold of $900,000 and net income of $100,000, the accounts receivable turnover ratio is ______.
9.38 Reason: $1,500,000 ÷ $160,000 = 9.38.
Given current assets of $700,000, ending inventory of $500,000, average inventory of $450,000, sales of $2,500,000, and cost of goods sold of $1,750,000, the average days to sell inventory is ______ days.
93.9 Reason: Inventory turnover = $1,750,000 ÷ $450,000 = 3.89 Average days to sell inventory= 365 ÷ 3.89 = 93.9 days
Which of the following statements about the price-earnings ratio is correct?
A high P/E ratio often indicates the market is optimistic about the company's future.
Net sales ÷ Average total assets =
Blank 1: asset Blank 2: turnover
Return on assets and earning power are other names for_____________ on _____________
Blank 1: return Blank 2: investment
Which of the following ratios are used to assess solvency?
Debt to assets Debt to equity Number of times interest is earned
Which of the following ratios are used to assess solvency?
Debt to assets ratio Plant assets to long-term liabilities
Which of the following ratios is used to assess solvency?
Debt to equity ratio
Which of the following ratios is used to assess the performance of a company's stock?
Earnings per share dividend yield
The price-earnings ratio is ______.
Market price of a share of common stock divided by EPS.
Which of the following statements are correct?
Numerous opportunities exist to manipulate EPS figures. Accounting assumptions impact EPS calculations. Investors attribute a great deal of importance to EPS figures.
Which of the following ratios are used to assess the performance of a company's stock?
Price-earnings ratio Book value per share Earnings per share Dividend yield
Liquidity ratios are used to assess ______.
a company's ability to pay short-term obligations
Other things being equal, if a company's quick ratio decreases, the company's ability to pay its short-term debt ______.
also decreases
Comparing two companies' earnings per share ratios can be made more difficult because different companies ______.
can use different methods of depreciation can use different inventory cost flow assumptions can use different estimates of future bad debts
The inventory turnover ratio = ______ ÷ average inventory.
cost of good sold
The dividend yield percentage = ______.
dividends per share ÷ market price per share
The number of times interest earned ratio = ______ ÷ interest expense.
earnings before interest and taxes
True or false: An accounts receivables turnover of 24.3 indicates the average collection period for accounts receivables is 24 to 25 days.
false
True or false: Financial statements can provide only highly summarized economic information.
false
Profitability ratios are used to assess management's ability to ______.
generate earnings
Other things being equal, a company will appear to have greater financial risk if its debt to assets ratio is
high
Other things being equal, a company would prefer that its accounts receivable turnover ratio be ______.
high
Other things being equal, the management of a company will prefer that the price-earnings ratio of its company's stock be ______.
high
Industries that require only minimal investment to operate will have_____________asset turnover ratios
higher
Other things being equal, the higher a company's current ratio, the_________(higher/lower) its liquidity
higher
Comparing the same financial statement items over two or more accounting periods is_____________ analysis
horizontal
Other things being equal, events that could cause a company's earnings per share to increase include a(n) ______.
increase in net income decrease in the number of shares of common stock outstanding decrease in the amount of preferred stock dividends a company has to pay
Quick assets do NOT include ______.
inventory
A company's ability to pay short-term debts are indicated by ______ ratios.
liquidity
Working capital is useful for evaluating a company's ______.
liquidity
Other things being equal, a company will appear to have greater financial risk if its number of times interest is earned ratio is ______.
low
Other things being equal, a company will appear to have less financial risk if its debt to equity ratio is_______________
low
The dividend yield is calculated by dividing dividends per share by ______ per share.
market price
Under the concept of ______, generally accepted accounting principles allow companies to expense, rather than capitalize and depreciate, relatively inexpensive long-term assets.
materiality
Receiving a $2 dividend on a share of stock ______ a better return than receiving a $1.50 dividend.
may or may not be
The accounts receivable turnover ratio = ______ ÷ average accounts receivable.
net credit sales
When making decisions, information___________________ is the problem of having so much data that important information becomes obstructed by trivial information. (Enter only one word per blank.)
overload
To avoid the materiality problems of comparing different size companies, horizontal_______________ analysis should be used
percentage
Vertical analysis may be calculated using ______.
percentage amounts only
Dividing a company's cost of goods sold for Year 2 by its cost of goods sold for Year 1, is the ______ analysis approach to ______ analysis.
percentage, horizontal
Management's ability to generate earnings is assessed by ______ ratios.
profitability
Studying various relationships between different items reported in a set of financial statements is called_____________ analysis
ratio
Studying various relationships between different items reported in a set of financial statements is called ______.
ratio analysis
Current reporting standards target users that have a ______ knowledge of business.
reasonably informed
Materiality refers to information's ______.
relevant importance
Financial leverage causes a company's return on equity percentage to be higher than its ______.
return on investment percentage
Another name for horizontal analysis is ______ analysis.
trend
True or false: Users of financial statement information include managers, creditors, stockholders, potential investors and regulatory agencies.
true
Using percentages to compare individual items on a financial statement, such as Wages Expense, to a key figure on the same statement, such as Sales, is called ______ analysis
vertical
Answer Mode Multiple Choice QuestionYour Answer incorrect ErrorBefore moving on, you must review a resource for this question. Assume three companies in the same industry have the following debt to equity ratios: Zebra Co. = 1.7 to 1 Albatross Co. = 1.2 to 1 Badger Co. = 0.8 to 1 Based on this information alone, which company appears to have the highest financial risk?
zebra
