Accounting Exam 2 review
a
?The debt ratio indicates: a) the ability of the firm to pay its current obligations b) the efficiency of the use of total assets c) the magnification of earnings caused by leverage d) the percentage of assets financed by creditors e) none of the above
d
?Which of the following ratios does not represent some form of comparison between accounts in current assets and accounts in current liabilities? a) working capital b) current ratio c) acid-test ratio d) cash ratio e) inventory turnover in days
c
Bander Company presents the following data for 2012 inventories, beginning of year = 310,150 inventories, end of year = 380, 490 cost of goods sold = 1,750,690 net sales = 8,690,150 The number of days' sales in inventory is: a) 59.1 b) 60.8 c) 79.3 d) 13.0 e) 16.0
a
Big Spring, Inc., had the following balance sheet results for 2012: "in millions" Current liabilities = $18.6 Bonds Payable = 28.6 lease obligations = 5.7 noncontrolling interest = 1.4 common stock = 82.6 retained earnings = 32.9 compute the debt-equity ratio: a) 47.0% b) 87.6 c) 45.2 d) 112.1 e) none of the above
c
Given the following financial data, determine the dollar amount of cost of goods sold: current ratio = 5.4 to 1 acid test ratio = 2.1 to 1 current liabilities = $200,000 Inventory Turnover = 6.1 *assume acid test ratio is computed as follows: (current assets - inventory) / current liabilities a) $1,080,000 b) $480,000 c) 660,000 d) 4,026,000 e) cannot be determined from the information given
c
Junction Company computed the following data for 2012 days' sales in receivables = 38.7 days accounts receivables turnover = 12.6 times accounts receivable turnover in days = 29.0 days days' sales in inventory = 68.5 days merchandise inventory turnover = 8.2 times inventory turnover in days = 44.5 days the estimated operating cycle for 2012 is: a) 93.8 days b) 97.4 days c) 73.5 days d) 107.2 days e) 20.8 days
c
Kerrville Company presents the following data for 2012 receivables, less allowance for losses and discounts of $15,350 = $266,700 net sales = 2,560,100 cost of goods sold = 1,580,360 The number of days' sales in receivables is: a) 53.1 b) 43.1 c) 40.2 d) 38.0 e) 36.5
a
LLano Company presents the following data for 2012 net sales, 2012 = $3,507,124 net sales, 2011= 2,930,247 cost of goods sold, 2012= 2,350,170 cost of goods sold, 2011= 1,500,120 inventory, end 2011 = 440,870 inventory, end 2012 = 490,250 the merchandise inventory turnover for 2012 is: a) 5.0 b) 5.6 c) 7.5 d) 7.7 e) 3.2
c
Medina Company presents the following data for 2012. receivables, end of year, less allowances for losses and discounts of $115,960 = $2,870,100 receivables, beginning of year, less allowance for losses and discounts of $102, 330 = 2,550,140 net sales = 24, 217, 080 the accounts receivable turnover in times per year is: a) 6.9 b) 7.9 c) 9.7 d) 8.6 e) 11.0
d
Mountain Home Dog Kennels had the following financial statistics for 2012: Long-term debt (average rate of interest is 8%) = $400,000 Interest expense = 25,000 Net income = 68,000 Income tax = 36,000 operating income before other income/expenses = 107,000 what is the times interest earned for 2012? a) 6.7 times b) 3.3 times c) 3.7 times d) 5.2 times e) none of the above
c
The following financial statement data are taken from Utopia Company's 2012 annual report: "in millions" Current assets = 12.6 investments = 9.4 intangibles = 6.8 property, plant, and equipment= 58.1 current liabilities= 6.4 long-term debt = 39.7 stockholder's equity = 40.8 Compute the debt ratio: a) 196.9% b) 113.0% c) 53% d) 45.7% e) none of the above
b
The following financial statement data re taken from Bracketville Company's 2012 annual report: "in millions" current assets = 18.6 investments = 19.4 intangibles = 6.8 property, plant, equipment = 68.1 current liabilities = 8.4 long-term debt = 69.7 stockholder's equity = 84.8 compute the debt to tangible net worth ratio: a) 92.1% b) 100% c) 53% d) 135.6% e) none of the above
b
a fixed charge coverage: a) is a balance sheet indication of debt carrying ability b) is an income statement indication of debt carrying ability c) is a liquidity ratio d) frequently includes research and development e) computation is standard from firm-to-firm
e
a times interest earned ratio indicates that: a) preferred stock has no maturity date b) the debt will never become due c) the firm will be able to repay the principle when due d) the principle can be refinanced e) none of the answers are correct
d
liquidity ratios can be used: a) to measure the degree of protection of long-term suppliers of funds b) to measure borrowing capacity c) to measure the earning ability of a firm d) to measure the firm's ability to meet its current obligations e) to measure the worth of the firm
d
suppose you are comparing two firms in the steel industry. One firm is large and the other is small. Which types of numbers would be most meaningful for statement analysis? a) absolute numbers would be most meaningful for both the large and small firm b) absolute numbers would be most meaningful in the large firm; relative numbers would be most meaningful in the small firm. c) relative numbers would be most meaningful for the large firm; absolute numbers would be most meaningful for the small firm d) relative numbers would be most meaningful for both the large and small firm, especially for interfirm comparisons e) it is not meaningful to compare a large firm with a small firm.
d
which of the following can offer a type of comparison in financial statement analysis? a) Past ratios and figures b) industry averages c) statistics of competitors d) all of the above e) none of the above
a
which of the following current assets will not generate cash in the future? a) prepayments b) accounts receivable c) merchandise inventory d) marketable securities e) notes receivable
b
which of the following does not represent a short-coming or controversial issue when performing financial analysis? a) financial statement anlysis is an art; it requires judgement decisions on the part of the analyst. b) financial analysis can be used to detect or isolate apparent liquidity problems c) there ar eas many ratios for financial analysis as there are pairs of figures d) some industry ratio formulas vary from source to source e) adequate detailed disclosure of how the industry ratios are computed is often lacking
b
which of the following ratios would generally be used to evaluate a firm's overall liquidity position? a) working capital b) current ratio c) acid-test ratio d) cash ratio e) inventory turnover in days
d
which of the following statements best compares long-term borrowing capacity ratios? a) the debt/equity ratio is more conservative than the debt ratio b) the debt ratio is more conservative than the debt/equity ratio c) the debt/equity ratio is more conservative than the debt to tangible net worth ratio d) the debt to tangible net worth ratio is more conservative than the debt/equity ratio e) the debt ratio is more conservative than the debt to tangible net worth ratio
d
which of the following would not be a reasonable conclusion when comparing FIFO-LIFO under an "inflationary" condition? a) FIFO generally results in a higher profit than does LIFO b) FIFO reports a higher inventory ending balance than does LIFO c) LIFO generally results in a lower profit figure than does FIFO d) LIFO results in a higher inventory ending balance than does FIFO e) The cash flow under LIFO is greater than the cash flow under FIFO by the different in the resulting come tax payable determined between the two methods.
e
which of the following would not be classified as a current asset? a) cash and cash equivalents b) marketable securities properly classified as "trading" c) Trade Accounts Receivable d) Merchandise Inventories e) Held-To-Maturity Bond Investments
a
which of these items represents a definite commitment to pay out funds in the future? a) bonds payable b) reserves for rebuilding furnaces c) deferred taxes d) noncontrolling shareholder's interests e) redeemable preferred stock
