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| 1.
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| Assets | 2001 | 2000 | 1999 | 1998 | | Cash | $10,000 | $15,000 | $12,000 | $8,000 | | Other current assets | 18,000 | 15,000 | 13,000 | 10,000 | | Plant and equipment | 20,000 | 23,000 | 24,000 | 15,000 | | Total assets | 48,000 | 53,000 | 49,000 | 33,000 |
Which of the following statements is true? |
| | A) | plant and equipment had the largest percentage gain from 1998 to 2000 |
| | B) | cash had the greatest percentage decrease between 2000 and 2001 |
| | C) | cash increased at a faster rate than total assets from 1998 to 2001 |
| | D) | cash was always the same percentage of total assets |
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| 2.
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| 2001 | 2000 | 1999 | 1998 | | Sales | $160,000 | $130,000 | $100,000 | $ 80,000 | | Cost of goods sold | 96,000 | 71,500 | 53,000 | 41,600 | | Net income | 28,000 | 26,000 | 25,000 | 24,000 |
Which of the following statements is NOT true? |
| | A) | sales have increased 200% since 1998 |
| | B) | net income has increased 16.67% since 1998 |
| | C) | gross profit on sales has increased 66.67% since 1998 |
| | D) | net income as a percentage of sales has decreased |
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| 3.
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Which is NOT true of common-size comparative statements? |
| | A) | each item is shown as a percentage of some total of which it is a part |
| | B) | dollar amounts are generally not shown |
| | C) | the net change in each item, on a year-to-year basis, is not shown |
| | D) | total assets are used as a total against which all assets are measured |
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| 4.
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| Current assets | $120,000 | | Cash | $20,000 | | Accounts receivable | $45,000 | | Short-term investments | $12,000 | | Merchandise inventory | $42,000 | | Current liabilities | $68,000 |
Which of the following is true? |
| | A) | working capital is $52,000, current ratio is 1.17 |
| | B) | current ratio is 2.0 , acid-test ratio is 1.15 |
| | C) | working capital is $10,000 , acid-test ratio is 1.15 |
| | D) | working capital is $52,000, current ratio is 1.76 |
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| 5.
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Net sales were $450,000, and the accounts receivable turnover was 5.5 times. What is the average accounts receivable? |
| | A) | not determinable from the information provided |
| | B) | $24,750 |
| | C) | $81,818 |
| | D) | $90,000 |
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| 6.
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The cost of goods sold was $240,000. Beginning and ending merchandising inventory balances were $20,000 and $30,000, respectively. The merchandise inventory turnover was: |
| | A) | 8.0 times |
| | B) | 12.0 times |
| | C) | 7.0 times |
| | D) | 9.6 times |
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| 7.
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The days' sales in inventory is 73. The cost of goods sold is $720,000. The net sales are $1,020,000. The beginning inventory was $82,000. What is the ending inventory? |
| | A) | $98,360 |
| | B) | $144,000 |
| | C) | $139,726 |
| | D) | $82,000 |
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| 8.
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Total asset turnover is a component of: |
| | A) | solvency |
| | B) | profitability |
| | C) | comparability |
| | D) | operating efficiency |
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| 9.
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Which change in the following ratios would be regarded as generally favourable by creditors but generally unfavourable by shareholders? |
| | A) | debt to equity ratio changed from 1:2 to 1:2.5 |
| | B) | current ratio changed from 2:5 to 3:4 |
| | C) | debt to equity ratio changed from 2:5 to 1:3 |
| | D) | return on total assets changed from 10% to 12.5% |
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| 10.
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Which of the following formulas and its results is not correct? |
| | A) | Formula: Net sales/Average total assets
Result: Total asset turnover |
| | B) | Formula: (Net income/Net sales) x 100
Result: Profit margin |
| | C) | Formula: (Net inc./Average total assets) x 100
Result: Return on total assets employed |
| | D) | Formula: (Total liabilities/Total assets) x 100
Result: Equity ratio |
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| 11.
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Which of the following ratios would not be considered a measurement of short-term liquidity? |
| | A) | current ratio |
| | B) | days' sales uncollected |
| | C) | debt ratio |
| | D) | acid-test ratio |
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| 12.
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Net sales were $360,000. The cost of goods sold was $180,000. Operating expenses were $120,000. The ending balance of the Accounts Receivable account was $20,000. The merchandise turnover ratio was 12.75. The profit margin was: |
| | A) | 16.67% |
| | B) | 20.0% |
| | C) | 40.0% |
| | D) | 33.3% |
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| 13.
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The denominator in the formula to calculate the return on common shareholders' equity is: |
| | A) | book value of the common shares |
| | B) | average total assets |
| | C) | total equity |
| | D) | total contributed capital |
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| 14.
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Which of the following formulas is used to calculate a price-earnings ratio? |
| | A) | dividends per share / earnings per share |
| | B) | current market price per share / earnings per share |
| | C) | net income less preferred dividends / number of com. shares outstanding |
| | D) | dividends per share / market price per share |
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| 15.
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The balance of the Common Shares account was $400,000 for the entire fiscal year. Net income for the year was $40,000, of which 25% was distributed to shareholders as a cash dividend. The market price of the shares on the last day of the year was $12 per share. The price earnings ratio was: |
| | A) | 40.0 |
| | B) | 4.0 |
| | C) | 12.0 |
| | D) | 2.5 |
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| 16.
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The market price per share is $32. The price earnings ratio is 5.0. The earnings per share are: |
| | A) | $160 |
| | B) | 50% of the market price per share |
| | C) | 25.60 |
| | D) | $6.40 |
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| 17.
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| 2001 | 2000 | 1999 | 1998 | | Total liabilities | $100,000 | $150,000 | $122,000 | $80,000 | | Shareholders' equity | 80,000 | 150,000 | 130,000 | 100,000 | | Net income | 20,000 | 23,000 | 24,000 | 15,000 |
If 50,000 common shares have been outstanding since 1998, then: |
| | A) | the 1998 debt-to-equity ratio was 1 to .80 |
| | B) | the earnings per share in 2001 were $0.40 |
| | C) | the book value per share in 1999 was $3.08 |
| | D) | earnings per share in 1998 were $0.15 |
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| 18.
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Which line is NOT correct? |
| | A) | Ratio: Current ratio; Type of measurement: Short-term liquidity |
| | B) | Ratio: Return on total assets; Type of measurement: Operating efficiency |
| | C) | Ratio: Dividend yield; Type of measurement: Capital structure |
| | D) | Ratio: Equity ratio; Type of measurement: Long-term risk and capital structure |
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| 19.
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Which of the following is not a liquidity ratio? |
| | A) | Current ratio |
| | B) | Acid-test ratio |
| | C) | Times interest earned |
| | D) | Merchandise turnover |
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| 20.
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Which current asset is excluded in calculating the acid-test ratio? |
| | A) | Cash |
| | B) | Accounts receivable |
| | C) | Marketable securities |
| | D) | Inventory |
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| 21.
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Which of the following financial ratios is the best way to judge the company's future performance, especially in the way the company will continue to grow? |
| | A) | Return on Equity |
| | B) | Earning per share |
| | C) | Price-earnings ratio |
| | D) | Dividend yield. |
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| 22.
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Which of the following ratios would be of the least interest to the short-term creditor of the business? |
| | A) | current ratio |
| | B) | times interest earned |
| | C) | acid-test ratio |
| | D) | working capital ratio |
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| 23.
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Net income is not used as a numerator or a denominator in which of the following financial ratios? |
| | A) | return on total assets employed |
| | B) | times fixed interest charges earned |
| | C) | return on common shareholders' equity |
| | D) | profit margin measurement |
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| 24.
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Which statement best describes solvency? |
| | A) | A company’s productivity in using its assets. |
| | B) | A company's ability to generate an adequate return on invested capital. |
| | C) | A company’s ability to meet its short-term cash requirements. |
| | D) | A company’s long-run financial viability and its ability to cover long-term obligations. |
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