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| 1 | |
Financial leverage is negative when: |
| | A) | the return on total assets is less than the rate of return on common stockholders' equity. |
| | B) | the return on total assets is less than the rate of return demanded by creditors. |
| | C) | total liabilities are less than stockholders' equity. |
| | D) | total liabilities are less than total assets. |
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| 2 | |
The records of Scott Enterprises include the following account balances as of the end of the most recent year:
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The book value per share of the company's common stock is: |
| | A) | $28. |
| | B) | $25. |
| | C) | $22. |
| | D) | $20. |
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| 3 | |
Selected financial data for Dexter Company appear below:
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During the year, the company paid dividends of $20,000 on its preferred stock. The company's net income for the year was $240,000. The company's return on common stockholders' equity for the year is closest to: |
| | A) | 25%. |
| | B) | 23%. |
| | C) | 19%. |
| | D) | 17%. |
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| 4 | |
The following data have been taken from Tellscher Chocolate Company's financial records for the current year:
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The price-earnings ratio is: |
| | A) | 15.0 to 1. |
| | B) | 9.0 to 1. |
| | C) | 7.0 to 1. |
| | D) | 1.67 to 1. |
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| 5 | |
River North Company reported net income of $150,000 and interest expense of $20,000. Total assets were $1,300,000 at the beginning of the year and $1,220,000 at the end of the year. The company's income tax rate was 30%. The company's return on total assets for the year was closest to: |
| | A) | 13.5%. |
| | B) | 13.0%. |
| | C) | 12.4%. |
| | D) | 11.9%. |
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| 6 | |
The market price of the common stock of Gigantic Company dropped from $550 to $325 per share. The dividend paid per share remained unchanged. The company's dividend payout ratio would: |
| | A) | be unchanged. |
| | B) | increase. |
| | C) | decrease. |
| | D) | be impossible to determine without more information. |
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| 7 | |
Selected year-end data for the Long Grove Confectionary Company are presented below:
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The company has no prepaid expenses and inventories remained unchanged during the year. Based on these data, the company's inventory turnover ratio for the year was closest to: |
| | A) | 1.20 times. |
| | B) | 1.67 times. |
| | C) | 2.33 times. |
| | D) | 2.40 times. |
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| 8 | |
If Accutek Company converts a short-term note payable into a long-term note payable, this transaction would: |
| | A) | decrease the current ratio and decrease the acid-test ratio. |
| | B) | decrease working capital and increase the current ratio. |
| | C) | decrease working capital and decrease the current ratio. |
| | D) | increase working capital and increase the current ratio. |
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| 9 | |
Hefferman Construction Company had $360,000 in sales on account last year. The beginning accounts receivable balance was $20,000 and the ending accounts receivable balance was $36,000. The company's average collection period (age of receivables) was closest to: |
| | A) | 20.28 days. |
| | B) | 28.39 days. |
| | C) | 36.50 days. |
| | D) | 56.78 days. |
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| 10 | |
Assume that a company reports accounts receivable, inventory, and prepaid expenses on its balance sheet. Which of those accounts should be included in the calculation of the company's acid-test ratio? |
| | A) | Accounts receivable and prepaid expenses, but not inventory |
| | B) | Accounts receivable, but not inventory or prepaid expenses |
| | C) | Inventory and prepaid expenses, but not accounts receivable |
| | D) | Inventory, but not accounts receivable or prepaid expenses |
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