Ratio Analysis MCQs

?

Tosh Enterprises reported the following account information: Accounts receivable $400,000 Accounts payable $260,000 B...






?

Tosh Enterprises reported the following account information: Accounts receivable $400,000 Accounts payable $260,000 B...






?

Tosh Enterprises reported the following account information: Accounts receivable $400,000 Accounts payable $260,000 B...






?

A financial analyst has obtained the following data from Kryton Industries’ financial statements: Cash $200,000 Marketable ...






?

Given an acid test ratio of 2.0, current assets of $5,000, and inventory of $2,000, the value of current liabilities is






?

The selected data pertain to Tilghman Company at December 31: Quick assets $208,000 Acid test ratio 2.6 to 1 Current ...






?

Devlin Company’s acid test ratio at May 31 Year 2, was






?

Beatnik Company has a current ratio of 2.5 and a quick ratio of 2.0. If the firm experienced $2 million in cost of sales and sustains an inventory tur...






?

All of the following are included when calculating the acid test ratio except






?

A company’s cash ratio will decrease if the company






?

In analyzing the short-term liquidity of a firm, many analysts prefer to use the quick (or acid test) ratio rather than the current ratio. The primary...






?

A corporation has $90 million in current assets. If the corporation has a current ratio of 1.2 and a quick ratio of 0.9, what is net working capital? ...






?

Bond Corporation has a current ratio of 2 to 1 and a quick ratio (acid test) of 1 to 1. A transaction that would change Bond’s quick ratio but not i...






?

Rice, Inc., uses the allowance method to account for uncollectible accounts. An account receivable that was previously determined uncollectible and wr...






?

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets ex...






?

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets ex...






?

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets ex...






?

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets ex...






?

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets ex...






?

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets ex...






?

Windham Company has current assets of $400,000 and current liabilities of $500,000. Windham Company’s current ratio will be increased by






?

Peters Company has a 2-to-1 current ratio. This ratio would increase to more than 2 to 1 if






?

Merit, Inc., uses the direct write-off method to account for uncollectible accounts receivable. If the company subsequently collects an account receiv...






?

The following transactions occurred during a companys first year of operations: I. Purchased a delivery van for cash II. Borrowed money by issuance...






?

Birch Products, Inc., has the following current assets: Cash $250,000 Marketable securities 100,000 Accounts receivable 800,000 Inventories 1,450,...






?

Davis Retail, Inc., has total assets of $7,500,000 and a current ratio of 2.3 times before purchasing $750,000 of merchandise on credit for resale. Af...






?

Markowitz Company increased its allowance for uncollectible accounts. This adjustment will






?

Garstka Auto Parts must increase its acid test ratio above the current 0.9 level in order to comply with the terms of a loan agreement. Which one of t...






?

The owner of a chain of grocery stores has bought a large supply of mangoes and paid for the fruit with cash. This purchase will adversely impact whic...






?

Both the current ratio and the quick ratio for Spartan Corporation have been slowly decreasing. For the past two years, the current ratio has been 2.3...






?

The acid test ratio shows the ability of a company to pay its current liabilities without having to






?

When a fixed asset is sold for less than book value, which one of the following will decrease?






?

If a company has a current ratio of 2.1 and pays off a portion of its accounts payable with cash, the current ratio will






?

Clauson, Inc., grants credit terms of 1/15, net 30 and projects gross sales for next year of $2,000,000. The credit manager estimates that 40% of thei...






?

Alliance Ltd. has $80 million in current assets, comprised of $30 million in inventory and $50 million in cash and marketable securities The companys...






?

Carson Corporation computed the following items from its financial records for the current year: Current ratio 2 to 1 Inventory turnover 54 days Ac...






?

To determine the operating cycle for a retail department store, which one of the following pairs of items is needed?






?

Accounts receivable turnover ratio will normally decrease as a result of






?

Which one of the following inventory cost flow assumptions will result in a higher inventory turnover ratio in an inflationary economy?






?

The days sales in receivables ratio will be understated if the company






?

When a balance sheet amount is related to an income statement amount in computing a ratio,






?

The number of days sales in receivables is a measure of






?

A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a...






?

A change in credit policy has caused an increase in sales, an increase in discounts taken, a decrease in the amount of bad debts, and a decrease in th...






?

The ratio of sales to working capital is a measure of






?

A high sales-to-working-capital ratio could indicate






?

A company sells 10,000 skateboards a year at $66 each. All sales are on credit, with terms of 3/10, net 30, that is, a 3% discount if payment is made ...






?

A company sells 10,000 skateboards a year at $66 each. All sales are on credit, with terms of 3/10, net 30, that is, a 3% discount if payment is made ...






?

The Irwin Corporation has $3 million per year in credit sales The companys average days sales outstanding is 40 days. Assuming a 360-day year what i...






?

The ratio that measures a firms ability to generate earnings from its resources is






?

Maydale Inc s financial statements show the following information: Accounts receivable, end of Year1 $320,000 Credit sales for Year2 3,600,000 Acc...






?

Zubin Corporation experiences a decrease in sales and cost of goods sold, an increase in accounts receivable, and no change in inventory. If all else ...






?

On its year-end financial statements, Caper Corporation showed sales of $3,000,000, net fixed assets of $1,130,000 and total assets of $2,000,000 The ...






?

Globetrade is a retailer that buys virtually all of its merchandise from manufacturers in a country experiencing significant inflation. Globetrade is ...






?

Lancaster, Inc., had net accounts receivable of $168,000 and $147,000 at the beginning and end of the year respectively The companys net income for t...






?

A corporation is able to reduce its days sales in inventory by adopting a more efficient inventory management system. Other things remaining the same...






?

A company changes its credit policy from 2/10 net 30 to 1/10 net 90. The most likely effect of this change is to






?

A corporation has a decrease in its operating cycle and a decrease in its cash cycle. All else remaining unchanged this would occur if the corporation...






?

A debt to equity ratio is






?

The relationship of the total debt to the total equity of a corporation is a measure of






?

Everything else being equal, a highly leveraged firm will have earnings per share. List A List B






?

If the ratio of total liabilities to equity increases, a ratio that must also increase is






?

A measure of long-term debt-paying ability is a companys






?

All of the following financial indicators are measures of liquidity and activity except the






?

A bondholder would be most concerned with which one the following ratios?






?

In general, as a company increases the amount of short-term financing relative to long-term financing, the






?

Which one of the following factors would likely cause a firm to increase its use of debt financing as measured by the debt to total capital ratio?






?

Which of the outcomes represented in the following table would result from a companys retirement of debt with excess cash? Total Assets Turnover R...






?

A company issued long-term bonds and used the proceeds to repurchase 40% of the outstanding shares of its stock. This financial transaction will like...






?

Stanford Company leased some special-purpose equipment from Vincent, Inc., under a long-term lease that was treated as an operating lease by Stanford....






?

Which one of the following is the best indicator of long-term debt paying ability?






?

The following information has been derived from the financial statements of Boutwell Company: Current assets $640,000 Total assets 990,000 Long-ter...






?

The interest expense for a company is equal to its earnings before interest and taxes (EBIT). The companys tax rate is 40%. The companys times inter...






?

A company has interest expense of $4 million, sales revenue of $50 million, earnings before interest and taxes of $20 million, and an income tax rate ...






?

The degree of operating leverage (DOL) is






?

For a firm with a degree of operating leverage of 3.5, an increase in sales of 6% will






?

This year, Nelson Industries increased earnings before interest and taxes (EBIT) by 17%. During the same period, net income after tax increased by 42%...






?

A firm with a higher degree of operating leverage when compared to the industry average implies that the






?

A degree of operating leverage of 3 at 5,000 units means that a






?

Firms with high degrees of financial leverage would be best characterized as having






?

The use of debt in the capital structure of a firm






?

A financial analyst with Mineral, Inc., calculated the companys degree of financial leverage as 1.5. If income before interest increases by 5%, earni...






?

Which one of the following statements concerning the effects of leverage on earnings before interest and taxes (EBIT) and earnings per share (EPS) is ...






?

Since incorporating 3 years ago, Lawrence, Inc., has estimated bad debts at a rate of 3% using the income statement approach. During its fourth year i...






?

Which of the following costs, when subtracted from total revenue, yields economic profit?






?

All of the following are affected when merchandise is purchased on credit except






?

On December 31, year 2, Northpark Co. collected a receivable due from a major customer. Which of the following ratios would be increased by this tra...






?

Which of the following statements concerning ratio analysis is/are correct? I. Ratio analysis uses only monetary measures for analysis purposes. ...






?

Farrow Co. is applying for a loan in which the bank requires a quick ratio of at least 1. Farrow’s quick ratio is 0.8. Which of the following action...






?

Information that relates to a firm’s solvency is used primarily to assess a firm’s ability to






?

A company has cash of $100 million, accounts receivable of $600 million, current assets of $1.2 billion, accounts payable of $400 million, and current...






?

Bobcat Company has a current ratio of 2:1. Which one of the following transactions could Bobcat use to increase its current ratio?






?

A company has income after tax of $5.4 million, interest expense of $1 million for the year, depreciation expense of $1 million, and a 40% tax rate. W...






?

The following information was taken from the income statement of Hadley Co.: Beginning inventory 17,000 Purchases 56,000 Ending inventory 13,000 ...






?

Cyco, Inc. determined the following concerning its operating activities: Accounts receivable conversion cycle 18 days Accounts payable conversion ...






?

The following calculations were made from Clay Co.’s 2003 books: Number of days’ sales in inventory 61 Days Number of days’ sales in trade a...






?

The controller of Peabody, Inc. has been asked to present an analysis of accounts receivable collections at the upcoming staff meeting. The following ...






?

Super Sets, Inc. manufactures and sells television sets. All sales are finalized on credit with terms of 2/10, n/30. Seventy percent of Super Set cust...






?

A company has two divisions. Division A has operating income of $500 and total assets of $1,000. Division B has operating income of $400 and total ass...






?

Return on assets is computed as Net Income (as appropriately adjusted)/Average Total Assets. DuPont Company developed a method of separating the retu...