Question 1

The following return on investment ratios were computed for Steven Company:  Required: 
A.Compute financial leverage percentage for each year and state whether it is positive or negative.
B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Accepted Answer

A. 2017: 15% - 12% = +3% positive.
2016:...

Question 2

MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2017 and 2016. MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2017 and 2016 respectively. The company paid cash dividends per share of $0.85 in 2017 and $0.63 in 2016. Total stockholders' equity was $13,572 million and $11,896 million in 2017 and 2016 respectively. The common shares outstanding were approximately 1,782,000 in both 2017 and 2016. MusicPod's dividend yield ratio for 2017 is closest to:

Accepted Answer

A)  34.4%
B)  1.4%
C)  30.4%
D)  1.6%E) A) and D)
F) A) and B)

Question 3

Which of the following statements is correct?

Accepted Answer

A)  A ratio calculation is most relevant in isolation.
B)  One of the advantages of ratio analysis is that it allows companies of different sizes to be compared.
C)  Finding benchmarks for comparison is a straightforward task.
D)  It is always preferable to compare a company's performance to industry-wide ratios rather than to use a competitor's ratios.E) A) and B)
F) C) and D)

Question 4

The debt-to-equity ratio measures which of the following?

Accepted Answer

A)  Liquidity.
B)  Solvency.
C)  Profitability.
D)  Market strength.E) All of the above
F) B) and C)

Question 5

Which of the following transactions will increase a current ratio, which is currently 2.5?

Accepted Answer

A)  Receiving cash from signing a 6-month note payable.
B)  Accruing an expense.
C)  Using cash to pay an account payable.
D)  Collecting an account receivable.E) B) and C)
F) None of the above

Question 6

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount. What was the current ratio?

Accepted Answer

A)  1.00
B)  1.25
C)  3.00
D)  5.00E) C) and D)
F) All of the above

Question 7

Purchasing treasury stock increases the return on equity ratio.

Accepted Answer

A) True 
 B)False

Question 8

Wildlife Co. reported net income of $8.3 million, interest expense of $0.5 million and is in a 30% tax rate bracket. Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million. Wildlife's financial leverage percentage is closest to:

Accepted Answer

A)  3.7%
B)  4.5%
C)  4.0%
D)  4.7%E) All of the above
F) None of the above

Question 9

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple Pie declared dividends of $2 per share of common stock during 2016. On December 31, 2016, the stock had a market price of $18.50 per share. Apple Pie's price/earnings ratio is closest to:

Accepted Answer

A)  9.25
B)  8.11
C)  5.84
D)  0.17E) A) and B)
F) C) and D)

Question 10

Baron Company reported the following data:  The cash ratio is closest to:

Accepted Answer

A)  1.14
B)  0.95
C)  0.38
D)  0.36E) A) and B)
F) A) and C)

Question 11

Liquidity ratios concentrate on:

Accepted Answer

A)  The operating cycle.
B)  Profitability.
C)  Short-term financial strength.
D)  Ability to pay interest on loans.E) B) and C)
F) C) and D)

Question 12

If the current ratio is 2, what will be the effect of the payment of a cash dividend, which was recorded as a liability on the date of declaration?

Accepted Answer

A)  An increase in the current ratio.
B)  A decrease in the current ratio.
C)  No effect on the current ratio.
D)  A decrease in the cash coverage ratio.E) A) and B)
F) A) and C)

Question 13

Lee Company has provided the following information: • Cash flow from operating activities, $240,000
• Net income, $204,000
• Interest expense, $20,000
• Interest cash payments, $10,000
• Income tax payments, $140,000
• Income tax expense, $136,000
What was Lee's times interest earned ratio?

Accepted Answer

A)  39.0
B)  18.0
C)  35.4
D)  17.7E) C) and D)
F) A) and C)

Question 14

The financial leverage percentage is positive when return on assets is greater than return on equity.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following transactions will increase the earnings quality ratio?

Accepted Answer

A)  Paying cash to suppliers.
B)  Accruing sales revenue.
C)  Selling treasury stock for more than its cost.
D)  Collecting an account receivable.E) A) and B)
F) None of the above

Question 16

Which of the following transactions decreases earnings per share?

Accepted Answer

A)  Declaring cash dividends payable to the common stockholders.
B)  Purchasing treasury stock.
C)  The accrual of revenue.
D)  Declaring and distributing a 10% common stock dividenD.Issuing additional shares of common stock via a stock dividend increases the number of common shares outstanding and therefore decreases earnings per share.E) A) and B)
F) A) and C)

Question 17

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Accepted Answer

A)  Mogul's current ratio decreased.
B)  Mogul's return on equity ratio decreased.
C)  Mogul's debt-to-equity ratio remained the same.
D)  Mogul's return on assets decreaseD.Stock dividends do not affect debt or total stockholders' equity.Therefore, the debt-to-equity ratio remained the same.E) None of the above
F) All of the above

Question 18

Which of the following ratios increases when cash is collected on an account receivable?

Accepted Answer

A)  Current.
B)  Quick.
C)  Return on assets.
D)  Receivable turnover ratio.E) None of the above
F) B) and D)

Question 19

Which of the following statements is not correct?

Accepted Answer

A)  Purchasing fixed assets through debt financing decreases the financial leverage ratio.
B)  Accruing an expense will affect the net profit margin ratio.
C)  Return on equity may increase even when the financial leverage ratio decreases.
D)  Purchasing treasury stock results in a decrease in total asset turnover.E) A) and D)
F) All of the above

Question 20

Which of the following ratios is not considered to be a test of profitability?

Accepted Answer

A)  Current ratio.
B)  Net profit margin.
C)  Return on assets.
D)  Earnings per share.E) B) and D)
F) B) and C)

Exam 13: Analyzing Financial Statements

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount. What was the current ratio?

Correct Answer
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Purchasing treasury stock increases the return on equity ratio.

Correct Answer
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Which of the following transactions will increase the earnings quality ratio?

Correct Answer
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The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple Pie declared dividends of $2 per share of common stock during 2016. On December 31, 2016, the stock had a market price of $18.50 per share. Apple Pie's price/earnings ratio is closest to:

Correct Answer
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Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Correct Answer
verified

Which of the following transactions decreases earnings per share?

Correct Answer
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The debt-to-equity ratio measures which of the following?

Correct Answer
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Liquidity ratios concentrate on:

Correct Answer
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Wildlife Co. reported net income of $8.3 million, interest expense of $0.5 million and is in a 30% tax rate bracket. Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million. Wildlife's financial leverage percentage is closest to:

Correct Answer
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Baron Company reported the following data: The cash ratio is closest to:

Correct Answer
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Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Correct Answer
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If the current ratio is 2, what will be the effect of the payment of a cash dividend, which was recorded as a liability on the date of declaration?

Correct Answer
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The financial leverage percentage is positive when return on assets is greater than return on equity.

Correct Answer
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Which of the following ratios increases when cash is collected on an account receivable?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Which of the following transactions will increase a current ratio, which is currently 2.5?

Correct Answer
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Which of the following ratios is not considered to be a test of profitability?

Correct Answer
verified

The following return on investment ratios were computed for Steven Company: Required: A.Compute financial leverage percentage for each year and state whether it is positive or negative. B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Correct Answer
verified
A. 2017: 15% - 12% = +3% positive.
2016:...
View Answer

Exam 13: Analyzing Financial Statements

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount. What was the current ratio?

Correct AnswerverifiedShow Answer

Purchasing treasury stock increases the return on equity ratio.

Correct AnswerverifiedShow Answer

Which of the following transactions will increase the earnings quality ratio?

Correct AnswerverifiedShow Answer

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple Pie declared dividends of $2 per share of common stock during 2016. On December 31, 2016, the stock had a market price of $18.50 per share. Apple Pie's price/earnings ratio is closest to:

Correct AnswerverifiedShow Answer

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Correct AnswerverifiedShow Answer

Which of the following transactions decreases earnings per share?

Correct AnswerverifiedShow Answer

The debt-to-equity ratio measures which of the following?

Correct AnswerverifiedShow Answer

Liquidity ratios concentrate on:

Correct AnswerverifiedShow Answer

Wildlife Co. reported net income of $8.3 million, interest expense of $0.5 million and is in a 30% tax rate bracket. Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million. Wildlife's financial leverage percentage is closest to:

Correct AnswerverifiedShow Answer

Baron Company reported the following data: The cash ratio is closest to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the current ratio is 2, what will be the effect of the payment of a cash dividend, which was recorded as a liability on the date of declaration?

Correct AnswerverifiedShow Answer

The financial leverage percentage is positive when return on assets is greater than return on equity.

Correct AnswerverifiedShow Answer

Which of the following ratios increases when cash is collected on an account receivable?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following transactions will increase a current ratio, which is currently 2.5?

Correct AnswerverifiedShow Answer

Which of the following ratios is not considered to be a test of profitability?

Correct AnswerverifiedShow Answer

The following return on investment ratios were computed for Steven Company: Required: A.Compute financial leverage percentage for each year and state whether it is positive or negative. B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Correct AnswerverifiedA. 2017: 15% - 12% = +3% positive.2016:...View AnswerShow Answer

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A. 2017: 15% - 12% = +3% positive.
2016:...
View Answer