Question 1

Wayne,Inc.has net sales revenue of $348,800,cost of goods sold of $274,400,and net income of $2,400.If interest expense is $8,000 and income tax expense is $800,the times interest earned ratio is:

Accepted Answer

A)  1.4.
B)  0.33.
C)  1.3.
D)  0.40.E) C) and D)
F) None of the above

Question 2

Solvency ratio data are primarily concerned with the ability of a company to:

Accepted Answer

A)  produce profits.
B)  maintain long-term survival and repay its debt.
C)  manage its cash flow.
D)  provide income for stockholders.E) B) and D)
F) A) and B)

Question 3

An increase in the gross profit percentage indicates that:

Accepted Answer

A)  cost of goods sold as a percentage of sales has decreased.
B)  cost of goods sold as a percentage of sales has increased.
C)  operating expenses as a percentage of sales have increased.
D)  operating expenses as a percentage of sales have decreased.E) A) and B)
F) A) and C)

Question 4

Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The net profit margin is:

Accepted Answer

A)  0.32.
B)  0.56.
C)  0.86.
D)  0.14.E) A) and B)
F) A) and C)

Question 5

During the current accounting period,revenue from credit sales is $536,800.The Accounts Receivable balance is $41,184 at the beginning of the period and $41,760 at the end of the period.Which of the following statements is correct?

Accepted Answer

A)  The receivables turnover ratio is 12.9.
B)  On average,it takes 12.9 days to collect payment from credit customers.
C)  The receivables turnover ratio is 28.3.
D)  On average,the company sells its inventory every 28.3 days.E) C) and D)
F) B) and D)

Question 6

Benchmarks are useful when evaluating a company's performance.

Accepted Answer

A) True 
 B)False

Question 7

Which type of ratio indicates a company's ability to generate income in the current period?

Accepted Answer

A)  Profitability ratios
B)  Liquidity ratios
C)  Solvency ratios
D)  Current ratiosE) A) and D)
F) All of the above

Question 8

Which of the following is a liquidity ratio?

Accepted Answer

A)  Inventory turnover
B)  Price/Earnings ratio
C)  Net profit margin
D)  Times interest earnedE) All of the above
F) C) and D)

Question 9

Which of the following measures would assist in assessing the profitability of a company?

Accepted Answer

A)  Earnings per share
B)  Times interest earned ratio
C)  Inventory turnover ratio
D)  Debt-to-assets ratioE) A) and B)
F) None of the above

Question 10

A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

Accepted Answer

A)  The debt-to-assets ratio will be unchanged.
B)  The debt-to-assets ratio will increase.
C)  The debt-to-assets ratio will decrease.
D)  The debt-to-assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.E) A) and B)
F) C) and D)

Question 11

Net income was $753,480 in the current year and $655,200 in the prior year.The year-to-year percentage change in net income is an increase of:

Accepted Answer

A)  15%.
B)  55%.
C)  87%.
D)  13%.E) A) and B)
F) A) and C)

Question 12

Trend data can be measured in dollar amounts or percentages.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following ratios is used to evaluate how efficient a company is in using its fixed assets to generate revenues?

Accepted Answer

A)  Current ratio
B)  Debt-to-assets ratio
C)  Return on fixed assets ratio
D)  Fixed asset turnover ratioE) A) and C)
F) B) and C)

Question 14

A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover.

Accepted Answer

A) True 
 B)False

Question 15

Which ratio is used to evaluate how well a company is managing its property,plant,and equipment?

Accepted Answer

A)  Receivables turnover
B)  Inventory turnover
C)  Fixed asset turnover
D)  Debt-to-assets ratioE) All of the above
F) None of the above

Question 16

Lyndale,Inc.'s sales are $513,000 and $360,000 during the current and prior years,respectively.The percentage change is:

Accepted Answer

A)  42.5%.
B)  70%.
C)  29.8%.
D)  130%.E) None of the above
F) A) and B)

Question 17

The ratio that measures the percentage of financing from creditors is the:

Accepted Answer

A)  current ratio.
B)  times interest earned ratio.
C)  debt-to-assets ratio.
D)  Price/Earnings ratio.E) C) and D)
F) A) and D)

Question 18

Which of the following ratios does not use net income in its calculation?

Accepted Answer

A)  Net profit margin
B)  Earnings per share
C)  Return on equity
D)  Fixed asset turnoverE) A) and B)
F) B) and C)

Question 19

The comparative financial statements of Seward,Inc.include the following data:  The gross profit percentage for the current year is closest to:

Accepted Answer

A)  42%.
B)  13.5%.
C)  57.7%.
D)  21.15%.E) A) and D)
F) B) and C)

Question 20

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Accepted Answer

A)  Anheuser Busch's net profit margin.
B)  the Fortune 500's net profit margin.
C)  Pepsico's net profit margin.
D)  the average net profit margin for the soft drink manufacturing industry.E) A) and D)
F) A) and C)

Exam 13: Measuring and Evaluating Financial Performance

Which of the following is a liquidity ratio?

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Which type of ratio indicates a company's ability to generate income in the current period?

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Which of the following ratios does not use net income in its calculation?

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Net income was $753,480 in the current year and $655,200 in the prior year.The year-to-year percentage change in net income is an increase of:

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The comparative financial statements of Seward,Inc.include the following data: The gross profit percentage for the current year is closest to:

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Benchmarks are useful when evaluating a company's performance.

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The ratio that measures the percentage of financing from creditors is the:

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Wayne,Inc.has net sales revenue of $348,800,cost of goods sold of $274,400,and net income of $2,400.If interest expense is $8,000 and income tax expense is $800,the times interest earned ratio is:

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Which ratio is used to evaluate how well a company is managing its property,plant,and equipment?

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Solvency ratio data are primarily concerned with the ability of a company to:

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A company with a high inventory turnover requires a larger investment in inventory than another company of similar sales with a lower inventory turnover.

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An increase in the gross profit percentage indicates that:

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During the current accounting period,revenue from credit sales is $536,800.The Accounts Receivable balance is $41,184 at the beginning of the period and $41,760 at the end of the period.Which of the following statements is correct?

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Trend data can be measured in dollar amounts or percentages.

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When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

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Which of the following ratios is used to evaluate how efficient a company is in using its fixed assets to generate revenues?

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Which of the following measures would assist in assessing the profitability of a company?

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Lyndale,Inc.'s sales are $513,000 and $360,000 during the current and prior years,respectively.The percentage change is:

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Kingsbury Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,and all other expenses of $262,080.The net profit margin is:

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A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

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