ch13 example #27019

1. Which one of the following is not a characteristic generally evaluated in ratio analysis? Liquidity. Profitability. Marketability. Solvency.

2. Ratios are most useful in identifying trends. differences. causes. relationships.

3. A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will both decrease. both increase. increase and remain the same, respectively. remain the same and decrease, respectively.

4. Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $6,800,000. The receivables turnover ratio was 8.0 times. 8.3 times. 8.5 times. 7.9 times.

5. Crestwood Department Store had net credit sales of $13,000,000 and cost of goods sold of $9,000,000 for the year. The average inventory for the year amounted to $2,500,000. The average days in inventory during the year was approximately 261 days. 122 days. 101 days. 70 days.

6. Hermann Corporation had net income of $200,000 and paid dividends to common stockholders of $50,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Hermann Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Hermann Corporation's price-earnings ratio is 3 times. 10 times. 12.5 times. 4 times.

7. The current assets of Ott Company are $210,000. The current liabilities are $120,000. The current ratio expressed as a proportion is 175%. 1.75:1. .57:1. $210,000 ÷ $120,000.

8. Hunt Company had $250,000 of current assets and $90,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Hunt Company's current ratio? The ratio remained unchanged. The change in the current ratio cannot be determined. The ratio decreased. The ratio increased.

9. Mays Corporation reported net income $24,000; net sales $400,000; and average assets $600,000 for 2012. What is the 2012 profit margin? 6%. 12%. 40%. 200%.

10. Which situation below might indicate a company has a low quality of earnings? a. Revenue is recognized when earned. b. Repair costs are capitalized and then depreciated. c. The financial statements are prepared in accordance with generally accepted accounting principles. d. The same accounting principles are used each year.

11. All of the following may be indicators of channel stuffing except a. deep discounts to customers. b. customers incentives for buying early. c. an extremely good earnings period followed by several subsequent bad periods. d. inventory levels that reflect seasonal demand levels.