Graded Homework

PLEASE HIGHLIGHT ALL ANSWERS AND LEAVE IN THIS FORMAT.

1. Which of the following use financial statement data to
make decisions?

a.
Customers

b.
Investors

c.
Suppliers

d.
All of these

2.Which statement would best provide
information about a company’s current liquidity?

a.
Balance Sheet

b.
Income Statement

c.
Statement of Cash Flows

d.
None of these

3.A banker is analyzing a company that operates
in the petroleum industry. Which of the following might be a major
consideration in determining whether the company should receive a loan?

a.
The petroleum industry
suffers from political pressures concerning the selling price of its products

b.
Infalation has been high for
several years in a row

c.
All companies in the
petroleum industry use the same accounting principles

d.
The company has a large
amount of interest payments related to many outstanding loans

4. Which type of analysis compares a single corporation
across time?

a.
Cross Sectional Analysis

b.
Time series Analysis

c.
Timetable Analysis

d.
Company Analysis

5.Which of the following types of analysis
compares on corporation to another corporation and to industry averages?

a.
Cross Sectional Analysis

b.
Time Series Analysis

c.
Timetable Analysis

d.
Company Analysis

6. How is the current ratio calculated?

a.
(Cash + Marketable
Securities + Accounts Receivables) / Current Liabilities

b.
(Cash + Market Securities) /
Current Liabilities

c.
Current Assets / Current
Liabilities

d.
Cash Flows from
Operating Activities / Current Liabilities

7. Partial information from Fabray Company’s balance
sheet is as follows:

Current Assets			Current Liabilities
Cash	$1,200,000		Notes Payable	$750,000
Marketable Securities	$3,750,000		Accounts Payable	$9,750,000
Accounts Receivable	$28,800,000		Accrued Expenses	$6,250,000
Inventories	$33,150,000		Income Taxes Payable	$250,000
Prepaid Expenses	$600,000		Total Current Assets	$17,000,000
Total Current Assets	$67,500,000

What is Fabray’s current ratio?

a.
0.25

b.
3.0

c.
1.8

d.
3.97

8. Hummel Inc. has $30,000 in current assets and $15,000
in current liabilities. What is Hummel’s current ratio?

a.
0.5

b.
1

c.
2

d.
3

9. How is the cash ratio calculated?

a.
(Cash + Marketable
Securities + Accounts Receivables) / Current Liabilities

b.
(Cash + Market Securities) /
Current Liabilities

c.
Current Assets / Current
Liabilities

d.
Cash Flows from
Operating Activities / Current Liabilities

10.Schuester Company has $40,000 in current
liabilities, $20,000 in cash, and $25,000 in marketable securities. What is
Schuester’s cash ratio?

a.
1.125

b.
0.889

c.
1.6

d.
0.625

11. What ratio is used to measure a firm’s liquidity?

a.
Debt Ratio

b.
Asset Turnover

c.
Current Ratio

d.
Return on Equity

12. Which of the following transactions could increase a
firm’s current ratio?

a.
Purchase of Inventory
for Cash

b.
Payment of Accounts Payable

c.
Collection of Accounts
Receivable

d.
Purchase of Temporary
Investments for Cash

13. Total Liabilities / Total Equity =

a.
Times Interest Earned
Ratio

b.
Accounts Payable Turnover

c.
Receivables Turnover
Ratio

d.
Debt-to-Equity Ratio

14. When analyzing a company’s debt-to-equity ratio, if
the ratio has a value that is greater than 1, then the company has:

a.
Less debt than equity

b.
More debt than equity

c.
Equal amounts of debt
and equity

d.
None of these are
correct

15. Cost of goods sold / average inventory is the formula
to compute:

a.
Accounts Receivable
Turnover

b.
Gross Profit Percentage

c.
Inventory Turnover

d.
Return on Sales
Percentage

16.Which of the following is the formula to
compute the net profit margin percentage?

a.
Net Income / Net sales

b.
Operating Income / Net sales

c.
Net Income / Average
Equity

d.
Net Income [Interest
Expense X (1 – Tax Rate)] / Average Total Assets

17. If Abrams Company has an inventory turnover of 7.3
and a receivables turnover of 9.6, approximately how long is its operating
cycle?

a.
72 days

b.
88 days

c.
95 days

d.
There is not enough
information to calculate the operating cycle

18. Which of the following ratios is used to measure the
profit earned on each dollar invested in a firm?

a.
Current Ratio

b.
Asset Turnover Ratio

c.
Return on Sales Ratio

d.
Return on Equity

19. Pillsbury Corporation has $65,000 of cost of goods
sold and average inventory of $30,000. What is Pillsbury’s inventory turnover
rate?

a.
0.46

b.
1.17

c.
1.46

d.
2.17

20.Selected information for Berry Company is as
follows:

Average Common Stock	$600,000
Average Additional paid-in capital	$250,000
Average Retained Earnings	$370,000
Sales Revenue for Year	$915,000
Net Income for Year	$240,000

Berry’s
return on equity, rounded to the nearest percentage point is:

a.
20%

b.
21%

c.
28%

d.
40%

21. Which of the following ratios is used to measure a
firm’s profitability?

a.
Liabilities / Equity

b.
Sales Assets

c.
Net Income / Net Sales

d.
Assets / Equity

22. If a company has a higher net profit margin than most
of its competitors, this means that:

a.
The company is more
efficient with its assets

b.
The company has more liyal
customers

c.
The company has a lower
proportion of debt financing

d.
The company has a higher
proportion of each sales dollar that is profit

23. When DuPont analysis reveals that a company has much
higher than average asset turnover and much lower than average profit margin,
what can be concluded about the company’s strategy?

a.
It is a product
differentiator

b.
It is a low-cost
provider

c.
It has no strategy

d.
It needs to concentrate
on improving it profit margins

24.Gross Profit Margin =

a.
Sales Revenue – Cost of
Goods Sold / Sales Revenues

b.
(Sales Revenues – Operating
Expenses) / Sales Revenues

c.
Current Assets / Current
Liabilities

d.
Inventory / (Cost of
Goods Sold / 365)

25. Investors should have strong confidence in a firm’s
outlook and earnings growth if the Price-to-Earnings Ratio is over ___.

a.
12

b.
10

c.
20

d.
5