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Exam 13: Analyzing Financial Statements

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Question 41

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Perot Company had profit before interest and taxes of $120,000.Interest expense for the period was $17,000 and income taxes amounted to $28,500.The average shareholders' equity was $680,000.What is Perot's return on equity?

A) 10.96%
B) 13.46%
C) 15.15%
D) 17.65%

E) B) and D)
F) All of the above

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Question 42

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A successful grocery store would probably have

A) a low inventory turnover.
B) a high inventory turnover.
C) zero profit margin.
D) low volume.

E) C) and D)
F) A) and B)

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Question 43

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The use of different inventory valuation methods by two companies will have an impact on the ratio comparisons.

Able Company began the year with a balance in inventory of $110,000 and ended the year with a balance of $102,000.The net sales for the year were $983,000 with a gross profit on sales of $295,000.What was the inventory turnover?

The fixed asset turnover ratio measures management's ability to generate sales with the use of fixed assets.It is especially valuable for capital intensive companies.

The records of Twain Company include the following: What is the financial leverage factor (rounded to the nearest percent) ?

The following data were reported for Marcellan Company:

Ratios can best be interpreted only by comparing them to other ratios or to some threshold value.

Howard Corporation reported a quick ratio of 1.75,current assets of $50,000 and a current (working capital)ratio of 2. (a)The total amount of quick assets was $_______. (b)What is another name for the quick ratio? ___________ (c)Describe what type of assets are considered quick assets and give some examples. (d)How does the quick ratio compare to the current ratio?

Indicate the effect of each item on the ratios given below in the following manner: if an item would cause an increase in the ratio,place a check in the + column; if a decrease,place a check in - column; and if no change,check the 0 column.Each item is independent of the others.

If trade receivables are collected quickly,it may indicate which of the following?

Easy Company reported the following data at year-end:

A company with a very high gross profit ratio would most likely be

The records of ZZZZ Better Corporation include the following: What is the return on equity (round to the nearest percent) ?

Which of the following ratios is not a test of solvency?

Short-term creditors are usually most interested in assessing

Calculate C Co's financial leverage and identify whether it was positive or negative.

Calculate C Co's financial leverage and identify whether it was positive or negative. A.14.1% positive B.15.2% positive C.17.8% negative D.19.9% negative

The ratio of quick assets to current liabilities is known as which of the following?

A general rule to use in assessing the average collection period is that it