Filters
Question type
Study Flashcards

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?


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 D)
F) A) and B)

Correct Answer

verifed

verified

A

Which of the following transactions will not increase the cash ratio?


A) Receiving cash from a common stock issue.
B) Refinancing a current liability with long-term debt.
C) Using cash to purchase a two-month treasury bill.
D) Collecting an account receivable.

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

Correct Answer

verifed

verified

Which of the following ratios increases when inventory is sold on account for a price equal to its original cost?


A) Current.
B) Quick.
C) Return on assets.
D) Return on equity.

E) None of the above
F) A) and B)

Correct Answer

verifed

verified

Which of the following statements is not correct?


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 asset turnover.

E) None of the above
F) C) and D)

Correct Answer

verifed

verified

At the end of 2014, Jared Corporation reported a return on assets of 16%; net income of $42,000; average total assets of $365,000, and average total liabilities of $165,000. Required: What was Jared's financial leverage percentage?

Correct Answer

verifed

verified

The return on equity ratio = 21% = Net i...

View Answer

Negative financial leverage occurs when the:


A) Average net (after tax) interest rate on borrowed funds is less than the company's earnings rate on its assets.
B) Return on assets is more than return on equity.
C) Return on equity is more than return on assets.
D) Operating expenses exceed gross profit.

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

Correct Answer

verifed

verified

B

The inventory turnover ratio is significantly affected by the choice of inventory accounting method.

A) True
B) False

Correct Answer

verifed

verified

True

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


A) Current ratio.
B) Profit margin.
C) Return on assets.
D) Earnings per share.

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

Correct Answer

verifed

verified

The year-end adjusting entry to adjust the unearned revenue account for revenue earned decreases which of the following ratios?


A) Current.
B) Debt-to-equity.
C) Quick.
D) Profit margin.

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

Correct Answer

verifed

verified

Finding comparable companies in order to compare performance is often difficult since no two companies have identical products, markets, and operating strategies.

A) True
B) False

Correct Answer

verifed

verified

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


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) C) and D)
F) All of the above

Correct Answer

verifed

verified

A primary objective of financial statements is to provide information to current and potential investors and creditors.

A) True
B) False

Correct Answer

verifed

verified

The base amount in preparing component percentages for an income statement is usually which of the following?


A) Income from operations.
B) Gross profit.
C) Net income.
D) Net sales.

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

Correct Answer

verifed

verified

Component percentages are used to express items on financial statements as a percentage of a single base amount.

A) True
B) False

Correct Answer

verifed

verified

During 2014, Home Style's cost of goods sold percentage was 68.2%, and selling and store operating costs was 19.3% of sales. During 2013, Home Style's cost of goods sold percentage was 68.9% while selling and store operating costs was 19.2% of sales. What effect would the change in these percentages have on 2014's gross profit percentage and profit margin percentage?


A) The decrease in the cost of goods sold percentage would increase both the gross profit and profit margin percentages, but the increase in the selling and store operating costs percentage would decrease both the gross profit and profit margin percentages.
B) The decrease in the cost of goods sold percentage would decrease both the gross profit and profit margin percentages, but the increase in the selling and store operating costs percentage would increase both the gross profit and profit margin percentages.
C) The decrease in the cost of goods sold percentage would increase both the gross profit and profit margin percentages, but the increase in the selling and store operating costs percentage would decrease only the profit margin percentage.
D) The decrease in the cost of goods sold percentage would decrease both the gross profit and profit margin percentages, but the increase in the selling and store operating costs percentage would increase only the profit margin percentage.

E) A) and C)
F) None of the above

Correct Answer

verifed

verified

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


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 C)
F) A) and D)

Correct Answer

verifed

verified

Bailey Corporation reported the following information for 2014:  Net income $10,000 Total assets 16,000 Total stockholders’ equity 8,000\begin{array}{lr}\text { Net income } & \$ 10,000 \\\text { Total assets } & 16,000 \\\text { Total stockholders' equity } & 8,000\end{array} What is Bailey's debt-to-equity ratio?


A) 2
B) 1.25
C) 1.0
D) 3.0

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

Correct Answer

verifed

verified

Agnes Company reported the following data:  Quick assets $55,000 Current assets 150,000 Total liabilities 300,000 Average net receivables 12,600 Beginning inventory 38,000 Long-term liabilities 200,000 Net credit sales 126,000 Cost of goods sold 84,000 Ending inventory 46,000\begin{array} { l r } \text { Quick assets } & \$ 55,000 \\\text { Current assets } & 150,000 \\\text { Total liabilities } & 300,000 \\\text { Average net receivables } & 12,600 \\\text { Beginning inventory } & 38,000 \\\text { Long-term liabilities } & 200,000 \\\text { Net credit sales } & 126,000 \\\text { Cost of goods sold } & 84,000 \\\text { Ending inventory } & 46,000\end{array} What was the inventory turnover ratio?


A) 2.2
B) 1.8
C) 2.0
D) 3.0

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

Correct Answer

verifed

verified

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 cash coverage ratio?


A) 39.0
B) 20.0
C) 19.8
D) 39.6

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

Correct Answer

verifed

verified

Which of the following ratios is not part of the DuPont model?


A) Asset turnover.
B) Debt-to-equity.
C) Net profit margin.
D) Return on equity.

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

Correct Answer

verifed

verified

Showing 1 - 20 of 110

Related Exams

Exam 1

Financial Statements and Business Decisions

122 Questions

Exam 2

Investing and Financing Decisions and the Accounting System

132 Questions

Exam 3

Operating Decisions and the Accounting System

114 Questions

Exam 4

Adjustments, Financial Statements, and the Quality of Earnings

136 Questions

Exam 5

Communicating and Interpreting Accounting Information

111 Questions

Exam 6

Reporting and Interpreting Sales Revenue, Receivables, and Cash

128 Questions

Exam 7

Reporting and Interpreting Cost of Goods Sold and Inventory

124 Questions

Exam 8

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

126 Questions

Exam 9

Reporting and Interpreting Liabilities

113 Questions

Exam 10

Reporting and Interpreting Bonds

120 Questions

Exam 11

Reporting and Interpreting Owners Equity

118 Questions

Exam 12

Statement of Cash Flows

116 Questions

Exam 14

Reporting and Interpreting Investments in Other Corporations

112 Questions

Show Answer