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2012-04-16_034851_mcq_shondreajames by hedongchenchen


									Multiple choice questions (1 point each) Select the one, best answer: Please Show Work
1. If a retail store has a current ratio of 2.25 to 1 and current assets of $72,000, the amount of working
capital is:
c $40,000.

2. When preparing a common size income statement:
c Each income statement item is expressed as a percentage of net sales.

3. The debt ratio is used primarily as a measure of:
b Creditor’s long-term risk.

4. The quick ratio:
c Cannot be higher than the current ratio.

Problem (6 points)
Shown below are selected data from the balance sheet of Certain Value Hardware, a small retail store
(dollar amounts are in thousands):

Cash $ 40
Accounts receivable 200
Inventory 390
Total assets 900
Current liabilities 300
Non-current liabilities 240

From this information, compute the
(a) acid test ratio
(b) the current ratio
(c) the working capital (in thousands)

 (a) acid test ratio                          times
 (b) the current ratio                        times
 (c) the working capital (in thousands)       $ 330
Shown below are selected data from the financial statements of Beck Intelligent Systems (dollar
amounts are in millions, except for the per-share data).
Income statement data:
Net sales $4,000
Cost of goods sold 1,800
Operating expenses 1,400
Net income 600

Balance sheet data:
Average total equity 3,000
Average total assets 5,000

Per share data (these amounts stated in actual dollars, not millions):
Beck Intelligent Systems reported earnings per share for the year of $2 and paid cash dividends of $1 per
share. At year-end, the Wall Street Journal listed Beck Intelligent Systems’ capital stock as trading at
$100 per share.
From this information, compute the:
(d) Gross margin ratio
(e) Return on total assets
(f) Return on equity
(g) Price/earnings ratio at year end

 (d) Gross margin ratio                     55%
 (e) Return on total assets                 12%
 (f) Return on equity                       20%
 (g) Price/earnings ratio at year end     $  50

Given below are comparative balance sheets and an income statement for Ringer Corporation

Ringer Corporation
Balance Sheets - 2011
Dec. 31 Jan. 1 Ringer Corporation
Income Statement for 2011
Cash $ 15,000 $ 14,000 Sales $205,000
Accounts receivable 45,000 37,000 Cost of goods sold (117,250)
Inventory 32,000 35,000 Gross profit on sales $ 87,750
Equipment (net) 55,000 65,000 Operating expenses (57,950)
Operating income $ 29,800
Accounts payable 25,000 28,000 Interest expense and income taxes (6,225)
Dividends payable 8,000 4,000 Net income $ 23,575
Long-term note
payable 14,000 14,000
Capital stock, $5 par 70,000 70,000
Retained earnings 30,000 35,000
$147,000 $151,000
All sales were made on account. Cash dividends declared during the year totaled $28,575.
From this information, compute the:
(h) Accounts receivable turnover
(i) Inventory turnover
(j) Debt ratio rounded to the nearest percent
(k) Earnings per share
(l) Return on common stockholders’ equity

 (h) Accounts receivable turnover             5 times
 (i) Inventory turnover                         times
 (j) Debt ratio rounded to the nearest
 percent                                     31.97%
 (k) Earnings per share                      $ 1.68
 (l) Return on common equity                 23.00%

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