financial management

1. Pine Hardware Store had net credit sales of $3,900,000 and cost of goods sold of $3,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover ratio was a. 5.6 times b. 6.5 times c. 4.6 times d. 6 times 2. The Walker Department Store had net credit sales of $8,000,000 and cost of goods sold of $6,000,000 for the year. The average inventory for the year amounted to $2,000,000. The inventory turnover ratio for the year is a. 4 times b. 7 times c. 3 times d. 2 times Figure 16-1. Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange. 3. Refer to Figure 16-1. Starbuck's price-earnings ratio is a. 2 times. b. 5 times. c. 10 times. d. 8 times. 4. Refer to Figure 16-1. Starbuck's dividend payout ratio for 2010 is a. $5 per share b. 25% c. 20% d. 12.5% 5. Grant Company reported the following on its income statement: Income before income taxes Income tax expense Net income

$420,000 120,000 $300,000

An analysis of the income statement revealed that interest expense was $60,000. Grant Company's times interest 9. Fastlane Company has 50,000 shares of common stock and 20,000 shares of preferred stock outstanding. There was no change in the number of common or preferred shares outstanding during the year. Preferred stockholders received dividends this year totaling $120,000. Common stockholders received dividends totaling $200,000. If the dividend payout ratio for the year was 80%, then the net income was: a. $400,000 b. $370,000 c. $160,000 d. $250,000 10. The following data have been taken from your company's financial records for the current year: Earnings per share Market price per share Dividend per share Book value per share

$ 8 $60 $ 6 $75

The price-earnings ratio is: a. 7.5 to 1 b. 10.0 to 1 c. 9.4 to 1 d. 13.3 to 1 11. Last year the return on total assets in Justin Company was 8.5%. The total assets were $2,900,000 at the beginning of the year and $3,100,000 at the end of the year. The tax rate was 30%, interest expense totaled $110,000, and sales were $5,200,000. Net income for the year was: a. $145,000

b. $222,000 c. $332,000 d. $178,000 12. Brown Company's net income last year was $90,000 and its interest expense was $15,000. Total assets at the beginning of the year were $640,000 and total assets at the end of the year were $680,000. The company's income tax rate was 40%. The company's return on total assets for the year was closest to: a. 14.5% b. 15.0% c. 13.6% d. 15.9% 13. Dartmouth Company has an quick ratio of 2.5 to 1. It has current liabilities of $40,000 and noncurrent assets of $70,000. If Dartmouth's current ratio is 3.1 to 1, its inventory and prepaid expenses must be a. $12,400 b. $24,000 c. $30,000 d. $40,000 14. Eagle Company has $12,000 in cash, $4,000 in marketable securities, $23,000 in current receivables, $22,000 in inventories, and $32,000 in current liabilities. The company's quick ratio is closest to: a. 1.09 to 1 b. 1.22 to 1 c. .72 to 1 d. 2.65 to 1 15. Erin Company has $15,000 in cash, $5,000 in marketable securities, $20,000 in current receivables, $25,000 in inventories, and $45,000 in current liabilities. The company's quick ratio is closest to: a. .89 to 1 b. .44 to 1 c. .78 to 1 d. 1.44 to 1 16. Franklin Company had $100,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The company's accounts receivable turnover was closest to: a. 10 times b. 6.25 times c. 3.85 times d. 7.69 times 17. Forest Company had $170,000 in sales on account last year. The beginning accounts receivable balance was $14,000 and the ending accounts receivable balance was $12,000. The company's accounts receivable turnover was closest to: a. 14.17 times b. 12.14 times c. 13.08 times d. 6.54 times 18. Freeman Company had $130,000 in sales on account last year. The beginning accounts receivable balance was $16,000 and the ending accounts receivable balance was $18,000. The company's accounts receivable turnover was closest to: a. 7.65 times b. 3.82 times c. 7.22 times d. 8.13 times 19. Harold Company, a retailer, had cost of goods sold of $190,000 last year. The beginning inventory balance was $28,000 and the ending inventory balance was $22,000. The company's inventory turnover was closest to: a. 7.6 times b. 6.79 times c. 3.8 times d. 8.64 times 20. Harley Company, a retailer, had cost of goods sold of $190,000 last year. The beginning inventory balance was $20,000 and the ending inventory balance was $26,000. The company's inventory turnover was closest to:

a. b. c. d.

9.5 times 7.31 times 4.13 times 8.26 times

21 Hamlin Company, a retailer, had cost of goods sold of $190,000 last year. The beginning inventory balance was $22,000 and the ending inventory balance was $28,000. The company's inventory turnover was closest to: a. 6.79 times b. 7.6 times c. 3.8 times d. 8.64 times 22 Irene's Dress Company, a retailer, had cost of goods sold of $260,000 last year. The beginning inventory balance was $20,000 and the ending inventory balance was $26,000. The company's average inventory turnover in days was closest to: a. 36.5 days b. 28.08 days c. 32.29 days d. 64.58 days 23. Ivan Men's Wear Company, a retailer, had cost of goods sold of $210,000 last year. The beginning inventory balance was $28,000 and the ending inventory balance was $20,000. The company's average inventory turnover in days was closest to: a. 41.71 days b. 83.43 days c. 48.67 days d. 34.76 days 24. The following information pertains to Barkley Company.: Merchandise purchased Cost of goods sold Inventory at the end of the year

$1,800,000 $2,000,000 $ 400,000

The inventory turnover for the year was: a. 10 times b. 5 times c. 4 times d. 3.6 times 25. Last year Janis Company had a net income of $290,000, income tax expense of $58,000, and interest expense of $20,000. The company's times interest earned was closest to: a. 15.5 times b. 10.6 times c. 18.4 times d. 14.5 times 26. Last year Jimilea Company had a net income of $260,000, income tax expense of $58,000, and interest expense of $20,000. The company's times interest earned was closest to: a. 14.0 times b. 9.1 times c. 16.9 times d. 13.0 times 27. Cottle Company has total assets of $220,000 and total liabilities of $70,000. The company's debt-toequity ratio is closest to a. .32 to 1 b. .68 to 1 c. .24 to 1 d. .47 to 1 28. Crystal Company has total assets of $190,000 and total liabilities of $60,000. The company's debt-toequity ratio is closest to: a. .32 to 1 b. .24 to 1 c. .46 to 1

d. .68 to 1 74. Selected financial data from Harlow Company for the most recent year appear below: Sales Cost of goods sold Dividends declared and paid Interest expense Operating expenses

$100,000 $ 60,000 $ 5,000 $ 8,000 $ 18,000

The income tax rate is 30%. The Return on Sales ratio was closest to: a. 14% b. 40% c. 22% d. 10% 75. Craft Company's net income last year was $50,000. The company paid preferred dividends of $20,000 and its average common stockholders' equity was $480,000. The company's return on common stockholders' equity for the year was closest to a. 10.4% b. 14.6% c. 6.3% d. 4.2% 76. The average stockholders equity for Holloway Co. last year was $2,000,000. Included in this figure was $200,000 par value of 8% preferred stock. If the return on common shareholders' equity was 12.5% for the year, net income was: a. $225,000 b. $250,000 c. $241,000 d. $234,000 77. Wellston Company's net income last year was $300,000. The company has 100,000 shares of common stock and 30,000 shares of preferred stock outstanding. There was no change in the number of common or preferred shares outstanding during the year. The company declared and paid dividends last year of $1.90 per share on the common stock and $1.70 per share on the preferred stock. The earnings per share of common stock is closest to: a. $2.49 b. $1.10 c. $3.51 d. $3.00 78. Lew Company's net income was $80,000 last year. The company has 20,000 shares of common stock and 5,000 shares of $100 par value, 7 percent preferred stock outstanding. There was no change in the number of common or preferred shares outstanding during the year. The earnings per share of common stock was: a. $4.00 b. $3.20 c. $2.25 d. $3.72 79. Data concerning Bouerneuf Company's common stock follow: Book value per share Market value per share Earnings per share Par value per share Dividend per share The price-earnings ratio would be a. 2.0 b. 2.67 c. 3.0 d. 4.0

$24.00 $18.00 $ 6.00 $ 4.00 $ 1.00

80. Bogart Company has 40,000 shares of common stock outstanding. The book value per share of this stock was $60.00 and the market value per share was $75.00 at the end of the year. Net income for the year was $400,000. Interest on long-term debt was $40,000. Dividends paid to common shareholders were $3.00 per share. The tax rate was 30%. The company's price-earnings ratio at the end of the year was: a. 7.5 to 1 b. 20 to 1 c. 25 to 1 d. 6 to 1 81. Many industrial averages and figures are published in the each of the following except? a. Key Business Ratios, Dun and Bradstreet b. The Almanac of Business and Industrial Financial Ratios, Prentice-Hall c. Annual Random Studies, Robert Morris Associates d. Standard and Poor's Industry Survey, Standard and Poor's e. Dow Jones-Irwin Business and Investment Almanac, Dow-Jones-Irwin 82. For meaningful analysis, ratios are best compared with a. historical company averages. b. industrial averages. c. historical and industrial averages. d. no standard. 83. A liquidity ratio measures the a. income or operating success of an enterprise over a period of time. b. ability of the enterprise to survive over a long period of time. c. short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash. d. number of times interest is earned. 84. Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was a. 7.4 times. b. 8.7 times. c. 6.2 times. d. 8 times. 85. Holt Company reported the following on its income statement: Income before income taxes Income tax expense Net income

$420,000 120,000 $300,000

An analysis of the income statement revealed that interest expense was $52,500. Holt Company's times interest earned was a. 9 times. b. 8 times. c. 7 times. d. 6 times. 86. The current assets of Kile Company are $150,000. The current liabilities are $120,000. The current ratio expressed as a proportion is a. 125%. b. 1.25 : 1 c. .80 : 1 d. $150,000/$120,000. 87. Risen Company had $250,000 of current assets and $90,000 of current liabilities before borrowing $50,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on the amount of Risen Company's working capital? a. No effect b. $50,000 increase c. $90,000 increase d. $50,000 decrease

88. If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of cash by shortterm debt and collection of accounts receivable have on the ratio? Short-term Borrowing a. Increase b. Increase c. Decrease d. Decrease

Collection of Receivable No effect Increase No effect Decrease

89. A company has a receivables turnover of 10 times. The average net receivables during the period are $500,000. What is the amount of net credit sales for the period? a. $50,000 b. $5,000,000 c. $600,000 d. $500,000 90. A company has an average inventory on hand of $100,000 and the days in inventory is 73 days. What is the cost of goods sold? a. $500,000 b. $7,300,000 c. $1,000,000 d. $3,650,000