31.Which of the following accounts belongs on the asset side of a balance sheet?

Select one:

a.depreciation expense

b.accounts payable

c.inventory

d.accruals

32.The increase in owners equity for a given period is equal to

Select one:

a.positive net cash flow minus dividends.

b.net income minus dividends.

c.sales minus dividends.

d.gross profit minus distributions to shareholders.

33.Which of the following accounts belongs in the equity section of a balance sheet?

Select one:

a.retained earnings

b.cash

c.long-term debt

d.dividends

34.A firm paid dividends of $10,000, paid interest of $20,000, reduced debt principal outstanding (paid off debt) in the amount of $100,000, and sold new stock for $150,000. What was the firm's cash flow from financing activities?

Select one:

a.+$20,000 ($20,000 flowed into the firm)

b.-$20,000 ($20,000 flowed out of the firm)

c.+$280,000 ($280,000 flowed into the firm)

d.-$280,000 ($280,000 flowed out of the firm)

35.The more debt a company uses to finance its assets, the lower will be its operating income due to higher interest expense.

Select one:

a.True

b.False

36.The Colorado Jet Boat Company had a cash balance of $3 million at the beginning of 2010. During 2010, Sales were $8 million and expenses were $7 million. Therefore

Select one:

a.the cash balance at the end of 2010 is $4 million.

b.the cash balance at the end of 2010 must be greater than $3 million.

c.the cash balance at the end of 2010 must be less than $11 million.

d.the cash balance at the end of 2010 cannot be determined from the information given.

37.An analyst is evaluating two companies, A and B. Company A has a debt ratio of 50% and Company B has a debt ratio of 25%. In his report, the analyst is concerned about Company B's debt level, but not about Company A's debt level. Which of the following would best explain this position?

Select one:

a.Company B has much higher operating income than Company A.

b.Company A has a lower times interest earned ratio and thus the analyst is not worried about the amount of debt.

c.Company B has a higher operating return on assets than Company A, but Company A has a higher return on equity than Company B.

d.Company B has more total assets than Company A.

38.When comparing inventory turnover ratios, other things being equal

Select one:

a.a lower inventory turnover is preferred in order to keep inventory costs low.

b.a higher inventory turnover is preferred to improve liquidity.

c.higher inventory turnover results from old or obsolete inventory increasing the inventory balance on the balance sheet.

d.higher inventory turnover results from an increase in the selling price of the product.

39.Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

Select one:

a.return on equity

b.the acid-test (or quick) ratio

c.the operating profit margin

d.the fixed asset turnover

40.Jones, Inc. has a current ratio equal to 1.40. Which of the following transactions will increase the company's current ratio?

Select one:

a.The company collects $500,000 of its accounts receivable.

b.The company sells $1 million of inventory on credit.

c.The company pays back $50,000 of its long-term debt.

d.The company writes a $30,000 check to pay off some existing accounts payable.

41.Denver Systems has total assets of $1,000,000; common equity of $400,000; a gross profit of $800,000; total operating expenses of $620,000; interest expense of $20,000; income taxes of $74,000; and preferred dividends of $30,000. What is Denver Systems' return on equity?

Select one:

a.7.5%

b.20.0%

c.21.5%

d.14.0%

42.Benkart Corporation has sales of $5,000,000, net income of $800,000, total assets of $2,000,000, and 100,000 shares of common stock outstanding. If Benkart's P/E ratio is 12, what is the company's current stock price?

Select one:

a.$60 per share

b.$96 per share

c.$240 per share

d.$360 per share

43.Given an accounts receivable turnover of 10 and annual credit sales of $900,000, the average collection period is

Select one:

a.18.25 days.

b.36.50 days.

c.90 days.

d.40.56 days.

44.Financial ratios are often reported by industry or line of business because differences in the type of business can make ratio comparisons uninformative or even misleading.

Select one:

a.True

b.False

45.Baker Corp. is required by a debt agreement to maintain a current ratio of at least 2.5, and Baker's current ratio now is 3. Baker wants to purchase additional inventory for its upcoming Christmas season, and will pay for the inventory with short-term debt. How much inventory can Baker purchase without violating its debt agreement if their total current assets equal $15 million?

Select one:

a.$0.50 million

b.$1.67 million

c.$4.50 million

d.$6.00 million