Accounting Financial Statement Questions 2

Q1.If a business reported a profit of $4 million last year, how well is it being run?
a. Not very well b. We can't tell with just a profit figure. We need more information c. Moderately well d. Very well

Q2.If a business applies to a bank for a loan, why will the bank look at figures from the company's industry?
a. To be able to calculate the company's return on assets b. To calculate profitability ratios for the company c. To compare the company's ratios with those of other company's d. To use time series analysis to see if performance is improving

Q3.What was the trend of the current ratio of Jordon, Inc from FYE10 to FYE11 if the ratio went from 2.8 in 2011 to 1.8 in 2012?
a. It has improved. b. It has gotten worse. c. It stayed the same.

Q4.In 2011, the quick ratio of Patti's Prunes was 1.3. This ratio using a rule of thumb (Reminder quick ratio = (current assets -inventory)/current liabilities)
a. is good because it is more than 1 b. is not so good because it should be equal to 1 c. is not good because it should be less than 1 d. is not so good because it should be at least equal to 2

Q5.In 2010, Jordon Inc.'s inventory turnover was 10. in 2011 it was 9. Did the turnover ratio get better, get worse, or remain the same? (Reminder inventory turnover =annual sales/year-end inventory)
a. Got better. b. Got worse. c. Remained the same.

Q6.In FYE10, dried fruit companies with sales of less than 1 million dollars had average collection period of 108 days.How did Patti's Prunes compare? (Reminder Average collection period = Accounts receivable/(Annual sales/360))
a. Better b. Same c. Worse

Q7.How would you characterize the debt ratio of Patti's Prunes if it had a debt ratio of 1 in FYE10?
a. The ratio indicates serious problems for Patti's Prunes b. The ratio was average c. The ratio was good

Q8.In FYE10, how does the profit to sales ratio for Patti's Prunes look? (Reminder Profit to sales = earnings after taxes/sales)
a. It looks good because it is more than 2 b. It looks poor because it is less than 2 c. It looks poor because it is less than 10 d. We can't tell because we have no comparison

Q9.In FYE11, dried fruit companies with sales of less than 1 million dollars had average ROA's of 36%. How did Patti's Prunes compare? (Reminder Return on Assets (ROA) = Earnings after taxes/Total assets)
a. Better b. Same (within a percentage point) c. Worse

Q10.The return on Equity (ROE) for Patti's Prunes in FYE11 was 300%. Does this mean?
a. Patti's Prunes is a star performer? b. Return is due to use of debt with low stockholder's equity? c. Patti's Prunes should be earning more after-tax income