Multiple Choice

1. If current assets exceed current liabilities, payment to creditors made on the last day of the month will a. decrease the current ratio b. increase cash flow from operations c. decrease working capital d. answer not given

2. The ratio of analytical measurement measures the productivity of assets regardless of capital structures is the a. current ratio c. return on assets quick ratio d. debt ratio

3. Indexed numbers are used in a. trend analysis c. vertical analysis b. ratio analysis d. common-size statements

4. Which of the following is a measure of long-term solvency? Current ratio c. asset turnover Interest coverage d. Profit margin

5. When cash sales resulted in some loss , compare the working capital ratio after the sale with the ratio before the sale :

The ratio after the sale is greater The ratio before the sale is equal to the ratio after the sale The ratio before the sale is greater There is no effect at all

6. Which of the following transactions will result in an increase in current ratio , assuming that the ratio is presently 2:1 ?

Repaid a 90 day loan Liquidated long-term liability Purchased merchandise on account Received payment on accounts receivable

7. At the end of year 5 , Jones Corporation has a current ratio of 2:1 . Which of the following transactions will decrease the current ratio ?

a. Issuance of long-term bonds at a premium b. Sale of merchandise on open account c. Sale of plant assets for less than the book value d. Declaration of cash dividends on common stock

8. When a balance sheet amount is related to an income statement amount in computing a ratio the balance sheet amount should be converted to an average for the year the income statement amount should be converted to an average for the year both amounts should be converted to market value comparisons with industry ratios are not meaningful 9. The ratio of analytical measurement that shows the rate earned by stockholders based on the current price of a share of stock is dividend yield EPS on common stock price - earnings ratio return on common stockholders

10. The net earnings of Co. XY after income taxes of P 12,000 and bond interest of 7,500 was P 48,000. The number of times bond interest is earned is a. 6.4 b. 7 c. 8 d. 9

11. If the average age of inventory is 100 days, the average age of accounts payable is 65 days, and the average age of accounts receivable is 40 days, the number of days in the cash flow cycle is a. 125 days b. 75 days c. 205 days d. 155 days

12. Net income after tax is P 54,000 . Income tax rate is effectively 40%. The number of times interest is earned was 4. The interest was a. P 20,000 b. P 36,000 c. P 30,000 d. P 22,500

13. Anson Corporation's net income last year was P7,975,000. The dividend on common stock was P8.20 per share and the dividend on preferred stock was P3.50 per share. The market price of common stock at the end of the year was P59.10 per share. Throughout the year, 500,000 shares of common stock and 200,000 shares of preferred stock were outstanding. The dividend payout ratio a) 1.06 b) 0.51 c) 0.56 d) 1.29

14.The following information appeared in the accounting records of a retail store for the year ended Dec. 31, 2019: Sales P300,000 Purchases 140,000 Inventories January 1 70,000 December 31 100,000 Sales Commission 10,000 The gross margin was a. P190,000 b. P 180,000 c. P160,000 d. P 150,000

15. Spark Co's calculated the following ratios for one of its profit centers : Gross Margin 30% Capital turnover 5 times Return on sales 25%. Return on assets was a. 25% b. 20% c. 125% d. 12.5%

16. The following information pertains to Sergio Co. Net accounts receivable December 31, 2012 P300,000 December 31, 2011 200,000 Inventories December 31, 2012 350,000 December 31, 2011 250,000 Accounts receivable turnover 8 Inventory turnover 5 The average collection period of receivable and the average conversion period of inventories are: a. 45 and 72 c. 45 and 45 b. 72 and 45 d. 72 and 72

17. Refer to no. 16 . The gross margin was : a. 500,000 b. 400,000 c. 300,000 d. 100,000

18. Jones Corp. had the following results for the period just ended; Sales P 2.0 million Net Income P 0.5 million; Capital Investment P 1.0 million To arrive at the return on investment, the following should be used: ROI = (20/20) X (20/5) c. ROI = (10/20) X (20/5) ROI = (20/10) X (5/20) d. ROI = (10/20) X (5/20)

19. ValleMiramar has the following data: Net sales, P1.8 M; Costs of Goods Sold , P 1.08; Operating Expenses, P 315,000; Earning's before interests and profit, P405,000; Net income, P195,000; Total Stockholders' Equity P.75M; Total Assets P 1M. . The return on investment is: a. 22.5% b. 26.5% c. 19.5% d. 40.5%

20. Refer to no. 19. the debt. and operating ratio are a. .25 and .775 c. .25 and .175 b. .75 and .775 d. .75 and .175

21. Extracts from the balance sheet ( 000,000 ) of A Co. as follows: Current Assets Merchandise Inventory P 77.1 Accounts Receivable 50.1 Cash on Hand and in 85.0 Creditors: Amounts falling due within one year 70.2 Bank Overdraft Other Creditors 147.0 What is the current ratio and the acid test ratio of the co.? Current ratio Acid test ratio a. .96 .38 b. .96 .36 c. .98 .61 d. .98 .62

22. Current ratio is 1.8:1 with working capital amounting to P 20,000, how much must the current liabilities be? a. P 45,000 b.P36,000 c.P25,000 d.P20,000

23. Selected data from the year end financial statements of Sister Corporation are presented below : ( The difference between average and ending inventories is immaterial). Current ratio 3 Quick ratio 2.5 Current liabilities P400,000 Inventory turnover 10X Gross Profit margin is 40% Sister's net sales for the year were : P 2.00 million c. P 5.0 million 1.20 million d. 3.3 million

24 - 27 You are requested to reconstruct accounts of Angel Trading for analysis. The following data were available to you: Gross margin for 2019 amounts................. P800,000 Beginning balance of Merchandise Inventory.. 280,000 Long-term liabilities consisted of bonds Payable with interest rate of.......... 15% Total Stockholders' Equity , Dec 31, 2019 P 625,000 Gross margin ratio ....................................... 40% Debt to equity ratio ..................................... 0.6 : 1 Times interest is earned ............... .......... 8 Quick ratio ................................................... 1.5 :1 Ratio of operating expense to sales............. 25% Inventory Turnover .............................. 5

24. The operating income for 2019 was a. P 487,500 b. P 300,000 c. P 500,000 d. P 250,000

25. The bonds payable was a. P 487,500 b. P 300,000 c. P 125,000 d. P 250,000

26. Total current liabilities would amount to a. P375,000 b. P487,500 c. P125,000 d. P250,000

27.Total current assets would amount to a. P187,500 b. P387,500 c. P467,500 d. P427,500 __________________________________________ 28. Junjun Co. has debt ratio of .50 , total assets turnover of 0.25 , and a profit margin of 10%. The president is unhappy with the current return on equity , and he thinks it could be doubled . This could be accomplished (1) by increasing the profit margin to 14% and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio along with the 14% profit margin is required to double the return on equity ? a. 0.75 b. 0.65 c. 0.70 d. 0.55

29. Some key financial data and ratios are reported in the table below for Hemmingway Hotels and for its competitor, Fitzgerald Hotels: Ratio Hemmingway Fitzgerald Profit margin 4% 3% ROA 9% 8% Total assets P 2.0 billion P1.5 billion BEP 20% 20% ROE 18% 24% On the basis of the information above, which of the following statements is most correct? a. Hemmingway has a higher total assets turnover than Fitzgerald. b. Hemmingway has a higher debt ratio than Fitzgerald. c. Hemmingway has higher net income than Fitzgerald. d. Statements a and b are correct. e. All of the statements above are correct.

30 - 34 are based on the following information: The Dec. 31, 2019 balance sheet of De Jesus Inc. is presented below. These are the only accounts in its balance sheet. Amounts indicated by (?) can be calculated from the additional information given : Assets Cash P25,000 Accounts Receivable ? Inventory ? Property, Plant and Equipment 294,000 Total 432,000 Liabilities and Stockholders Equity Accounts Payable P ? Income Taxes Payable 25,000 Long-term debt ? Common Stock 300,000 Retained Earnings ? Total ? Additional-Information: ====== Current ratio (at year end) 1.5:1 Debt/ Equity ratio 0.8 Inventory turnover based on sales and ending inventory 15 times Inventory turnover based on cost of sales and Ending inventory 10.5 times Gross margin for 2019 P 315,000

30. The balance in trade accounts payable was: a. P67,000 b. P 92,000 c. P 182,000 d. P 207,000

31. The balance in Retained Earnings was: a. P(60,000) b. P60,000 c. P132,000 d. (P132,000 )

32. The balance in Inventory account was: a. P 138,000 b. P 70,000 c. P43,000 d. P 135,000

33.The balance of accounts receivable was : a. P 138,000 b. P60,000 c. P43,000 d. P34,000

34. The balance of long-term debt was: a. P300,000 b. P192,000 c. P100,000 d. P230,000