Question 1

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is called the

Select one:

a.price-earnings ratio.

b.earnings ratio.

c.quick ratio.

d.current ratio.

Question 2

The purpose of an audit is to

Select one:

a.determine whether or not a company is a good investment.

b.render an opinion on the fairness of the statements.

c.determine whether or not a company complies with income tax regulations.

d.determine whether or not a company is a good credit risk.

Question 3

Statements in which all items are expressed in relative terms are called common-size statements.

Select one:

a. true

b. false

Question 5

If a firm has an quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

Select one:

a.true

b.false

Question 6

The percent of fixed assets to total assets is an example of

Select one:

a.vertical analysis.

b.solvency analysis.

c.profitability analysis.

d.horizontal analysis.

Question 7

The following information is available for Morgan Corp.:

2010

Market price per share of common stock

$25.00

Earnings per share on common stock

1.25

Which of the following statements is correct?

Select one:

a.The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2010.

b.The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2010.

c.The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2010.

d.The market price per share and the earnings per share are not statistically related to each other.

Question 8

The terms acid-test ratio and quick ratio refer to the same ratio--the instant debt-paying ability of a company.

Select one:

a.true

b.false

Question 9

The relationship of $225,000 to $100,000, expressed as a ratio, is

Select one:

a.2.0 to 1.

b.1.8 to 1.

c.1.5 to 1.

d.2.25 to 1.

Question 10

A company with working capital of $500,000 and a current ratio of 2.25 pays a $100,000 short-term liability. The amount of working capital immediately after payment is

Select one:

a.$600,000.

b.$400,000.

c.$500,000.

d.$100,000.

Question 11

Based on the following data for the current year, what is the accounts receivable turnover?

Net sales on account during year

$ 500,000

Cost of merchandise sold during year

300,000

Accounts receivable, beginning of year

45,000

Accounts receivable, end of year

35,000

Inventory, beginning of year

90,000

Inventory, end of year

110,000

Select one:

a. 12.5

b. 14.3

c.11.1

d.7.5

Question 12

Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year

$ 517,500

Cost of merchandise sold during year

450,000

Accounts receivable, beginning of year

50,000

Accounts receivable, end of year

40,000

Inventory, beginning of year

110,000

Inventory, end of year

140,000

Select one:

a.7.2

b.3.6

c.3.2

d.4.2

Question 13

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as vertical analysis.

Select one:

a.true

b.false

Question 14

The balance sheets at the end of each of the first two years of operations indicate the following:

2011

2010

Total current assets

$600,000

$560,000

Total investments

60,000

40,000

Total property, plant, and equipment

900,000

700,000

Total current liabilities

125,000

80,000

Total long-term liabilities

350,000

250,000

Preferred 9% stock, $100 par

100,000

100,000

Common stock, $10 par

600,000

600,000

Paid-in capital in excess of par--common stock

60,000

60,000

Retained earnings

325,000

210,000

If net income is $130,000 and interest expense is $40,000 for 2011, and the market price is $40, what is the price-earnings ratio on common stock (rounded to one decimal place)?

Select one:

a.14.9

b.18.4

c.17.3

d.19.8

Question 15

The percentage analysis of increases and decreases in individual items in comparative financial statements is called

Select one:

a.vertical analysis.

b.solvency analysis.

c.profitability analysis.

d.horizontal analysis.

Question 16

The excess of current liabilities over current assets is referred to as working capital.

Select one:

a.true

b.false

Question 17

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

Select one:

a.decrease.

b.remain the same.

c.either increase or decrease.

d.increase.

Question 18

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as

Select one:

a.solvency and leverage.

b.solvency and profitability.

c.solvency and liquidity.

d.solvency and equity.

Question 19

Based on the following data, what is the amount of quick assets?

Accounts payable

$ 32,000

Accounts receivable

56,000

Accrued liabilities

7,000

Cash

20,000

Intangible assets

40,000

Inventory

72,000

Long-term investments

100,000

Long-term liabilities

75,000

Marketable securities

40,000

Notes payable (short-term)

20,000

Property, plant, and equipment

625,000

Supplies

2,000

Select one:

a.$228,000

b.$188,000

c.$116,000

d.$114,000

Question 20

Which of the following is a measure of the liquid position of a corporation?

Select one:

a.Earnings per share

b.Inventory turnover

c.Current ratio

d.Number of times interest charges earned

Question 21

Which of the following is included in the computation of the quick ratio?

Select one:

a.Prepaid rent

b.Accounts receivable

c.Inventory

d.Supplies

Question 22

The ratio computed by dividing current assets by current liabilities is the

Select one:

a.current ratio.

b.earnings ratio.

c.acid-test ratio.

d.quick ratio.

Question 23

Solvency analysis focuses on the ability of a business to make a profit.

Select one:

a.true

b.false

Question 24

The ability of a business to earn a reasonable amount of income is referred to as the factor of

Select one:

a.leverage.

b.profitability.

c.wealth.

d.solvency.

Question 25

Based on the following data for the current year, what is the accounts receivable turnover?

Net sales on account during year

$ 525,500

Cost of merchandise sold during year

375,000

Accounts receivable, beginning of year

50,000

Accounts receivable, end of year

40,000

Inventory, beginning of year

110,000

Inventory, end of year

140,000

Select one:

a.13.14

b.11.7

c.10.35

d.8.3