1. The following information was included in a note to the 2015 financial statements of Romeo Productions: The company has a loan agreement with First National Bank that states:

   1.	The current ratio must be 2.0 or higher at all times.
   2.	The debt-to-equity ratio must not exceed 0.7 at any time.
   3.	The times interest earned ratio must be 5.0 or higher.
   4.	The inventory turnover ratio must be 4.0 or higher.

   The companys ratios are: current ratio, 2.3; debt-to-equity ratio, 0.6; times interest earned ratio, 7.1; and inventory turnover ratio, 3.7. Based on this information, the company was in default of its loan agreement because of the

   		current ratio
   		debt-to-equity ratio
   		times interest earned ratio
   		inventory turnover ratio

2. Lakeshore Industries This company reported the following information on its recent balance sheet: Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding Refer to Lakeshore Industries. What is the effect on the companys accounting equation of issuing 1,000 additional shares of common stock at $15 per share?

   		Assets increase $10,000.
   		Stockholders' equity increases $15,000.
   		Stockholders' equity increases $10,000.
   		Assets decrease $15,000.

3. Medstar Ambulance Service Information from the companys financial records is presented below:

   Notes payable, December 31, 2013	$1,000,000
   Notes payable, December 31, 2014	1,200,000
   Loss on Note retirement--2014	45,000
   Interest expense on bonds--2014	75,000

   At the end of 2014, the company issued notes at par value for $1,200,000 cash. The proceeds were used to retire the $1,000,000 note issue outstanding at the end of 2013 (before their maturity date). All interest expense was paid in cash during 2014. Refer to Medstar Ambulance Service. How much was paid to retire the $1,000,000 note issue during 2014?

   		$ 800,000
   		$1,200,000
   		$1,045,000
   		$1,075,000

4. Which of the following statements is not true? The information in the statement of cash flows helps investors, creditors and others:

   		assess a company's ability to produce future cash inflows.
   		judge a company's ability to meet it obligations and pay dividends.
   		estimate the company's needs for external financing.
   		show the inflows and outflow of net income on the accrual basis.

5. Rainsoft Company Selected data from the financial statements are provided below:

   	2015	2014	2013
   Cash	$ 44,000	$ 28,000	$ 14,000
   Accounts Receivable	84,000	32,000	114,400
   Inventory	44,000	166,000	100,000
   Prepaid Expenses	46,000	36,000	41,600
   Total Current Assets	$218,000	$262,000	$270,000
   Total Current Liabilities	$130,000	$144,000
   Net Credit Sales	442,000	652,000
   Cost of Goods Sold	336,000	598,000
   Net Cash Flows from Operating Activities	32,000	58,000

   Refer to Rainsoft Company. Assume that competitors in the industry have an average accounts receivable turnover ratio of 7.8 times in 2015. What is the companys accounts receivable turnover ratio for 2015?

   		5.26
   		7.62
   		7.80
   		8.91

6. Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50, and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares are outstanding?

   		95,000
   		100,000
   		105,000
   		150,000

7. Presented below is the operating activities section of a statement of cash flows for 2014:

   Operating activities:
   Net income		$120,000
   Add:	Depreciation	10,000
   	Decrease in accounts receivable	5,000
   		$135,000
   Deduct:	Decrease in accounts payable	15,000
   	Net cash inflow from operating activities	$120,000

   Which method of preparing the operating activities section was used?

   		The direct method.
   		The indirect method.
   		Either method.
   		Cannot be determined without further information.

8. Rio Imports Information from the financial statements are provided below:

   	2015	2014
   Current Liabilities	$460,000	$320,000
   Long-Term Liabilities	240,000	640,000
   Stockholders' Equity	840,000	1,080,000
   Net Cash Flows from Operating Activities	160,000	102,000
   Interest and Principal Payments	24,000	16,000
   Net Sales	950,000	900,000
   Net Income	180,000	144,000
   Interest Expense	17,000	23,000
   Income Taxes	32,000	29,000
   Dividends Paid to Common Stockholders	30,000	60,000

   Refer to Rio Imports. The debt-to-equity ratio for 2015 is

   		an indicator that the companys ability to meet current interest payments to creditors is increasing.
   		increasing slightly from 2014 to 2015.
   		an indicator that for every $1 of capital that has been provided by stockholders, creditors provided $0.83.
   		an indicator that the companys reliance on stockholders for funding increased from 2014 to 2015.

9. A company reported the following information in its 2014 annual report:

   Cash flows from operating activities	$295,000
   Additions to property, plant and equipment	110,000
   Proceeds from disposals of property, plant and equipment	57,000
   Total payments expected to retire long-term debt over the next 5 years	250,000

   What is the cash flow adequacy ratio for 2014?

   		6.96
   		5.90
   		3.70
   		0.74

10. Labor Finders, Inc. Selected data from the companys financial statements are presented below:

    	2015	2014
    Net income	$ 150,000	$ 120,000
    Cash dividends paid on preferred stock	15,000	15,000
    Cash dividends paid on common stock	42,000	38,000
    Common stock price	15	14
    Preferred stock price	31	26
    Purchases of treasury stock	100,000	-0-
    Total stockholders' equity	2,300,000	2,157,000
    Common stockholders' equity	1,780,000	1,637,000
    Average number of preferred shares outstanding	20,000	20,000
    Average number of common shares outstanding	104,000	95,000

    Refer to Labor Finders, Inc. The companys 2015 earnings per share is reported as

    		$1.08
    		$1.20
    		$1.30
    		$1.43