Trek Inc. Statement of Earnings For the year ended December 31, 2020 (in thousands of dollars) Sales $1,640 Cost of sales _(800) Gross profit 840 Depreciation expense Selling and administrative expenses Earnings from operations (40) _(400) 400 Loss on sale of equipment Interest expense Earnings before income taxes Income tax expense Net earnings (6) (24) 370 _(100) $ 270 Trek Inc. Summary Statement of Financial Position (in thousands of dollars) Dec. 31, 2020 Dec. 31, 2019 Assets Cash $ 52 $ 60 Short-term Investments 80 40 Account Receivable (net) 198 80 Inventories 240 160 Prepaid Expenses 3 7 Property, Plant and Equipment (net) 857 853 Total Assets $1,430 $1,200 Liabilities and Shareholders' Equity Current Liabilities $ 240 Bonds Payable Common Shareholders' Equity Total Liabilities and Shareholders' Equity 200 990 $1,430 $ 160 200 840 $1,200 Additional information: a) Trek, Inc. purchased new equipment in 2020 for $55,000. It also sold used equipment during the year. b) Trek Inc. had 84.000 common shares outstanding at December 31, 2019. On January 2, 2020, Trek Inc. sold and issued 6,000 additional common shares for a total amount of $60,000. There were no other transactions affecting common shares during 2020. The market price per share was $33 at December 31, 2020. Trek's board of directors declared dividends at December 31, 2020, payable in January 2021. 7 or of 32 The times interest earned ratio for 2020 is equal to: Select one: O a. 12.25 O b. 0.08 O c. 11.25 O d. 16.42 Unsure 8 of 32 The price-earnings ratio for 2020 is equal to: Select one: O a. 11.00 O b.0.09 O c. 10.28 O d. 10.65 9 of 32 of 32 The dividend yield ratio for 2020 is equal to: Select one: O a. 6.06% O b. 1.51% c. 4.00% O d. 18.33% Unsure 10 or 32 What is the amount of cash that Trek Inc received for the sale of the equipment? Select one: a. $5,000 O b. $38,000 O c. $30,000 O d. $13,000 11 of 32 The quick ratio measures the ability of the company Select one: O a to pay its total liabilities with cash on-hand b. to pay its current liabilities using quick assets c. to pay its current liabilities with current assets Od to transform its total assets into cash Notes Unsure 2 12:32 Which of the following is NOT TRUE about the inventory turnover ratio? Select one: O a. The ratio measures how many times average Inventory was purchased and sold during the period O b. If an ice cream stand has consistently weak sales due to rainy weather, this would likely result in a low inventory turnover ratio O A company's inventory turnover ratio should be compared across the years and to its competitors' Inventory turnover ratios in order to conclude whether it is favorable or not Od. A high turnover ratio typically means a company has weaker sales and declining demand for a company's product. Notes 13 0132 Which of the following best explains the purpose of the debt-to-equity ratio? Select one: a. It is an exclusive measure of the proportion of cash in a company that is financed via bank loans or shares issued to investors O b. It measures how much debt has been used to finance the acquisition of assets relative to equity financing O c. It measures how much of a company's start-up costs were financed either through debt or asset financing Od. It measures the ability of the company to pay its total liabilities with total assets. Note Unsure 14 0132 Which of the following is TRUE about the price earnings ratio? Select one: aIt measures the relationship between a company's earnings per share at the beginning and ending of a given period, O b. It is considered a test of solvency O c. Its calculation requires information about the current market price per share, d. It measures how the company's product prices impact its earnings 15132 of 32 The write-off of an uncollectible account receivable would have which effect on the company's quick ratio? Assume the quick ratio is less than 1. Select one: O a. Increase b. Decrease c. No effect Od. Dollar amounts are needed to determine the direction of the effect. Unsure 16132 Which of the following transactions would represent a decrease in the company's current ratio, which equals 0.93? Select one: O a. The write-off of an account receivable b. The purchase of the company's own bonds from bondholders c. The issuance of shares in exchange for land d. The purchase of merchandise inventory on account