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Exam 12: Statement Cash Flows

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Question 51

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Which of the following ratios is not a test of solvency?

A) Debt to equity ratio.
B) Times interest earned ratio.
C) Cash coverage ratio.
D) Earnings per share ratio.

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Question 52

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An aircraft company would most likely have

A) a high inventory turnover.
B) a low profit margin.
C) high volume.
D) a low inventory turnover.

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Question 53

Multiple Choice

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A supplier to a company would be most interested in the

Match the indicators with the characteristic that is reflected best by it.

Red Company reported total shareholders' equity of $500,000, which included a common share account balance of $200,000 (40,000 shares) at the end of 20X2. Compute the book value per common share assuming the company had only common shares. The book value per common share was $________.

Companies that focus on maintaining high profit margins in order to generate higher returns on equity are most likely employing what type of business strategy?

Solvency is of most interest to:

Perot Company had profit before interest and taxes of $120,000. Interest expense for the period was $17,000 and income taxes amounted to $28,500. The average shareholders' equity was $680,000. What is Perot's return on equity?

$\begin{array}{l}\text { Consider the following statement of earnings data for Mandrake Mills Inc. }\\\begin{array} { | l | r | r | } \hline & \mathbf { 2 0X7 } & \mathbf { 2 0 X 6 } \\\hline \text { Sales revenue } & \$ 97,300 & \$ 86,200 \\\hline \text { Less: Cost of goods sold } & \underline { 45,600 } & \underline { 53,400 } \\\hline \text { Gross profit } & 51,700 & 32,800 \\\hline \text { Selling and administration expense } & \underline { 22,500 } & \underline { 18,300 } \\\hline \text { Income before income tax } & \$ 29,200 & \$ 14,500 \\\hline\end{array}\end{array}$ -The common size percentage for selling and administration costs in 20X7 was

A general rule to use in assessing the average collection period is that it

Which of the following ratios usually is not considered to be a test of profitability?

Consider the following information: $\begin{array} { | l | r | } \hline \text { Net earnings } & \$ 930,000 \\\hline \text { Beginning number of shares } & 140,000 \\\hline \text { Ending number of shares } & 160,000 \\\hline \text { Current price per share } & \$ 80.00 \\\hline \text { Dividend per share } & \$ 1.20 \\\hline\end{array}$ What is the dividend yield?

The cumulative effect of accounting changes is disclosed in the statement of shareholders' equity (or retained earnings).

Information about management and director compensation would best be found

A common measure of profitability is the

On a common size income statement, all items are shown as:

A high inventory turnover ratio indicates a large supply of inventory.

Match the ratio computation with the ratio. Ratio Computation A. Pro?t ÷ Net sales revenue B. Net credit sales ÷ Average net receivables C. Return on equity - Return on assets D. Sales revenue ÷ Total operating expenses E. Total liabilities ÷ Shareholders' Equity F. Market price per share ÷ EPS G. Pro?t ÷ Average shareholders ' equity H. Creditors' equity ÷ Total equities I. Income tax expense ÷ Pretax income J. Quick assets ÷ Current liabilities K. Sales revenue ÷ Total assets L. Dividends per share ÷ Market price per share M. Shareholders' equity ÷ Total equities N. Cost of goods sold ÷ Average inventory O. (Income + After-tax interest expense) ÷ T otal assets P. Current assets ÷ Current liabilities Q. Pro?t ÷ Average number of shares of common share outstanding R. (Cash + Cash equivalents) ÷ Current liabilities S. Cash Flows from Operating Activities ÷ Pro?t T. (Pro?t + Interest + Income Tax Expense) ÷ Interest Expense U. Net Sales Revenue ÷ Net Fixed Assets V. Cash Flows from Operating Activities (before interest and tax expense) ÷ Interest P aid W. Not given above.Ratio Designation ____ 1. Return on equity ____ 2. Return on assets ____ 3. Financial leverage ____ 4.EPS ____ 5.Pro?t margin ____ 6.Current ratio ____ 7.Quick ratio ____ 8.Receivables turnover ratio ____ 9.Inventory turnover ratio ___ 10.Debt/equity ratio ___ 11.Owners' equity to total equities ___ 12.Creditors' equity to total equities ___ 13.Price/earnings ratio ___ 14.Dividend yield ratio ___ 15.Book value per common share ___ 16.Cash coverage ratio ___ 17.Cash ratio ___ 18.Quality of earnings ___ 19. Times interest earned ___ 20. Fixed asset turnover ratio

If the average collection period is 45 days, what is the receivables turnover?

Lyceum Co. reported profit of $8.3 million, interest expense of $.5 million and they are in a 30% tax rate bracket. Their average total assets are $65.8 million and average shareholders' equity is $48.6 million. What is Lyceum's financial leverage advantage or disadvantage?