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Exam 13: Measuring and Evaluating Financial Performance

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Question 81

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A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

A) The debt-to-assets ratio will be unchanged.
B) The debt-to-assets ratio will increase.
C) The debt-to-assets ratio will decrease.
D) The debt-to-assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.

E) A) and B)
F) A) and C)

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Question 82

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Fullerton Co.has the following information from its accounting records: $\begin{array}{lr}\text { Current assets } & \$ 80,000 \\\text { Total assets } & 200,000 \\\text { Current liabilities } & 40,000 \\\text { Total liabilities } & 120,000\end{array}$ If Fullerton uses cash of $10,000 to pay a current liability,its:

A) current ratio increases and its debt-to-assets ratio increases.
B) current ratio increases and its debt-to-assets ratio decreases.
C) current ratio decreases and its debt-to-assets ratio increases.
D) current ratio decreases and its debt-to-assets ratio decreases.

E) B) and D)
F) A) and D)

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Question 83

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Which of the following statements about the Price/Earnings ratio is not correct?

The conceptual framework for financial accounting and reporting consists of which three main components?

Trend data can be measured in dollar amounts or percentages.

Company A has a receivables turnover of 8.0.Company B has a receivables turnover of 10.0.Which of the following statements is correct?

Special items reported as part of comprehensive income,but not included in net income,might include:

Which of the following ratios is calculated by dividing current assets by current liabilities?

Which of the following is a liquidity ratio?

The financial information below presents selected information from the financial statements of Pelican Company.Sales revenue during the current year was $13,700,300 and cost of goods sold was $8,905,195.All of Pelican's sales are made on account and are due within 30 days. $\begin{array} { l r r } & \text { Prior Year } & \text { Current Year } \\\cline { 2 - 4 } \text { Cash and cash equivalents } & \$ 552,330 & \$ 599,780 \\\text { Accounts receivable } & 4,550,000 & 3,800,000 \\\text { Inventory } & 920,360 & 1,223,440 \\\text { Total current assets } & 8,700,030 & 8,480,100 \\\text { Total assets } & 11,100,020 & 10,980,000 \\\text { Total current liabilitics } & 7,200,300 & 7,476,000 \\\text { Total liabilities } & 8,449,900 & 8,240,700\end{array}$ Required: Part a.Current ratios as of the end of the current and prior year. Part b.Calculate the receivables turnover ratio for the current year. Part c.Calculate the days to collect for the current year. Part d.Calculate the inventory turnover ratio for the current year. Part d.Calculate the days to sell for the current year. Part e.Evaluate the company's liquidity position at the end of the current year.Cite any additional information not given in the problem that would be helpful in evaluating the company's liquidity. Round all ratios to two decimal places.

The following information is taken from the financial statements of Clybourn Company for the current year: $\begin{array}{lr}\text { Current Assets } & \$ 32,000 \\\text { Total Assets } & 1,424,000 \\\text { Cost of Goods Sold } & 1,040,000 \\\text { Gross Profit } & 320,000 \\\text { Net Income } & 192,000\end{array}$ On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

Assume the following sales data for a company: $\begin{array}{lll}\text { Year 1 } & \$, 200,000 \\\text { Year 2 } & 5,880,000 \\\text { Year 3 } & 5,250,000\end{array}$ By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

Which of the following measures would assist in assessing the solvency of a company?

Match each term with the appropriate definition.Not all definitions will be used. -Earnings Per Share

Solvency ratio data are primarily concerned with the ability of a company to:

Which ratio is used to evaluate how well a company is managing its property,plant,and equipment?

Choose the appropriate letter match each financial performance ratios with the appropriate category.

Listed below are the current ratios of four different companies.Based on these current ratios,which company is in the most liquid position?

Larabee Company's stock sells for $20 per share.The company has $160 million in earnings and 500 million outstanding shares.The Price/Earnings ratio for the company is closest to:

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except: