Question 1

Financial statement ratios support informed judgments and decision making most effectively:

Accepted Answer

A) when viewed for a single year. 
B) when viewed as a trend of entity data. 
C) when compared to an industry average for the most recent year. 
D) when the trend of entity data is compared to the trend of industry data. 
A) when viewed for a single year. 
B) when viewed as a trend of entity data. 
C) when compared to an industry average for the most recent year. 
D) when the trend of entity data is compared to the trend of industry data. D

Question 2

FGT Motorsports had net assets at the end of the year of $320,000.The only transactions affecting stockholders' equity during the year were net income of $51,000 and dividends of $11,000.
Required:
Calculate FGT Motorsports' average stockholders' equity and return on equity (ROE).

Accepted Answer

Net assets = Assets - Liabilities = Stockholders' Equity Thus, "net assets" at the end of the year = ending SE ROE = Net income / Average stockholders' equity Average stockholders' equity = (beginning SE + ending SE)/ 2 Thus, you need to calculate beginning stockholders' equity in order to be able to determine the average stockholders' equity. $320,000 ending SE - $51,000 net income + $11,000 dividends = $280,000 beginning SE ($280,000 beginning SE + $320,000 ending SE)/ 2 = $300,000 average stockholders' equity $51,000 net income / $300,000 average stockholders' equity = 17% ROE

Question 3

One-Two-Tree Landscaping Services has net income of $18,000, sales of $300,000, and average total assets of $125,000.
Required:
Calculate One-Two-Tree's margin, turnover, and return on investment (ROI).

Accepted Answer

$18,000 net income / $300,000 sales = 6% margin $300,000 sales / $125,000 average total assets = 2.4 turnover 6% margin × 2.4 turnover = 14.4% ROI, or $18,000 net income / $125,000 average total assets = 14.4% ROI

Question 4

Which of the following is not usually considered a measure of an entity's liquidity?

Accepted Answer

A) Current ratio. 
B) Acid-test ratio. 
C) Cash ratio. 
D) Working capital. 
A) Current ratio. 
B) Acid-test ratio. 
C) Cash ratio. 
D) Working capital.

Question 5

Mechforce Manufacturing's net income was $420,000 on sales of $14 million.Average assets for the year were $10 million.Margin for the year was:

Accepted Answer

A) 1.4 
B) 1.8 
C) 3.0% 
D) 4.2% 
A) 1.4 
B) 1.8 
C) 3.0% 
D) 4.2%

Question 6

An advantage of the DuPont model for calculating ROI is that:

Accepted Answer

A) it focuses on asset utilization as well as net income. 
B) it is easier to use than the straightforward ROI formula. 
C) it uses average assets and the straightforward ROI formula does not. 
D) it uses average stockholders' equity. 
A) it focuses on asset utilization as well as net income. 
B) it is easier to use than the straightforward ROI formula. 
C) it uses average assets and the straightforward ROI formula does not. 
D) it uses average stockholders' equity.

Question 7

Attesson, Inc.has a current ratio of 1.9 and current assets of $136,800.
Required:
Calculate Attesson's current liabilities and working capital.

Accepted Answer

$136,800 current assets / 1.9

Question 8

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:

Accepted Answer

A) raises the current ratio. 
B) lowers the current ratio. 
C) doesn't affect the current ratio. 
D) depends on the amount paid. 
A) raises the current ratio. 
B) lowers the current ratio. 
C) doesn't affect the current ratio. 
D) depends on the amount paid.

Question 9

Return on equity:

Accepted Answer

A) will be the same as return on investment. 
B) relates dividends and turnover. 
C) relates dividends and stockholders' equity. 
D) relates net income and stockholders' equity. 
A) will be the same as return on investment. 
B) relates dividends and turnover. 
C) relates dividends and stockholders' equity. 
D) relates net income and stockholders' equity.

Question 10

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.ROI for the year was:

Accepted Answer

A) 3.0% 
B) 4.0% 
C) 12.0% 
D) 12.5% 
A) 3.0% 
B) 4.0% 
C) 12.0% 
D) 12.5%

Question 11

Which of the following accounts is part of working capital?

Accepted Answer

A) Retained Earnings 
B) Sales 
C) Merchandise Inventory 
D) Common Stock 
A) Retained Earnings 
B) Sales 
C) Merchandise Inventory 
D) Common Stock

Question 12

Rotablade's net income was $600,000 on sales of $24 million for the year.Average assets for the year were $8 million.For the year:

Accepted Answer

A) margin was 4%, turnover was 3.0, and ROI was 12%. 
B) margin was 2.5%, turnover was 2.0, and ROI was 5%. 
C) margin was 4%, turnover was 2.0, and ROI was 8%. 
D) margin was 2.5%, turnover was 3.0, and ROI was 7.5% 
A) margin was 4%, turnover was 3.0, and ROI was 12%. 
B) margin was 2.5%, turnover was 2.0, and ROI was 5%. 
C) margin was 4%, turnover was 2.0, and ROI was 8%. 
D) margin was 2.5%, turnover was 3.0, and ROI was 7.5%

Question 13

Mamba Metals, Inc.had an ROI of 12%, margin of 3%, and sales of $20 million for the year.Mamba's turnover for the year was:

Accepted Answer

A) 3.0 
B) 4.0 
C) 36% 
D) $600,000 
A) 3.0 
B) 4.0 
C) 36% 
D) $600,000

Question 14

ZeroFued's net income for the year was $300,000.Average assets totaled $2 million, and average liabilities totaled $500,000.Return on equity (ROE)was:

Accepted Answer

A) 12% 
B) 15% 
C) 20% 
D) 60% 
A) 12% 
B) 15% 
C) 20% 
D) 60%

Question 15

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.Net income for the year was:

Accepted Answer

A) $500,000 
B) $1,500,000 
C) $2,000,000 
D) $6,000,000 
A) $500,000 
B) $1,500,000 
C) $2,000,000 
D) $6,000,000

Question 16

Which of the following is a universally accepted measure of profitability?

Accepted Answer

A) Return on investment. 
B) Return on retained earnings. 
C) Return on liabilities. 
D) All of these. 
A) Return on investment. 
B) Return on retained earnings. 
C) Return on liabilities. 
D) All of these.

Question 17

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.Average assets for the year were:

Accepted Answer

A) $1,500,000 
B) $6,000,000 
C) $12,500,000 
D) $20,000,000 
A) $1,500,000 
B) $6,000,000 
C) $12,500,000 
D) $20,000,000

Question 18

When comparing entity financial ratios with industry ratios:

Accepted Answer

A) it should be assumed that the data result from the consistent application of alternative accounting methods. 
B) relative values at a point in time may not be significant. 
C) the trend of entity ratios should be compared to the current year's industry ratio. 
D) entity ratios should not be compared with industry ratios. 
A) it should be assumed that the data result from the consistent application of alternative accounting methods. 
B) relative values at a point in time may not be significant. 
C) the trend of entity ratios should be compared to the current year's industry ratio. 
D) entity ratios should not be compared with industry ratios.

Question 19

United Machining's margin was 2% and turnover was 3.0 on sales of $60 million for the year.On the basis on this information:

Accepted Answer

A) net income for the year was $3,600,000, average assets were $20 million, and ROI was 2%. 
B) net income for the year was $1,200,000, average assets were $10 million, and ROI was 2%. 
C) net income for the year was $1,200,000, average assets were $20 million, and ROI was 6%. 
D) net income for the year was $3,600,000, average assets were $10 million, and ROI was 6%. 
A) net income for the year was $3,600,000, average assets were $20 million, and ROI was 2%. 
B) net income for the year was $1,200,000, average assets were $10 million, and ROI was 2%. 
C) net income for the year was $1,200,000, average assets were $20 million, and ROI was 6%. 
D) net income for the year was $3,600,000, average assets were $10 million, and ROI was 6%.

Question 20

A current ratio of 6.0 is usually an indication that the firm:

Accepted Answer

A) has a low degree of liquidity. 
B) has a reasonable degree of liquidity. 
C) has not made the most productive use of its assets. 
D) has made the most productive use of its assets. 
A) has a low degree of liquidity. 
B) has a reasonable degree of liquidity. 
C) has not made the most productive use of its assets. 
D) has made the most productive use of its assets.

Financial statement ratios support informed judgments and decision making most effectively:

FGT Motorsports had net assets at the end of the year of $320,000.The only transactions affecting stockholders' equity during the year were net income of $51,000 and dividends of $11,000. Required: Calculate FGT Motorsports' average stockholders' equity and return on equity (ROE).

One-Two-Tree Landscaping Services has net income of $18,000, sales of $300,000, and average total assets of $125,000. Required: Calculate One-Two-Tree's margin, turnover, and return on investment (ROI).

Which of the following is not usually considered a measure of an entity's liquidity?

Mechforce Manufacturing's net income was $420,000 on sales of $14 million.Average assets for the year were $10 million.Margin for the year was:

An advantage of the DuPont model for calculating ROI is that:

Attesson, Inc.has a current ratio of 1.9 and current assets of $136,800. Required: Calculate Attesson's current liabilities and working capital.

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:

Return on equity:

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.ROI for the year was:

Which of the following accounts is part of working capital?

Rotablade's net income was $600,000 on sales of $24 million for the year.Average assets for the year were $8 million.For the year:

Mamba Metals, Inc.had an ROI of 12%, margin of 3%, and sales of $20 million for the year.Mamba's turnover for the year was:

ZeroFued's net income for the year was $300,000.Average assets totaled $2 million, and average liabilities totaled $500,000.Return on equity (ROE)was:

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.Net income for the year was:

Which of the following is a universally accepted measure of profitability?

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.Average assets for the year were:

When comparing entity financial ratios with industry ratios:

United Machining's margin was 2% and turnover was 3.0 on sales of $60 million for the year.On the basis on this information:

A current ratio of 6.0 is usually an indication that the firm:

Accountingpresent and Past

Financial Statements and Accounting Conceptsprinciples

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant, and Equipment,

Accounting for and Presentation of Liabilities

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements,

Financial Statement Analysis

Managerial Accounting and Cost-Volume-Profit Relationships

Cost Accounting and Reporting

Cost Planning

Cost Control

Cost for Decision Making

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Exam 3: Fundamental Interpretations Made From Financial Statement Data

Financial statement ratios support informed judgments and decision making most effectively:

FGT Motorsports had net assets at the end of the year of $320,000.The only transactions affecting stockholders' equity during the year were net income of $51,000 and dividends of $11,000. Required: Calculate FGT Motorsports' average stockholders' equity and return on equity (ROE).

One-Two-Tree Landscaping Services has net income of $18,000, sales of $300,000, and average total assets of $125,000. Required: Calculate One-Two-Tree's margin, turnover, and return on investment (ROI).

Which of the following is not usually considered a measure of an entity's liquidity?

Mechforce Manufacturing's net income was $420,000 on sales of $14 million.Average assets for the year were $10 million.Margin for the year was:

An advantage of the DuPont model for calculating ROI is that:

Attesson, Inc.has a current ratio of 1.9 and current assets of $136,800. Required: Calculate Attesson's current liabilities and working capital.

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:

Return on equity:

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.ROI for the year was:

Which of the following accounts is part of working capital?

Rotablade's net income was $600,000 on sales of $24 million for the year.Average assets for the year were $8 million.For the year:

Mamba Metals, Inc.had an ROI of 12%, margin of 3%, and sales of $20 million for the year.Mamba's turnover for the year was:

ZeroFued's net income for the year was $300,000.Average assets totaled $2 million, and average liabilities totaled $500,000.Return on equity (ROE)was:

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.Net income for the year was:

Which of the following is a universally accepted measure of profitability?

Yellowday Energy's margin was 3% and turnover was 4.0 on sales of $50 million for the year.Average assets for the year were:

When comparing entity financial ratios with industry ratios:

United Machining's margin was 2% and turnover was 3.0 on sales of $60 million for the year.On the basis on this information:

A current ratio of 6.0 is usually an indication that the firm:

Accountingpresent and Past

Financial Statements and Accounting Conceptsprinciples

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant, and Equipment,

Accounting for and Presentation of Liabilities

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements,

Financial Statement Analysis

Managerial Accounting and Cost-Volume-Profit Relationships

Cost Accounting and Reporting

Cost Planning

Cost Control

Cost for Decision Making

Filters