Exam 13: Measuring and Evaluating Financial Performance

Use the financial information below to calculate and interpret the following: A.Capital acquisitions ratio. B.Times interest earned ratio. C.Quality of income ratio. Sales revenue \ 159,131 Cost of goods sold 64,360 Gross profit 94,771 Selling, general and administrative expenses 8,800 Amortization 2,585 Total operating expenses 11,385 Operating income 83,386 Interest expense 2,847 Net income before taxes 80,539 Income tax expense 3,414 Net income \7 7,125 Cash used for interest payments $\quad\quad\quad\$ 2,847$ Cash used for income tax payments $\quad\quad \$ 3,414$ Net income \ 77,125 Add amortization 2,585 Add the decrease in accounts receivable 8,860 Add the decrease in inventory 367 Subtract the increase in prepaid expenses (650) Subtract the decrease in accounts payable (1,202) Net cash provided by operating activities \ 87,085 Cash provided by sale of property, plant, and equipment \1 ,165 Cash provided by sale of short-term investments 1,393 Cash used for purchases of property, plant, and equipment (8,950) Cash used for purchases of short-term investments (778) Net cash provided by (used for) investing activities ( \7 ,170)

Calculate the price to earnings ratio for the current year.

Which of the following are the constraints on how broadly accounting rules can be applied?

The time period assumption is also known as the continuity assumption. BT: Knowledge

Nonrecurring items such as discontinued operations and extraordinary events are presented above the income tax expense line on the income statement because they are subject to income taxes just like any other sources of income. BT: Comprehension

The patent on a major drug produced by a pharmaceutical company will soon expire.Sales of the drug contribute 10% to the company's net income.Which of the following statements is most likely to be true in these circumstances?

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

If the debt-to-assets ratio is 0.63,it means that 37% of the company's financing has been provided by shareholders' equity. BT: Comprehension

Which of the following factor does not contribute to the going-concern problem?

The going-concern assumption states that the:

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

Which of the following could not explain why a company has a lower quality of income ratio but a higher EPS than one of its competitors?

A current ratio of less than one is not so much of a concern when the company has a:

Gains and losses due to changes in foreign currency rates are not included in net income. BT: Knowledge

Net income was $418,600 in 2010 and $364,000 in 2011.The year- to-year percent change in net income is:

The fixed asset turnover ratio is a measure of the efficiency of a company. BT: Knowledge

Calculate the earnings per share for the current year.

Industries differ greatly in terms of the percentage of sales made on credit.This means some measures of liquidity are less relevant to companies in some industries than in others. BT: Comprehension

Company X has net sales revenue of $780,000,cost of goods sold of $343,200,and all other expenses of $327,600.The gross profit percentage is:

If a company is expanding its facilities,its fixed asset turnover ratio is likely to fall temporarily. BT: Comprehension