Deck 24: Financial Statements and Ratios

Question 1

Which of the following is a sales element of an operating statement?

A)cost of goods sold
B)inventory
C)direct labor
D)returns
E)selling expenses

Answer 1

D
Explanation: Sales elements include gross sales,returns,allowances,and net sales.

Question 2

All of the following are cost elements of an operating statement except which?

A)cost of goods sold
B)inventory
C)returns and allowances
D)direct labor
E)gross margin

Answer 2

C
Explanation: Cost elements include cost of goods sold,inventory,purchase discounts,direct labor,and gross margin.

Question 3

A company's gross sales may be reduced by

A)the size of the contribution margin.
B)the percentage of markdowns.
C)depreciation and amortization.
D)stock turn rate and the markup percentage.
E)returns or allowances.

Answer 3

E
Explanation: Gross sales represent the total amount billed to customers.Dissatisfied customers or errors may reduce gross sales through returns and allowances.

Question 4

________ is a reduction in a retail price that is necessary if the items will not sell at the full selling price to which they have been marked up.

A)Stock turn rate
B)Markdown
C)ROI
D)Markup
E)Net margin

Question 5

The ________ summarizes the profitability of a business firm for a specific time period,usually a month,quarter,or year.

A)balance sheet
B)annual report
C)income statement
D)assets-liabilities statement
E)data mine

Question 6

A company's operating statement consists of three key elements: sales of the firm's products and services,costs incurred in making and selling these products and services,and

A)stock turn rates for its various products.
B)profit or loss.
C)markup on cost.
D)return on investment.
E)bundle pricing options.

Question 7

The gift shop purchased four sets of Block brand hand-painted stemware expecting to sell all four at the list price of $24.99.Unfortunately,the demand for the stemware was not as high as the owner had anticipated.She was only able to sell one at this price.She reduced the price on the other three sets to $16.49 and was able to sell all three sets.Calculate her markdown percentage.

A)0)34 percent
B)2)78 percent
C)3)43 percent
D)27.8 percent
E)34.2 percent

Question 8

If Jane Westerlund,owner of a picture frame store,raises the average price of a framed picture to $100 and the cost of goods sold is $36,what is the percentage markup on selling price?

A)36 percent
B)55 percent
C)64 percent
D)100 percent
E)178 percent

Question 9

If Jane Westerlund,owner of a picture frame store,raises the average price of a framed picture to $80 and the cost of goods sold is $36,what is the percentage markup on cost?

A)36 percent
B)55 percent
C)64 percent
D)100 percent
E)182 percent

Question 10

The inventory for Jane Westerlund's picture frame store would include

A)her molding,matting,and glass.
B)her skill in framing prints.
C)her equipment,chairs,tables.
D)her cost of goods sold.
E)her rent and utility expenses.

Question 11

All of the following are operating ratios used to set a price for an offering except which?

A)stock turns
B)ROI
C)market share
D)markdown
E)markup

Question 12

When Beth purchased diabetic candy from a catalog retailer,she was sent orange- and lemon-flavored candy coated in dark chocolate.When she called to complain to the catalog retailer,she was told to keep the candy that was incorrectly sent to her,and that the company would immediately ship her the correct candy.This incorrectly sent candy would be listed as a(n)________ on the operating statement for the catalog retailer.

A)product return
B)markdown
C)amortized product
D)liquidity error
E)allowance

Question 13

The ________ is the dollars added to cost of goods sold (COGS)to arrive at the selling price.

A)markup
B)selling price
C)return on investment
D)stock turn rate
E)markdown

Question 14

A company's operating statement is also called a(n)

A)income statement.
B)balance sheet.
C)de facto annual report.
D)assets-liabilities statement.
E)data mine.

Question 15

Gross sales minus returns and allowances for a firm are called its

A)inventory shrinkage.
B)discounted return on investment.
C)gross sales.
D)net sales.
E)gross margin.

Question 16

When Paulette saw the dress in the store window,she knew two things.She had to own the dress,and she could not afford it at its current price.As she viewed the dress in the store,she thought of the dress as her own and believed no one else would buy it.It seems she was right because no one else did buy it,and the store had to reduce its price by 30 percent in order to dispose of it.This made it affordable for Paulette,who took advantage of a(n)

A)negative markup.
B)markup elimination.
C)markdown.
D)liquidity reduction.
E)increase in net margin.

Question 17

To increase the number of dogs boarding at its facilities,Muntz Kennels mailed coupons to dog owners who lived within a 25-mile radius of the facility.The printing and postage costs for the mailing plus the coupon redemptions would appear in which major expense category on the company's income statement?

A)general
B)administrative
C)fixed
D)selling
E)variable

Question 18

The three major categories of expenses are

A)direct,semi-direct,and indirect.
B)variable,fixed,and semi-variable.
C)external,internal,and societal.
D)manufacturing,promotion,and distribution.
E)selling,administrative,and general.

Question 19

A retailer of children's clothing had net sales of $72,000.But to get those sales,she had to reduce her prices by $2,000.Calculate her markdown.

A)0)35 percent
B)2)78 percent
C)3)50 percent
D)3)70 percent
E)26.7 percent

Question 20

The total cost of the products sold by a firm during a specified period is referred to as

A)amortization.
B)cost of goods sold.
C)gross sales.
D)net sales.
E)gross margin.

Question 21

Rebecca Gollanek makes and sells wooden cooling racks for cakes,cookies,and bread for $22.50 each.She has invested $4,300 in the venture and made $2,200 in net profit.Calculate her return on investment.

A)22.0 percent
B)43.0 percent
C)48.8 percent
D)51.2 percent
E)195.5 percent

Question 22

________ is the financial ratio that measures the ability of a firm to move its inventory quickly.

A)Markup
B)Selling price
C)Return on investment
D)Stock turn rate
E)Markdown

Question 23

Leon George sold kites at the beach last summer.He invested $2,500 in the venture and made $1,400 net profit (net income).Calculate his return on investment.

A)15.6 percent
B)17.9 percent
C)29.9 percent
D)47.0 percent
E)56.0 percent

Question 24

Leon George sold kites at the beach last summer.He invested $2,500 in kites and ended the season with $100 worth of kite inventory.Calculate his stock turn rate for the summer.

A)1)0
B)1)5
C)2)0
D)3)0
E)24.0

Question 25

The ________ is the ratio of net income to the investment used to earn that net income.

A)markup
B)selling margin
C)return on investment
D)return on assets
E)markdown