Financial Analysis Quiz

A liquidity ratio measures the

•       income or operating success of an enterprise over a period of time.

• ability of the enterprise to survive over a long period of time.

• short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.

• number of times interest is earned.

The current ratio is

• calculated by dividing current liabilities by current assets.

• used to evaluate a company's liquidity and short-term debt paying ability.

• used to evaluate a company's solvency and long-term debt paying ability.

• calculated by subtracting current liabilities from current assets.

The acid-test (quick) ratio

• is used to quickly determine a company's solvency and long-term debt paying ability.

• relates cash, short-term investments, and net receivables to current liabilities.

• is calculated by taking one item from the income statement and one item from the balance sheet.

• is the same as the current ratio except it is rounded to the nearest whole percent.

Parker Hardware Store had net credit sales of $8,000,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was

• 7.7 times.

• 4.6 times.

• 11.4 times.

• 12.3 times.

Parker Hardware Store had net credit sales of $8,000,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. TThe average collection period of the receivables in terms of days was

• 365 days.

• 29.6 days.

• 30 days.

• 48.7 days.

Wagon Department Store had net credit sales of $16,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is

• 8 times.

• 15 times.

• 7.5 times.

• 5 times.

Profit margin is calculated by dividing

• sales by cost of goods sold.

• gross profit by net sales.

• net income by stockholders' equity.

• net income by net sales.

The debt to total assets ratio measures

• the company's profitability.

• whether interest can be paid on debt in the current year.

• the proportion of interest paid relative to dividends paid.

• the percentage of the total assets provided by creditors.

Dean Corporation reported net income $48,000, net sales $400,000, and average assets $800,000 for 2012. The 2012 profit margin was:

• 6%

• 12%

• 50%

• 200%

Flake Company reported the following on its income statement:

Income before income taxes                                             $600,000

Income tax expense              150,000

Net income                           $450,000

An analysis of the income statement revealed that interest expense was $50,000.

Flake Company's times interest earned was

• 13 times.

• 12 times.

• 6 times

• 7 times