Practice Midterm Quiz 16

Question 1

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
75.	Compute CURRENT RATIO.

a. 7.86
b. 1.00
c. 0.79
d. 0.73
e. 8.76

Answer 1

75.
Solution = E

Current Assets 1840
Current Liabilities 210

8.76

Question 2

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
76.	Compute DEBT RATIO.

a. 100.4%
b. 91.3%
c. 99.6%
d. 87.6%
e. 91.7%

Answer 2

76.
Solution = C

Total Liabilities 2530
Total Assets 2540

99.6%

Question 3

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
77.	Compute NUMBER OF DAYS’ SALES IN INVENTORY. Note: If you need to compute the average balance for any account, assume that the beginning-of-year balance is the same as the end-of-year balance reported above.

a. 231.2 days
b. 1,156.0 days
c. 115.6 days
d. 63.3 days
e. 157.9 days

Answer 3

77.
Solution = A

Cost of Goods Sold 300
Inventory 190

1.578947

Days’ Sales in Inventory 231.2

Question 4

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
78.	Compute AVERAGE COLLECTION PERIOD (also called NUMBER OF DAYS’ SALES IN ACCOUNTS RECEIVABLE). Note: If you need to compute the average balance for any account, assume that the beginning-of-year balance is the same as the end-of-year balance reported above.
a.	77.9 days
b.	93.8 days
c.	231.2 days
d.	389.3 days
e.	63.3 days
f.	157.9 days

Answer 4

78.
Solution = D

Sales 1500
Accounts Receivable 1600

.9375

Days’ sales in Receivables 389.3

Question 5

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
79.	The market price per share is $30.00. The number of shares outstanding is 100. -- Compute PRICE-EARNINGS RATIO (also called P/E RATIO).
a.	12.00
b.	10.00
c.	21.43
d.	46.67
e.	27.27

Answer 5

79.
Solution = C

Market value of shares 3000
Net Income 140

21.43

Question 6

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
80.	Compute FIXED ASSET TURNOVER (also called PPE TURNOVER).

a. 3.29
b. 2.14
c. 2.54
d. 3.52
e. 1.40

Answer 6

80.
Answer = B

$1,500 / $700 = 2.14

Question 7

Accounts Payable 210
Accounts Receivable 1600
Capital Stock 120
Cash 50
Cost of Goods Sold 300
Inventory 190
Long-term Debt 2320
Net Income 140
Property, Plant, and Equipment (net) 700
Retained Earnings (110)
Sales 1500
81.	Compute DEBT-TO-EQUITY RATIO.

a. 2.31
b. 0.96
c. 1.05
d. 0.23
e. 253.00

Answer 7

81.
Solution = E

Total Liabilities 2530
Total Stockholders’ Equity 10

253

Question 8

82. Which ONE of the following is TRUE with respect to P/E ratio?

a. The P/E ratio serves as an index of the investor’s expectations of a company’s earnings growth potential in the future.
b. The P/E ratio serves as an index of the investor’s expectations of a company’s liquidity.
c. The P/E ratio serves as an index of the investor’s expectations of a company’s solvency.
d. The P/E ratio serves as an index of the investor’s expectations of a company’s leverage.

Answer 8

82.

Solution = A