Online Quiz 16

Question 1

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
Compute CURRENT RATIO.
10.38
4.13
0.42
1.73
0.40

Answer 1

Answer: 4.13

Question 2

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
Compute DEBT RATIO.
57.8%
72.3%
42.2%
14.5%
27.7%

Answer 2

Answer: 57.8%

Question 3

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
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.

292. 0 days
293. 0 days
294. 7 days
295. 3 days
296. 0 days

Answer 3

Answer: 121.7 days

Question 4

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
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.
74.3 days
24.3 days
60.8 days
10.0 days
36.5 days

Answer 4

Answer: 36.5 days

Question 5

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
The market price per share is $15.00. The number of shares outstanding is 100.
Compute PRICE-EARNINGS (or P/E) RATIO.
10.38
6.00
36.50
18.75
4.38

Answer 5

Answer: 18.75

Question 6

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
Compute RETURN ON EQUITY.
34.8%
8.0%
16.7%
16.0%
22.9%

Answer 6

Answer: 22.9%

Question 7

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
Compute DEBT-TO-EQUITY RATIO.
0.73
1.37
2.86
0.32
2.37

Answer 7

Answer: 1.37

Question 8

Which ONE of the following is an ADVANTAGE of HIGHER LEVERAGE?
Cost of goods sold is substantially lower if a company has higher leverage.
Higher leverage is usually associated with a much lower average collection period (number of days’ sales in accounts receivable).
Higher leverage means that more assets can be purchased without any additional equity investment by stockholders.
Higher leverage is usually associated with a much lower number of days’ sales in inventory.
Higher leverage creates downward pressure on a company’s accumulated depreciation.

Answer 8

Answer: Higher leverage means that more assets can be purchased without any additional equity investment by stockholders.

Question 9

The following data are from Lorien Company.
Accounts Payable 80
Accounts Receivable 100
Capital Stock 120
Cash 30
Cost of Goods Sold 600
Inventory 200
Long-term Debt 400
Net Income 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
Compute FIXED ASSET TURNOVER. 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.

0. 50
1. 37
2. 86
3. 00
4. 37

Answer 9

Answer: 2.00

Question 10

The following data are from Soren Company.
Accounts Payable 60
Accounts Receivable 100
Capital Stock 140
Cash 30
Interest Expense 35
Inventory 200
Long-term Debt 400
Income before taxes 80
Property, Plant, and Equipment (net) 500
Retained Earnings 230
Sales 1,000
Compute the TIMES INTEREST EARNED ratio.
11.43
3.29
9.28
7.74
2.29

Answer 10

Answer: 3.29