Which one of the following assets is generally the most liquid?
1.
Which one of the following assets is generally the most liquid?
inventory
buildings
accounts receivable
equipment
patents
2.
It is easier to evaluate a firm using its financial statements when the firm:
is a conglomerate.
is global in nature.
uses the same accounting procedures as other firms in its industry.
has a different fiscal year than other firms in its industry.
tends to have one-time events such as asset sales and property acquisitions.
3.
Which one of the following is a current liability?
amount due to a supplier in 18 months
debt payable to a mortgage company in nine months
estimated taxes just paid
loan payment due in 13 months
amount due from a customer in 30 days
4.
Award: 1 out of 2.00 points
| During 2015, Rainbow Umbrella Corp. had sales of $740,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $550,000, $90,000, and $95,000, respectively. In addition, the company had an interest expense of $94,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) |
| a. | What is the company’s net income for 2015? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) |
| Net income | $ |
| b. | What is its operating cash flow? (Do not round intermediate calculations.) |
| Operating cash flow | $ |
| During 2015, Rainbow Umbrella Corp. had sales of $740,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $550,000, $90,000, and $95,000, respectively. In addition, the company had an interest expense of $94,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) |
| a. | What is the company’s net income for 2015? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) |
| b. | What is its operating cash flow? (Do not round intermediate calculations.) |
5.
Which one of these is a correct definition?
Net working capital equals current assets plus current liabilities.
Current liabilities are debts that must be repaid in 18 months or less.
Current assets are assets with short lives, such as inventory.
Long-term debt is defined as a residual claim on a firm’s assets.
Tangible assets are fixed assets such as patents.
6.
Award: 10 out of 10.00 points
| Sankey, Inc., has current assets of $5,125, net fixed assets of $25,600, current liabilities of $4,500, and long-term debt of $9,900. (Do not round intermediate calculations.) |
| What is the value of the shareholders’ equity account for this firm? |
| How much is net working capital? |
| Net working capital |
| Sankey, Inc., has current assets of $5,125, net fixed assets of $25,600, current liabilities of $4,500, and long-term debt of $9,900. (Do not round intermediate calculations.) |
| What is the value of the shareholders’ equity account for this firm? |
| Shareholders’ equity | $ |
| How much is net working capital? |
| Net working capital | $ |
7.
| Shelton, Inc., has sales of $390,000, costs of $178,000, depreciation expense of $43,000, interest expense of $24,000, and a tax rate of 40 percent. (Do not round intermediate calculations.) |
| What is the net income for the firm? |
8.
| During the year, the Senbet Discount Tire Company had gross sales of $1.25 million. The firm’s cost of goods sold and selling expenses were $544,000 and $234,000, respectively. The firm also had notes payable of $990,000. These notes carried an interest rate of 6 percent. Depreciation was $149,000. The firm’s tax rate was 30 percent. |
| a. | What was the firm’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.) |
| Net income |
| b. | What was the firm’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.) |
| Operating cash flow |
References
WorksheetSection: 2.2 The Income StatementSection: 2.5 Cash Flow of the Firm
| During the year, the Senbet Discount Tire Company had gross sales of $1.25 million. The firm’s cost of goods sold and selling expenses were $544,000 and $234,000, respectively. The firm also had notes payable of $990,000. These notes carried an interest rate of 6 percent. Depreciation was $149,000. The firm’s tax rate was 30 percent. |
| a. | What was the firm’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.) |
| Net income | $ |
| b. | What was the firm’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.) |
| Operating cash flow | $ |
9.
| Use the following information for Ingersoll, Inc., (assume the tax rate is 40 percent): |
| 2014 | 2015 | |||
| Sales | $ | 8,335 | $ | 8,909 |
| Depreciation | 1,175 | 1,176 | ||
| Cost of goods sold | 2,746 | 3,110 | ||
| Other expenses | 689 | 584 | ||
| Interest | 575 | 653 | ||
| Cash | 4,159 | 5,253 | ||
| Accounts receivable | 5,489 | 6,177 | ||
| Short-term notes payable | 844 | 796 | ||
| Long-term debt | 14,010 | 16,550 | ||
| Net fixed assets | 34,955 | 35,877 | ||
| Accounts payable | 4,416 | 4,235 | ||
| Inventory | 9,720 | 9,988 | ||
| Dividends | 1,006 | 1,101 | ||
|
|
||||
| Prepare an income statement for this company for 2014 and 2015. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) | |||||||
| Use the following information for Ingersoll, Inc., (assume the tax rate is 40 percent): |
| 2014 | 2015 | |||
| Sales | $ | 8,335 | $ | 8,909 |
| Depreciation | 1,175 | 1,176 | ||
| Cost of goods sold | 2,746 | 3,110 | ||
| Other expenses | 689 | 584 | ||
| Interest | 575 | 653 | ||
| Cash | 4,159 | 5,253 | ||
| Accounts receivable | 5,489 | 6,177 | ||
| Short-term notes payable | 844 | 796 | ||
| Long-term debt | 14,010 | 16,550 | ||
| Net fixed assets | 34,955 | 35,877 | ||
| Accounts payable | 4,416 | 4,235 | ||
| Inventory | 9,720 | 9,988 | ||
| Dividends | 1,006 | 1,101 | ||
|
|
||||
| Prepare an income statement for this company for 2014 and 2015. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) |
| Prepare the balance sheet for this company for 2014 and 2015. (Do not round intermediate calculations. Be sure to list the accounts in order of their liquidity.) |
10.
The total asset turnover ratio measures the amount of:
total assets needed for every $1 of sales.
sales generated by every $1 in total assets.
fixed assets required for every $1 of sales.
net income generated by every $1 in total assets.
net income than can be generated by every $1 of fixed assets.
11.
Al’s Sport Store has sales of $3,190, costs of goods sold of $2,030, inventory of $548, and accounts receivable of $424. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?
97.2
111.1
62.7
109.0
98.5
Inventory turnover = $2,030/$548 = 3.7044 Days in inventory = 365/3.7044 = 98.53 days
12.
A firm has total debt of $1,090 and a debt-equity ratio of .32. What is the value of the total assets?
$4,496
$1,439
$3,406
$3,498
$3,200
Total equity = $1,090 / .32 = $3,406
Total assets = $1,090 + $3,406= $4,496
13.
Ratios that measure a firm’s ability to pay its bills over the short run without undue stress are known as:
asset management ratios.
long-term solvency measures.
liquidity measures.
profitability ratios.
market value ratios.
14.
The debt-equity ratio is measured as:
total equity divided by long-term debt.
total equity divided by total debt.
total debt divided by total equity.
long-term debt divided by total equity.
total assets minus total debt, divided by total equity.
15.
The Purple Martin has annual sales of $4,800, total debt of $1,210, total equity of $2,500, and a profit margin of 7 percent. What is the return on assets?
7.00 percent
9.06 percent
27.77 percent
13.44 percent
11.74 percent
16.
Ratios that measure how efficiently a firm’s management uses its assets and equity to generate bottom line net income are known as _______ ratios.
asset management
long-term solvency
short-term solvency
profitability
market value
17.
Which statement expresses all accounts as a percentage of total assets?
pro forma balance sheet
common-size income statement
statement of cash flows
pro forma income statement
common-size balance sheet
18.
A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:
$1 in total equity.
$.53 in total assets.
$1 in current assets.
$.53 in total equity.
$1 in fixed assets.
19.
The quick ratio is measured as:
current assets divided by current liabilities.
cash on hand plus current liabilities, divided by current assets.
current liabilities divided by current assets, plus inventory.
current assets minus inventory, divided by current liabilities.
current assets minus inventory minus current liabilities.
20.
The current ratio is measured as:
current assets minus…
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