Question : 49. A firm had retained earnings of $100,000 in 2012 and : 1197710

 

 

49. A firm had retained earnings of $100,000 in 2012 and $125,000 in 2013. The increase in retained earnings from 2012 to 2013 is

A. 12.5 percent.

B. 20 percent.

C. 25 percent.

D. 125 percent.

 

50. A company had income of $180,000 in 2012 and $240,000 in 2013. The increase in retained earnings from 2012 to 2013 is

A. 133 percent.

B. 33 percent.

C. 25 percent.

D. 125 percent.

 

51. Comparing the amount of a balance sheet item in one year to the amount for the same item in a prior year is called

A. common-size analysis.

B. vertical analysis.

C. horizontal analysis.

D. trend analysis.

 

52. A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with

A. the total of the assets on the balance sheet for that date.

B. the net sales from the income statement for the period ending on that date.

C. the total stockholders’ equity on the balance sheet for that date.

D. the amount for the same balance sheet item on a previous date.

 

53. If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2012 to 2013, the firm used

A. vertical analysis.

B. horizontal analysis.

C. common-size analysis.

D. trend analysis.

 

54. Which of the following is true of horizontal analysis?

A. The percentages of change can be added or subtracted from top to bottom.

B. The current year is always the base year.

C. The amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point.

D. The amounts and percentages of increase or decrease can be added and subtracted vertically in a column.

 

55. Modern Products, Inc. had accounts receivable of $240,000 in 2012, and $300,000 in 2013. Net sales for 2013 was $3,000,000, and gross profit margin was $1,200,000. The accounts receivable turnover for 2013 was:

A. 12.5 times.

B. 11.1 times.

C. 10 times.

D. 5 times.

 

56. Trend analysis looks at

A. selected ratios over a period of time.

B. two years of information for comparison.

C. two or more companies for comparison.

D. profitability by industry.

 

57. If the ratio of total stockholders’ equity to total assets was greater in 2013 than in 2012, then

A. total assets increased by a greater amount than did total stockholders’ equity.

B. the ratio of total liabilities to total assets was smaller in 2013 than in 2012.

C. creditors would consider it riskier to lend to this company in 2013 than in 2012.

D. the ratio of total liabilities to total assets was larger in 2013 than in 2012.

 

58. What is a ratio that measures financial strength?

A. ratio of stockholders’ equity to total liabilities

B. current ratio

C. working capital

D. rate of return on sales

 

 

 

59. A company has total assets of $120,000, current assets of $80,000, total liabilities of $50,000, and current liabilities of $25,000. What is the current ratio?

A. 4.80 to 1

B. 3.20 to 1

C. 2.40 to 1

D. 1.60 to 1

 

60. A company’s January 1 balance in Merchandise Inventory is $40,000. The December 31 balance is $35,000. Cost of goods sold is $220,000. The company’s inventory turnover is

A. 17.05 to 1.

B. 6.29 to 1.

C. 5.87 to 1.

D. 18.18 to 1.

 

61. Which of the following is most likely to indicate that a firm is experiencing difficulty in collecting its receivables?

A. Its accounts receivable turnover decreases from 10 to 8.

B. Its accounts receivable turnover increases from 8 to 10.

C. Its average collection period decreases from 36 to 32.

D. Its average collection period increases from 25 to 28.

 

62. Low inventory turnover compared with the industry average might reflect

A. obsolete goods.

B. poor purchasing procedures.

C. excess merchandise.

D. all of the above.