51. Solvency measures a company’s ability: A. to meet long-term obligations as they become due.B. to meet short-term obligations as they become due.C. to make a profit in the short-run.D. to make a profit in the long-run.
52. Which of the following ratios would be the best measure of solvency? A. Return on assets ratioB. Price earnings ratioC. Current ratioD. Times-interest-earned ratio
53. Which of the following ratios would not be the best measure of solvency? A. Return on assets ratioB. Debt-to-equity ratioC. Debt service coverage ratioD. Times-interest-earned ratio
54. Which of the following statements would be the best interpretation of a company’s low debt-to-equity ratio? A. The company chooses to pay cash for most of its major purchases.B. The company is not liquid.C. The company prefers to pay stockholders high dividends out of their retained earnings.D. The company prefers to raise funds by issuing capital stock than long-term borrowing.
55. Which ratio would be best for measuring a company’s ability to repay both principal and interest on outstanding loans from cash generated from operating activities? A. Current ratioB. Times-interest-earned ratioC. Debt service coverage ratioD. Debt-to-equity ratio
56. During 2012, Mark Walker, Inc. had cash flow from operations of $330,000, dividends paid totaling $15,000, and equipment purchases of $120,000. The ratio of cash flow from operations to capital expenditures is: A. 2.63.B. 0.36.C. 2.75.D. 2.88.
57. Hardister Corp.Hardister Corp. has the following information available from its financial statements for 2012:
Balance sheet information:
Income statement information:
Assets
Current assets
$ 400,000
Sales (all on account)
$3,000,000
Long-term assets
600,000
Cost of goods sold
1,500,000
Total assets
$1,000,000
Salary expense
200,000
Miscellaneous expenses
400,000
Liabilities
Interest expense
100,000
Current liabilities
$ 200,000
Income before taxes
$ 800,000
Long-term liabilities
100,000
Income tax expense
300,000
Total liabilities
$ 300,000
Net income
$ 500,000
Stockholders’ Equity
Capital stock
$ 300,000
Retained earnings
400,000
Total Stockholders’ Equity
$ 700,000
Refer to the Hardister Corp. information above. Hardister’s current ratio is: (round to two decimal places) A. 3.33.B. .67.C. .50.D. 2.00.
58. Hardister Corp.Hardister Corp. has the following information available from its financial statements for 2012:
Balance sheet information:
Income statement information:
Assets
Current assets
$ 400,000
Sales (all on account)
$3,000,000
Long-term assets
600,000
Cost of goods sold
1,500,000
Total assets
$1,000,000
Salary expense
200,000
Miscellaneous expenses
400,000
Liabilities
Interest expense
100,000
Current liabilities
$ 200,000
Income before taxes
$ 800,000
Long-term liabilities
100,000
Income tax expense
300,000
Total liabilities
$ 300,000
Net income
$ 500,000
Stockholders’ Equity
Capital stock
$ 300,000
Retained earnings
400,000
Total Stockholders’ Equity
$ 700,000
Refer to the Hardister Corp. information above. Hardister’s debt-to-equity ratio is: (round to two decimal places) A. .50.B. .43.C. .75.D. .25.
59. Hardister Corp.Hardister Corp. has the following information available from its financial statements for 2012:
Balance sheet information:
Income statement information:
Assets
Current assets
$ 400,000
Sales (all on account)
$3,000,000
Long-term assets
600,000
Cost of goods sold
1,500,000
Total assets
$1,000,000
Salary expense
200,000
Miscellaneous expenses
400,000
Liabilities
Interest expense
100,000
Current liabilities
$ 200,000
Income before taxes
$ 800,000
Long-term liabilities
100,000
Income tax expense
300,000
Total liabilities
$ 300,000
Net income
$ 500,000
Stockholders’ Equity
Capital stock
$ 300,000
Retained earnings
400,000
Total Stockholders’ Equity
$ 700,000
Refer to the Hardister Corp. information above. Hardister’s times-interest-earned ratio is: (round to two decimal places) A. 8.00.B. 9.00.C. 6.00.D. 5.00.
60. Hardister Corp.Hardister Corp. has the following information available from its financial statements for 2012:
Balance sheet information:
Income statement information:
Assets
Current assets
$ 400,000
Sales (all on account)
$3,000,000
Long-term assets
600,000
Cost of goods sold
1,500,000
Total assets
$1,000,000
Salary expense
200,000
Miscellaneous expenses
400,000
Liabilities
Interest expense
100,000
Current liabilities
$ 200,000
Income before taxes
$ 800,000
Long-term liabilities
100,000
Income tax expense
300,000
Total liabilities
$ 300,000
Net income
$ 500,000
Stockholders’ Equity
Capital stock
$ 300,000
Retained earnings
400,000
Total Stockholders’ Equity
$ 700,000
Refer to the Hardister Corp. information above. Assuming Hardister has no preferred stock and the average number of common shares outstanding was 10,000, what would be earnings per share for 2012? (round to two decimal places) A. $ 80.00B. $ .02C. $ 50.00D. $300.00
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