91. Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis? A. ratio of fixed assets to long-term liabilitiesB. ratio of net sales to assetsC. number of days’ sales in receivablesD. rate earned on stockholders’ equity
92. The number of times interest expense is earned is computed as A. net income plus interest expense, divided by interest expenseB. income before income tax plus interest expense, divided by interest expenseC. net income divided by interest expenseD. income before income tax divided by interest expense
93. Balance sheet and income statement data indicate the following:
Bonds payable, 10% (issued 1988 due 2012)
$1,000,000
Preferred 5% stock, $100 par (no change during year)
300,000
Common stock, $50 par (no change during year)
2,000,000
Income before income tax for year
350,000
Income tax for year
80,000
Common dividends paid
50,000
Preferred dividends paid
15,000
Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)? A. 3.7B. 4.4C. 4.5D. 3.5
94. The current ratio is A. used to evaluate a company’s liquidity and short-term debt paying ability.B. is a solvency measure that indicated the margin of safety of a noteholder or bondholder.C. calculated by dividing current liabilities by current assets.D. calculated by subtracting current liabilities from current assets.
95. A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will A. both decrease.B. both increase.C. increase and remain the same, respectively.D. remain the same and decrease, respectively.
96. Hsu Company reported the following on its income statement:
Income before income taxes
$420,000
Income tax expense
120,000
Net income
$300,000
An analysis of the income statement revealed that interest expense was $80,000. Hsu Company’s times interest earned was A. 8 times.B. 6.25 times.C. 5.25 times.D. 5 times.
97. The following information pertains to Brock Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
30,000
Inventory
25,000
Property, plant and equipment
215,000
Total Assets
$310,000
Liabilities and Stockholders’ Equity
Current liabilities
$ 60,000
Long-term liabilities
95,000
Stockholders’ equity-common
155,000
Total Liabilities and stockholders’ equity
$310,000
Income Statement
Sales
$ 90,000
Cost of goods sold
45,000
Gross margin
45,000
Operating expenses
20,000
Net income
$ 25,000
Number of shares of common stock
6,000
Market price of common stock
$20
What is the current ratio for this company? A. 1.42B. 0.78C. 1.58D. 0.67
98.
Accounts payable
$ 30,000
Accounts receivable
35,000
Accrued liabilities
7,000
Cash
25,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
36,000
Notes payable (short-term)
20,000
Property, plant, and equipment
400,000
Prepaid expenses
2,000
Based on the above data, what is the amount of quick assets? A. $168,000B. $96,000C. $60,000D. $61,000
99.
Accounts payable
$ 30,000
Accounts receivable
35,000
Accrued liabilities
7,000
Cash
25,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
36,000
Notes payable (short-term)
20,000
Property, plant, and equipment
400,000
Prepaid expenses
2,000
Based on the above data, what is the amount of working capital? A. $213,000B. $113,000C. $153,000D. $39,000
100.
Accounts payable
$ 30,000
Accounts receivable
35,000
Accrued liabilities
7,000
Cash
25,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
36,000
Notes payable (short-term)
20,000
Property, plant, and equipment
400,000
Prepaid expenses
2,000
Based on the above data, what is the quick ratio, rounded to one decimal point? A. 1.7B. 2.9C. 1.1D. 1.0
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