Question : 91. Which of the following ratios provides a solvency measure that : 1239373

 

 

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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