Question : 41. What calculated as follows: Profit Margin for ROA : 1230614

 

 

41. What is calculated as follows:

                      Profit Margin for ROA                 Total Assets
  ?        =         (before interest expense        x         Turnover 
                       and related income                            Ratio 
                          tax savings) Ratio
 
A. return on net assets
B. return on sales margin
C. return on gross margin
D. return on assets
E. return on net income

 

42. The rate which indicates how quickly a firm collects cash is the _____ turnover ratio. 
A. cash
B. accounts receivable
C. sales receipts
D. inventory
E. asset

 

43. The _____ turnover ratio equals sales revenue divided by average accounts receivable during the period. 
A. cash
B. accounts receivable
C. sales receipts
D. sales revenue
E. asset

 

44. The rate at which _____  turn(s) over measures how quickly a firm collects cash. 
A. accounts receivable
B. assets turn over
C. inventory
D. accounts payable
E. notes receivable

 

45. The accounts receivable turnover ratio equals 
A. profit margin divided by average accounts receivable at the end of the period.
B. gross margin divided by average accounts receivable at the end of the period.
C. sales revenue divided by ending accounts receivable at the end of the period.
D. sales revenue divided by average accounts receivable during the period.
E. gross margin divided by average accounts receivable during the period.

 

46. Most firms that sell to other businesses, as opposed to consumers, sell on account and collect within 30 to 90 days. Interpreting any particular firm’s accounts receivable turnover and days receivable outstanding requires knowing the terms of sale. If a firm’s terms of sale are “net 30 days” and the firm collects its accounts receivable in 45 days, then the 
A. collections are not in accord with the stated terms
B. situation warrants a review of the credit and collection activity to ascertain the cause
C. situation warrants a review of the credit and collection activity to guide corrective action
D. situation indicates that the firm handles accounts receivable well
E. choices a, b and c

 

47. Many firms sell to customers on account as a strategy to stimulate sales. Comparing accounts receivable turnovers over time or between firms requires an analysis of  
A. the growth rate in sales
B. the amount of interest revenue generated
C. the cost of administering the credit-granting activity
D. the losses from uncollectible accounts.
E. all of the above

 

48. The _____ ratio indicates how fast firms sell their inventory items, measured in terms of the rate of movement of goods into and out of the firm. 
A. asset turnover
B. inventory turnover
C. asset
D. inventory
E. cost of goods sold

 

49. Managing inventory turnover involves balancing which of the following consideration(s) in setting the optimum level of inventory and, thus, the rate of inventory turnover.  
A. for a given amount of gross margin on the goods, firms prefer to sell as many goods as possible with a minimum of assets tied up in inventories
B. an increase in the rate of inventory turnover between periods indicates reduced costs of financing the investment in inventory
C. management does not want to have so little inventory on hand that shortages result in lost sales
D. increases in the rate of inventory turnover caused by inventory shortages could signal a loss of customers
E. all of the above

 

50. Some analysts calculate the inventory turnover ratio by dividing sales, rather than cost of goods sold, by the average inventory.  Which of the following regarding the inventory turnover ratio is not true. 
A. using sales in the numerator, will lead to incorrect measures of the inventory turnover ratio for calculating the average number of days that inventory is on hand until sale
B. as long as the ratio of selling price to cost of goods sold remains relatively constant, either measure will identify changes in the trend of the inventory turnover ratio
C. using sales in the numerator, will lead to correct measures of the inventory turnover ratio for calculating the average number of days that inventory is on hand until sale
D. Choices a and b
E. none of the above

 

 

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