Question : 91. The accounts payable turnover ratio uses purchases account in its : 1245956

 

 

91. The accounts payable turnover ratio uses purchases on account in its computation.  Although firms do not disclose their purchases, the analyst can calculate the purchase amount as follows:  A. Purchases = Cost of Goods Sold + Ending Inventory + Beginning Inventory B. Purchases = Cost of Goods Sold + Ending Inventory – Beginning Inventory C. Purchases = Cost of Goods Sold – Ending Inventory + Beginning Inventory D. Purchases = Cost of Goods Sold – Ending Inventory – Beginning Inventory E. Purchases = Cost of Goods Sold x Ending Inventory – Beginning Inventory

 

92. Analysts use measures of long-term _____  to evaluate a firm’s ability to meet interest and principal payments on long-term debt and similar obligations as they come due. If a firm cannot make the payments on time, it becomes insolvent and may have to reorganize or liquidate.  A. insolvency factorsB. reorganization factorsC. liquidity risk D. insolvency risk E. cash flow risk

 

93. In assessing the debt ratios, analysts customarily vary the standard in relation to the stability of the firm’s earnings and cash flows from operations. Public utilities have liabilities to assets ratios frequently on the order of  A. 0% to 10%. B. 10% to 20%. C. 30% to 40%. D. 60% to 70%. E. 90% to 100%.

 

94. In assessing the debt ratios, analysts customarily vary the standard in relation to the stability of the firm’s earnings and cash flows from operations. Banks have liabilities to assets ratios, typically  A. over 10%. B. over 30%. C. over 50%. D. over 70%. E. over 90%.

 

95. A mature, financially healthy company typically has a cash flow from operations to total liabilities ratio of  A. 5% or more.B. 20% or more.C. 45% or more.D. 70% or more.E. 90% or more.

 

96. The fixed asset turnover ratio A. measures the relation between sales and the investment in fixed assets such as property, plant, and equipment.B. measures the amount of sales generated from a particular level of investments in fixed assets.C. is calculated by dividing sales by the average fixed assets for the period.D. all of the above.E. none of the above.

 

97. The accounts payable turnover ratio can reveal A. the result of sales divided by average working capital.B. the number of days in the operating cycle.C. the length of the operating cycle in order to compare it with industry averages.D. the number of days that a firm’s accounts payable remain outstanding.E. none of the above.

 

98. During Year 2, Lamar Corporation purchased $600,000 of merchandise inventory. The cost of sales for year 2 was $660,000 and the ending merchandise inventory at December 31, Year 2 was $60,000. What was the inventory turnover for Year 2? A. 8.0B. 7.3C. 6.6D. 6.0E. 6.7

 

99. Selected data from Carson Corporation’s financial statements for the year ended December 31, Year 2 are as follows. 

Current ratio

1.4

Quick ratio

0.86

Current liabilities

$450,000

Accounts receivable turnover

6.0

Merchandise inventory turnover

4.0

Rate of return on assets

6.5%

 

 

Selected Account Balances at December 31, Year 1: 

Accounts receivable

$355,000

Merchandise inventory

190,000

 

 

Year 2 Operations 

Sales

$1,241,000

Cost of goods sold

800,000

 

 

Assuming that prepaid expenses are immaterial, ending merchandise inventory at December 31, Year 2 is A. $180,000B. $210,000 C. $220,000D. $240,000E. $260,000

 

100. Why might a firm use the quick ratio instead of the current ratio in its liquidity analysis? A. It wants to target long-term debt instead of short term debt.B. Its accounts receivable are greater than its cash.C. Its inventory is not very liquid.D. It considers the cash flow amount in the quick ratio more important than the other liquidity ratios.E. Its notes receivable are greater than its cash.

 

 

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