Question :
41. Airport Gift Mart, Inc. reported the following amounts in its : 1224843
41. Airport Gift Mart, Inc. reported the following amounts in its financial statements:
2012
2011
Average inventory
$ 330,000
$ 250,000
Cost of goods sold
5,940,000
5,500,000
From 2011 to 2012, the company’s efficiency in managing inventory is: A. declining, because the inventory turnover ratio is decreasing.B. improving, because the inventory turnover ratio is increasing.C. declining, because the inventory turnover ratio is increasing.D. improving, because the inventory turnover ratio is decreasing.
42. The quick ratio: A. is generally larger than the current ratio.B. decreases when a company’s assets becomes more liquid.C. increases when a company has more cash sales than credit sales.D. is larger when a company’s assets are more liquid.
43. The current assets of Lane Enterprises are considered very liquid at December 31, 2012. This means that Lane: A. has a larger quick ratio than current ratio.B. must decrease its liquidity in order to appear more favorable to potential investors.C. should attempt to borrow money in order to remain in business.D. is able to pay its current obligations using its current assets.
44. The quick ratio differs from the current ratio in that it: A. represents the amount of cash on hand instead of the total current assets.B. excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible collection problems.C. is a stricter measure of a company’s ability to pay its current obligations.D. signals the need to liquidate short-term investments when it drops below 2.0.
45. The inventory turnover ratio is represented by which of the following formulas? A. Net credit sales / Average inventoryB. Average inventory / Net credit salesC. Cost of goods sold / Average inventoryD. Average inventory / Cost of goods sold
46. If a company’s current ratio is 2.2 and the current liabilities are $400,000, then the current assets are: A. $1,280,000.B. $880,000.C. $420,000.D. $181,818.
47. Amethyst Company paid off a $100,000 two-year note payable. The effect of this transaction is that the: A. current ratio decreased.B. earnings per share increased.C. working capital increased.D. debt to equity ratio increased.
48. Short-term creditors are usually most interested in assessing: A. marketability.B. profitability.C. operating results.D. liquidity.
49. Most companies: A. agree that a current ratio of 0.75 is sufficient for business operations.B. try to maintain protection from creditors by keeping only a small amount of cash available.C. are not concerned with the debt management ratios when cash flows are good.D. strive for an appropriate balance between debt and equity financing.
50. Faultless, Inc.Selected data from Faultless’ financial statements are provided below.
2012
2011
Current assets
$6,000
$3,000
Long-term assets
7,000
4,000
Current liabilities
2,000
3,000
Long-term liabilities
7,000
0
Stockholders’ equity
4,000
4,000
Net sales
9,500
9,100
Net income
1,000
500
Refer to the financial information presented for Faultless, Inc. Which of the following is true regarding the debt management ratios for Faultless between 2011 and 2012? A. The debt to equity and debt to assets ratios both increased.B. The debt to equity and total debt to assets ratios both decreased.C. The debt to equity and long-term debt to equity ratios both decreased.D. The debt to equity ratio decreased and the debt to assets ratios increased.
