Multiple choice questions (Due 3/4/2020 - Please submit your answer)
1. Assume the following sales data for a company:
2020 $1,050,000
2019 950,000
2018 800,000
2017 650,000
If 2017 is the base year, what is the percentage increase in sales from 2017 to 2019?
a. 100%
b. 61.5%
c. 46.2%
d. 68.4%
2. Saira, Inc. has the following income statement (in millions):
SAIRA, INC.
Income Statement
For the Year Ended December 31, 2020
Net Sales $300
Cost of Goods Sold 180
Gross Profit 120
Operating Expenses 45
Net Income $75
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
a. 40%
b. 60%
c. 100%
d. None of these answer choices are
correct.
3. Blaney Clothing Store had a balance in the Accounts Receivable account of $437,500 at the beginning of the year and a balance of $500,000 at the end of the year. Net credit sales during the year amounted to $3,000,000. The average collection period of the receivables in terms of days was
a. 53.2 days.
b. 365 days.
c. 60.1 days.
d. 57 days.
4. The acid-test (quick) ratio
a. is used to quickly determine a company's solvency and long-term debt paying ability.
b. relates cash, short-term investments, and net receivables to current liabilities.
c. is calculated by taking one item from the income statement and one item from the balance sheet.
d. is the same as the current ratio except
it is rounded to the nearest whole percent.
5. A liquidity ratio measures the
a. income or operating success of an enterprise over a period of time.
b. ability of the enterprise to survive over a long period of time.
c. short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.
d. number of times interest is
earned.
6. Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,500,000. The average number of days in inventory during the year was
a. 365 days.
b. 60.8 days.
c. 50.7 days.
d. 30
days.
7. Profit margin is calculated by dividing
a. sales by cost of goods sold.
b. gross profit by net sales.
c. net income by stockholders' equity.
d. net income by net sales.
8. The debt to assets ratio measures
a. the company's profitability.
b. whether interest can be paid on debt in the current year.
c. the proportion of interest paid relative to dividends paid.
d. the percentage of the total assets provided by creditors
Answer to Q1:
Percentage increase : ($950,000- $650,000)/$650,000 ; 46.2% Option C
Answer to Q2:
Vertical Analysis % of Cost of Goods sold:
Cost of Goods sold/ NEt sales *100 ; (180/300)*100
= 60% option b
Answer to Q3
Average Collection period: 365/ Accounts Receivable Turnover
Accounts Rec. Turnover: Credit Sales / Average Receivable
= $3,000,000/[(437,500+500,000)/2]
= 6.4
Average Collection period: 365/6.4 ; 57.0 days option d
Answer To Q4
Option B : Acid test ratio : relates cash, short-term investments, and net receivables to current liabilities.
As it proportions to most liquid assets to the amount of current liabilities.
Answer to Q5
Option C : short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.
It measures company ability to pay it short term needs.
Answer to Q 6
Average number of days in inventory : (Average inventory / COGS) * 365
=( 2,500,000/15,000,000)*365
= 60.8 days option B.
Answer to Q7
Option B: gross profit by net sales.
Profit margin means percentage of profit with respect to the NEt Sales a company is achieved.
Answer to Q8
Option D
the percentage of the total assets provided by creditors
Multiple choice questions (Due 3/4/2020 - Please submit your answer) 1. Assume the following sales data for...