2023 Question 1 The Bubba Corp had net income before taxes of 200 000 and sales of 2 000 000 If

Question 1
The Bubba Corp. had net income before taxes of $200,000 and sales of $2,000,000. If it is in the 50% tax bracket, its after-tax profit margin is:
A. 5%
B. 12%
C. 20%
D. 25%

Question 2
ABC Co. has an average collection period of 60 days. Total credit sales for the year were $3,000,000. What is the balance in accounts receivable at year-end?
A. $50,000
B. $100,000
C. $500,000
D. $80,000

Question 3
Asset utilization ratios:
A. relate balance sheet assets to income statement sales.
B. measure how much cash is available for reinvestment into current assets.
C. are most important to stockholders.
D. measures the firm’s ability to generate a profit on sales.

Question 1
Total asset turnover indicates the firm’s:
A. liquidity.
B. debt position.
C. ability to use its assets to generate sales.
D. profitability.

Question 2
If accounts receivable stays the same and credit sales go up:
A. the average collection period will go up.
B. the average collection period will go down.
C. accounts receivable turnover will decrease.
D. B and C.

Question 3
A firm’s long term assets = $75,000, total assets = $200,000, inventory = $25,000 and current liabilities = $50,000. What are the current ratio and the quick ratio?
A. Current ratio = 0.5; quick ratio = 1.5
B. Current ratio = 1.0; quick ratio = 2.0
C. Current ratio = 1.5; quick ratio = 2.0
D. Current ratio = 2.5; quick ratio = 2.0

Question 1
Investors and financial analysts wanting to evaluate the operating efficiency of a firm’s managers would probably look primarily at the firm’s:
A. debt utilization ratios.
B. liquidity ratios.
C. asset utilization ratios.
D. profitability ratios.

Question 2
An increasing average collection period indicates:
A. the firm is generating more income.
B. accounts receivable are going down.
C. the company is becoming more efficient in its collection policy.
D. the company is becoming less efficient in its collection policy.

Question 3
In addition to comparison with industry ratios, it is also helpful to analyze ratios using:
A. trend analysis.
B. historical comparisons.
C. neither; only industry ratios provide valid comparisons.
D. both a and b.

Question 1
If a firm has both interest expense and lease payments:
A. times interest earned will be smaller than fixed charge coverage.
B. times interest earned will be greater than fixed charge coverage.
C. times interest earned will be the same as fixed charge coverage.
D. fixed charge coverage cannot be computed.

Question 2
Disinflation, as compared to inflation, would normally be good for investments in:
A. bonds.
B. gold.
C. collectible antiques.
D. textbooks.

Question 3
The __________ method of inventory costing is least likely to lead to inflation-induced profits.
A. FIFO
B. LIFO
C. Weighted average
D. Lower of cost or market

Question 1
A large extraordinary loss has what effect on cost of goods sold?
A. Raises it
B. Lowers it
C. Has no effect
D. Need more information

Question 2
Which of the following is a potential problem of utilizing ratio analysis?
A. Trends and industry averages are historical in nature.
B. Financial data may be distorted due to price-level changes.
C. Firms within an industry may not use similar accounting methods.
D. all of the above

 

Question 3
If government bonds pay 8.5% interest and insured savings accounts pay 5.5% interest, stockholders in a moderately risky firm would expect return-on-equity values of:
A. 5.5%.
B. 6.5%.
C. 12%.
D. above 8.5%, but the exact amount is uncertain.