26. A company had net income of $250,000. On January 1, there were 12,000 shares of common stock outstanding. On May 1, the company issued an additional 9,000 shares of common stock. The company decl

26. A company had net income of $250,000. On January 1, there were 12,000 shares of common stock outstanding. On May 1, the company issued an additional 9,000 shares of common stock. The company declared a $7,900 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions.

The company had an earnings per share of: (Points : 2)

$13.45

$13.89

$11.53

$26.90

Amount cannot be determined as problem does not state if there are any dividends in arrears

27. Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company has an earnings per share of: (Points : 2)

$3.75

$3.00

$3.33

$15.00

$3.16

28. A bond traded at 102 ½ means that: (Points : 2)

The bond pays 2.5% interest

The bond traded at $1,025 per $1,000 bond

The market rate of interest is 2.5%

The bonds were retired at $1,025 each

29. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. (Points : 2)

$0

$33,750

$67,500

$750,000

$1,550,000

30. Which of the following statements is true? (Points : 2)

Interest on bonds is tax deductible

Interest on bonds is not tax deductible

Dividends to stockholders are tax deductible

Bonds do not have to be repaid

31. Net income divided by net sales is equal to the: (Points : 2)

Return on total assets

Profit margin

Current ratio

Total asset turnover

Days’ sales in inventory

32. A company has sales of $5,417,000, a gross profit ratio of 35%, ending merchandise inventory of $201,425, and total current assets of $1,539,600. What is the days sales’ in inventory ratio for the year? (Points : 2)

6.10

20.88

26.15

22.67

15.77

33. Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100%, are called: (Points : 2)

Comparative statements

Common-size comparative statements

General-purpose financial statements

Base line statements

Index statements

34. The comparison of a company’s financial condition and performance across time is known as: (Points : 2)

Horizontal analysis

Vertical analysis

Political analysis

Financial reporting

Investment analysis

35. A company’s transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: (Points : 2)

Operating activities

Investing activities

Financing activities

Direct activities

Indirect activities

36. The ability to meet short-term obligations and to efficiently generate revenues is called: (Points : 2)

Liquidity and efficiency

Solvency

Profitability

Market prospects

Creditworthiness

37. Wessen Company reports net income of $180,000 for the year ended December 31, 2010. It also reports $45,800 depreciation expense, $21,410 amortization expense and a $15,000 gain on the sale of machinery. Its comparative balance sheets reveal a $28,300 increase in accounts receivable, $20,400 decrease in accounts payable, $10,470 increase in prepaid expenses, and $33,140 decrease in wages payable. What is the net cash flows provided (used) by operating activities using the indirect method? (Points : 2)

($140,200)

$133,490

$139,900

($133,490)

$78,300

38. The indirect method for the preparation of the operating activities section of the statement of cash flows: (Points : 2)

Separately lists each major item of operating cash receipts

Separately lists each major item of operating cash payments

Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities

Is required if the company is a merchandiser

39. A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: (Points : 2)

$50,000

$5,000

$45,000

Zero. This is an operating activity

Zero. This is a financing activity

40. The measurement of key relations among financial statement items is known as: (Points : 2)

Financial reporting

Horizontal analysis

Investment analysis

Ratio analysis

Risk analysis

41. The average number of times a company’s inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the: (Points : 2)

Accounts receivable turnover

Inventory turnover

Days’ sales uncollected

Current ratio

42. Internal users of financial information: (Points : 2)

Are not directly involved in operating a company

Are those individuals involved in managing and operating the company

Include shareholders and lenders

Include directors and customers

Include suppliers, regulators and the press

43. A company has a profit margin of 5%. If net income is equal to $83,000 and average total assets is equal to $45,000, how much are net sales? (Points : 2)

$4,150

$2,250

$1,660,000

$6,400

$128,000

44. The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers and subtracts the major items of operating cash disbursements, such as cash paid for merchandise is referred to as the: (Points : 2)

Direct method of reporting net cash provided or used by operating activities

Cash basis of accounting

Classified statement of cash flows

Indirect method of reporting net cash provided or used by operating activities

Net method of reporting cash flows from operating activities

45. One of several ratios that reflects solvency includes the: (Points : 2)

Acid-test ratio

Current ratio

Times interest earned ratio

Total asset turnover

Days’ sales in inventory

46. Financial reporting refers to: (Points : 2)

The application of analytical tools to general-purpose financial statements

The communication of relevant financial information to decision makers

Financial statements only

Ratio analysis

Profitability

47. The ability to generate future revenues and meet long-term obligations is referred to as: (Points : 2)

Liquidity and efficiency

Solvency

Profitability

Market prospects

Creditworthiness

48. A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals: (Points : 2)

4.8%

5.0%

20.0%

20.8%

24.0%

49. Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the: (Points : 2)

Inventory turnover ratio

Profit margin

Days’ sales in inventory

Current ratio

Total asset turnover

50. Trend analysis is also called: (Points : 2)

Financial analysis

Ratio analysis

Index number trend analysis

Industry analysis

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