Chap016 PDF

Chapter 016, "How Well Am I Doing?
" Financial Statement Analysis
LO1: Trend and common -size analyses
LO2: Ratios for common stockholders
LO3: Ratios for short -term creditors
LO4: Ratios for long -term creditors
Professional Exam Adapted

Difficulty
Question Type ID Origin CMA/CPA origin

1 T/F M x 2/e:16-4 Authors
2 T/F E x 6/e:18-8 Authors
3 T/F E x New-1997B E.N.
4 T/F M x New-1997D E.N.
5 T/F E x New-1997E E.N.
14 T/F H x 8/e:AltTB18-07 David Keyes
16 T/F H x New-6 E.N.
Conceptual
17 M/C E x 6/e:18-16 Authors
Conceptual
18 M/C M x 5/29/94-1 Authors
16-1
Chapter 016, "How Well Am I Doing?" Financial Statement Analysis
Conceptual
19 M/C M x 8/e:AltTB18-19 David Keyes
CMA, 12/93,
Conceptual Part 2, Question
20 M/C M x CMA CMA, 12/93, Part 2, Question 18 CMA 18
Conceptual
21 M/C M x 9eLD:CH18Q3 Larry Deppe
Conceptual
22 M/C M x 9eLD:CH18Q5 Larry Deppe
Conceptual
23 M/C M x CMA 4/e:17-1081 CMA CMA, ???
Conceptual
24 M/C M x 4/e:17-1054 Authors
CMA, 12/94,
Conceptual Part 1, Question
25 M/C H x CMA CMA, 12/94, Part 1, Question 15 CMA 15
Conceptual
26 M/C M x CMA 3/e:17-29 CMA CMA, ???
Conceptual
27 M/C H x 5/e:17-19 Authors
Conceptual
Conceptual
Conceptual
Conceptual
Conceptual
Conceptual
33 M/C M x 8/e:AltTB18-12 David Keyes
34 M/C E x 10/31/2004 Single MC A3 E.N.
35 M/C E x 12/26/95,C2 E.N.
37 M/C M x 12/26/95,A2 E.N.
16-2

41 M/C M x 12/26/95,B2 E.N.
44 M/C E x 10/31/2004 Single MC B3 E.N.
45 M/C E x 10/31/2004 Single MC C3 E.N.
46 M/C E x 10/31/2004 Single MC D3 E.N.
47 M/C E x 10/31/2004 Single MC E3 E.N.
48 M/C E x 10/31/2004 Single MC F3 E.N.
49 M/C E x 10/31/2004 Single MC G3 E.N.
50 M/C E x 10/31/2004 Single MC H3 E.N.
51 M/C H x x 4/e:17-1069 Authors
CMA, 12/93,
Part 2, Question
53 M/C M x 12/26/95,D2 E.N.
CMA, 12/93,
Part 1, Question
CMA, 12/92,
Part 1, Question
57 M/C E x 12/26/95,E2 E.N.
58 M/C E x 12/26/95,F2 E.N.
59 M/C E x 12/26/95,G2 E.N.
60 M/C E x 12/27/95,H2 E.N.
61 M/C E x 12/27/95,I2 E.N.
62 M/C E x 11/1/2004 Single MC I3 E.N.
63 M/C E x 11/1/2004 Single MC J3 E.N.
64 M/C E x 11/1/2004 Single MC K3 E.N.
65 M/C E x 11/1/2004 Single MC L3 E.N.
66 M/C E x 11/1/2004 Single MC M3 E.N.
67 M/C E x 11/1/2004 Single MC N3 E.N.
68 M/C E x 11/1/2004 Single MC O3 E.N.
16-3
69 M/C E x 12/27/95,J2 E.N.

71 M/C E x 12/27/95,K2 E.N.
72 M/C E x 11/1/2004 Single MC P3 E.N.
73 M/C E x 11/1/2004 Single MC Q3 E.N.
16-
1 74-90 Multipart M/C M x x x x 10/30/2004 Multi MC A3 E.N.
16-
2 91-98 Multipart M/C M x x 10/30/2004 Multi MC B3 E.N.
16- 99- E-
3 102 Multipart M/C M x x 5/e:17-20 to 23 Authors
16- 103-
4 109 Multipart M/C M x x x 1/5/96,O3 E.N.
16- 110- CMA, 6/93, Part 2, Questions 1- CMA, 6/93, Part
5 114 Multipart M/C M x x CMA 6 CMA 2, Questions 1-6
16- 115-
6 121 Multipart M/C M x 1/4/96,L3 E.N.
CMA, 6/95, Part
16- 122- CMA, 6/95, Part 1, Questions 3 1, Questions 3 &
7 123 Multipart M/C H x CMA &4 CMA 4
16- 124-
8 125 Multipart M/C M x 8/e:AltTB 18-23 to 24 David Keyes
16- 126-
9 132 Multipart M/C M x 10/30/2004 Multi MC C3 E.N.
16- 133-
10 139 Multipart M/C M x 10/30/2004 Multi MC D3 E.N.
16- 140-
11 146 Multipart M/C M x 1/4/96,M3 E.N.
16- 147- M- CMA, 6/95, Part 2, Questions 1- CMA, 6/95, Part
12 149 Multipart M/C H x CMA 3 CMA 2, Questions 1-3
16- 150-
13 156 Multipart M/C M x 10/30/2004 Multi MC E3 E.N.
16- 157-
14 163 Multipart M/C E x 10/30/2004 Multi MC F3 E.N.
16- 164-
15 168 Multipart M/C E x 10/30/2004 Multi MC G3 E.N.
16- 169-
16 173 Multipart M/C E x 10/30/2004 Multi MC H3 E.N.
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16- 174-
17 175 Multipart M/C M x 1/4/96,N3 E.N.
16- 176-
18 177 Multipart M/C M x 10/30/2004 Multi MC I3 E.N.
16- 178-
19 179 Multipart M/C E x 10/30/2004 Multi MC J3 E.N.
180 Problem M x x x x 10/30/2004 Problem A3 E.N.
181 Problem M x x 10/30/2004 Problem B3 E.N.
182 Problem E x 10/31/2004 Problem I3 E.N.
183 Problem M x x x 1/6/96,P9 E.N.
184 Problem M x x x 2/e:16-1 Authors
CMA, 6/94, Part
185 Problem H x x x CMA CMA, 6/94, Part 2, Question 5 CMA 2, Question 5
186 Problem M x 1/6/96,Q4 E.N.
187 Problem M x 10/30/2004 Problem C3 E.N.
188 Problem E x 10/30/2004 Problem D3 E.N.
189 Problem E x 10/31/2004 Problem J3 E.N.
190 Problem E x 10/31/2004 Problem K3 E.N.
191 Problem E x 10/31/2004 Problem L3 E.N.
192 Problem E x 10/31/2004 Problem M3 E.N.
193 Problem E x 10/31/2004 Problem N3 E.N.
194 Problem E x 10/31/2004 Problem O3 E.N.
195 Problem E x 10/31/2004 Problem P3 E.N.
196 Problem M x x 1/ 6/96,R4 E.N.
197 Problem M x 10/30/2004 Problem E3 E.N.
198 Problem E x 10/30/2004 Problem F3 E.N.
199 Problem E x 11/1/2004 Problem Q3 E.N.
200 Problem E x 11/.1/2004 Problem R3 E.N.
201 Problem E x 11/1/2004 Problem S3 E.N.
202 Problem E x 11/1/2004 Problem T3 E.N.
203 Problem E x 11/1/2004 Problem U3 E.N.
204 Problem E x 11/1/2004 Problem V3 E.N.
205 Problem E x 11/1/2004 Problem W3 E.N.
206 Problem M x 10/30/2004 Problem G3 E.N.
207 Problem E x 10/30/2004 Problem H3 E.N.
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208 Problem E x 11/1/2004 Problem X3 E.N.

209 Problem E x 11/1/2004 Problem Y3 E.N.
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True / False Questions
1. In determining whether a company's financial condition is improving or deteriorating over

time, vertical analysis of financial statement data would be more useful than horizontal
analysis.
True False
2. Trend percentages state several years' financial data in terms of a base year. For example,
sales for every year would be stated as a percentage of the sales in the base year.
True False
3. The gross margin percentage is computed taking the difference between sales and cost of
goods and then dividing the result by sales.
True False
4. The gross margin percentage is computed by dividing net income before interest and taxes
by sales.
True False
5. The price-earnings ratio is determined by dividing the price of a product by its profit
margin.
True False
6. The price-earnings ratio is computed by dividing the market price per share by the current
earnings per share.
True False
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7. When computing the return on total assets, the after-tax effect of interest expense must be
subtracted from net income.
True False
8. If the assets in which funds are invested have a rate of return lower than the fixed rate of
return paid to the supplier of the funds, then financial leverage is positive.
True False
9. If the market value of a share of stock is greater than its book value, the stock is probably
overpriced.
True False
10. Assuming that a company has a current ratio greater than 1.0, repaying a short-term note
payable will increase the current ratio.
True False
11. The acid-test ratio is a test of the quality of accounts receivable--in other words, whether
they are likely to be collected.
True False
12. When computing the acid-test ratio, prepaid expenses are ignored.
True False
13. Only credit sales (i.e., sales on account) are included in the computation of the accounts
receivable turnover.
True False
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14. Net operating income will always increase when a company increases its accounts
True False
15. The inventory turnover ratio is equal to the average inventory balance divided by the cost
of goods sold.
True False
16. Working capital equals current assets, plus noncurrent liabilities and stockholders' equity,
less total assets.
True False
Multiple Choice Questions
17. Horizontal analysis of financial statements is accomplished through:

A. placing statement items on an after-tax basis.
B. common-size statements.
C. computing both earnings per share and the price-earnings ratio.
D. trend percentages.
18. Earnings per share of common stock will immediately increase as a result of:
A. the sale of additional shares of common stock by the company.
B. an increase in the dividends paid to common stockholders by the company.
C. an increase in the company's net income.
D. the issuance of bonds by the company to finance construction of new buildings.
16-9
19. What effect will a year-end increase in the market price of a corporation's common stock
have on the following ratios?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
20. An increase in the market price of a company's common stock will immediately affect its:
A. dividend yield ratio.
B. debt-to-equity ratio.
C. earnings per share of common stock.
D. dividend payout ratio.
21. Which of the following is true regarding the calculation of return on total assets?
A. The numerator of the ratio consists only of net income.
B. The denominator of the ratio consists of the balance of total assets at the end of the period
under consideration.
C. The numerator of the ratio consists of net income plus interest expense times the tax rate.
D. The numerator of the ratio consists of net income plus interest expense times one minus the
tax rate.
22. If a company's bonds bear an interest rate of 8%, the tax rate is 30%, and the company's
assets are generating an after-tax return of 7%, then the leverage would be:
A. positive.
B. negative.
C. neither positive or negative.
D. impossible to determine without knowing the return on common stockholders' equity.
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23. A company's current ratio and acid-test ratios are both greater than 1. If obsolete inventory
is written off, this would:
A. decrease the acid-test ratio.
B. increase the acid-test ratio.
C. increase net working capital.
D. decrease the current ratio.
24. If a company converts a short-term note payable into a long-term note payable, this
transaction would:
A. decrease working capital and increase the current ratio.
B. decrease working capital and decrease the current ratio.
C. decrease the current ratio and decrease the acid-test ratio.
D. increase working capital and increase the current ratio.
25. Which one of the following would increase the working capital of a company?
A. Cash payment of payroll taxes payable.
B. Refinancing a short-term note payable with a two year note payable.
C. Cash collection of accounts receivable.
D. Payment of a 20-year mortgage payable with cash.
26. If a company has a high current ratio but a low acid-test ratio, one can conclude that:
A. the company has a large outstanding accounts receivable balance.
B. the company has a large investment in inventory.
C. the company has a large amount of current liabilities.
D. the company's financial leverage is very high.
27. Desktop Co. presently has a current ratio of 1.2 and an acid-test ratio of 0.8. Prepaying
next year's office rent of $50,000 will:
A. have no effect on either the company's current ratio or its acid-test ratio.
B. have no effect on the company's current ratio but will decrease its acid-test ratio.
C. decrease the company's current ratio and decrease its acid-test ratio.
D. increase the company's current ratio and increase its acid-test ratio.
16-11
28. The Miller Company paid off some of its accounts payable using cash. The company's
current ratio is greater than 1. The company's current ratio would:
A. increase.
B. decrease.
C. remain unchanged.
D. impossible to determine from the information given.
29. Rahner Company has a current ratio of 1.75. This ratio will decrease if Rahner Company:
A. borrows cash using a six-month note.
B. pays the taxes payable which have been a current liability.
C. pays the following month's rent on the last day of the year.
D. sells inventory for more than their cost.
30. VIM Company purchased $100,000 in inventory from its suppliers on credit terms. The
company's acid-test ratio would most likely:
A. increase.
B. decrease.
C. be unchanged.
D. impossible to determine without more information.
31. Which of the following accounts would be included in the calculation of the acid-test
ratio?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
16-12
32. Allen Company's average collection period for accounts receivable was 40 days last year,
but increased to 60 days this year. Which of the following would most likely account for this
change?
A. a decrease in accounts receivable relative to sales.
B. a decrease in sales.
C. a relaxation of credit policies.
D. an increase in sales.
33. Which of the following would cause a corporation's inventory turnover ratio to increase?
A. an increase in the accounts receivable turnover.
B. an increase in sales price per unit without a reduction in the number of units sold.
C. a switch from the immediate cash payment of inventory purchases to the credit purchase of
inventory with payment due in 60 days (sales are unaffected).
D. none of these.
34. Litten Corporation's most recent income statement appears below:
The gross margin percentage is closest to:

A. 92.0%
B. 416.5%
C. 24.0%
D. 47.9%
16-13
35. Craston Company's net income last year was $70,000. The company paid preferred
dividends of $10,000 and its average common stockholders' equity was $480,000. The
company's return on common stockholders' equity for the year was closest to:
A. 12.5%
B. 14.6%
C. 16.7%
D. 2.1%
36. Fulton Company's price-earnings ratio is 8.0 and the market price of a share of common
stock is $32. The company has 3,000 shares of preferred stock outstanding with each share
receiving a dividend of $3 per share. The earnings per share of common stock is:
A. $10
B. $7
C. $4
D. $3
37. Arston Company's net income last year was $300,000. The company has 150,000 shares
of common stock and 60,000 shares of preferred stock outstanding. There was no change in
the number of common or preferred shares outstanding during the year. The company
declared and paid dividends last year of $1.50 per share on the common stock and $0.60 per
share on the preferred stock. The earnings per share of common stock is closest to:
A. $2.00
B. $1.76
C. $0.50
D. $2.24
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38. The following data have been taken from your company's financial records for the current
year:
The price-earnings ratio is:

A. 1.67
B. 15.0
C. 9.0
D. 7.0
39. The Herald Company has 50,000 shares of common stock outstanding. Earnings per share
of common stock for the year is $15.00. The dividend paid to the preferred stockholders
during the year was $2.00 per share. Common stockholders received dividends totaling
$150,000. The dividend payout ratio for the year was closest to:
A. 38.4%
B. 33.3%
C. 23.1%
D. 20.0%
40. Information concerning the common stock of Morris Company as of the end of the
company's fiscal year is presented below.
The dividend yield ratio is closest to:

A. 50.0%
B. 33.3%
C. 120.0%
D. 11.1%
16-15
41. Bracken Company's net income last year was $85,000 and its interest expense was
$10,000. Total assets at the beginning of the year were $660,000 and total assets at the end of
the year were $600,000. The company's income tax rate was 30%. The company's return on
total assets for the year was closest to:
A. 14.6%
B. 14.0%
C. 13.5%
D. 15.1%
42. The total assets of the Philbin Company on January 1 were $2.3 million and on December
31 were $2.5 million. Net income was $188,000. Dividends totaled $75,000, interest expense
totaled $70,000, and the tax rate was 30%. The return on total assets was closest to:
A. 9.5%
B. 6.8%
C. 9.9%
D. 10.8%
43. The following account balances have been provided for the end of the most recent year:
The book value per share is:

A. $28
B. $25
C. $36
D. $34
16-16
44. Wernett Corporation's net income for the most recent year was $1,509,000. A total of
200,000 shares of common stock and 100,000 shares of preferred stock were outstanding
throughout the year. Dividends on common stock were $4.95 per share and dividends on
preferred stock were $1.35 per share. The earnings per share of common stock is closest to:
A. $1.92
B. $7.55
C. $6.87
D. $2.60
45. Leonhardt Corporation's net income last year was $3,800,000. The dividend on common
stock was $2.00 per share and the dividend on preferred stock was $1.80 per share. The
market price of common stock at the end of the year was $53.40 per share. Throughout the
year, 500,000 shares of common stock and 100,000 shares of preferred stock were
outstanding. The price-earnings ratio is closest to:
A. 9.54
B. 7.03
C. 7.38
D. 10.19
46. Iffert Corporation's net income last year was $4,040,000. The dividend on common stock
was $6.40 per share and the dividend on preferred stock was $2.30 per share. The market
price of common stock at the end of the year was $43.30 per share. Throughout the year,
300,000 shares of common stock and 100,000 shares of preferred stock were outstanding. The
dividend payout ratio is closest to:
A. 0.50
B. 0.91
C. 1.02
D. 0.48
47. Last year, Bartberger Corporation's dividend on common stock was $10.20 per share and
the dividend on preferred stock was $3.60 per share. The market price of common stock at the
end of the year was $51.70 per share. The dividend yield ratio is closest to:
A. 0.74
B. 0.07
C. 0.20
D. 0.27
16-17
48. Montgomery Corporation's most recent income statement appears below:
The beginning balance of total assets was $720,000 and the ending balance was $730,000.
The return on total assets is closest to:
A. 17.4%
B. 21.2%
C. 24.8%
D. 30.3%
49. Excerpts from Melby Corporation's most recent balance sheet appear below:
Net income for Year 2 was $94,000. Dividends on common stock were $33,000 in total and
dividends on preferred stock were $11,000 in total. The return on common stockholders'
equity for Year 2 is closest to:
A. 7.8%
B. 7.4%
C. 4.8%
D. 8.8%
16-18
50. Data from Murrish Corporation's most recent balance sheet appear below:
A total of 200,000 shares of common stock and 40,000 shares of preferred stock were
outstanding at the end of the year. The book value per share is closest to:
A. $5.00
B. $5.70
C. $2.65
D. $4.70
51. Centerville Company's debt-to-equity ratio is 0.60 Total assets are $320,000, current
assets are $170,000 and working capital is $80,000. Centerville's long-term liabilities must
be:
A. $30,000
B. $80,000
C. $90,000
D. $120,000
52. Selected data from Sheridan Corporation's year-end financial statements are presented
below. The difference between average and ending inventory is immaterial.
Sheridan's sales for the year were:

A. $800,000
B. $480,000
C. $1,200,000
D. $240,000
16-19
53. Draper Company's working capital is $12,000 and its current liabilities are $71,000. The
company's current ratio is closest to:
A. 0.83
B. 1.17
C. 6.92
D. 0.17
54. Starrs Company has current assets of $300,000 and current liabilities of $200,000. Which
of the following transactions would increase its working capital?
A. Prepayment of $50,000 of next year's rent
B. Refinancing $50,000 of short-term debt with long-term debt
C. Acquisition of land valued at $50,000 by issuing new common stock
D. Purchase of $50,000 of marketable securities for cash
55. Harwichport Company has a current ratio of 3.5 and an acid-test ratio of 2.8. Current
assets equal $175,000 of which $5,000 consists of prepaid expenses. The remainder of current
assets consists of cash, accounts receivable, marketable securities, and inventory. Harwichport
Company's inventory must be:
A. $30,000
B. $40,000
C. $50,000
D. $35,000
56. Marcy Corporation's current ratio is currently 1.75. The firm's current ratio cannot fall
below 1.5 without violating agreements with its bondholders. If current liabilities are
presently $250 million, the maximum new short-term debt that can be issued to finance an
equivalent amount of inventory expansion is:
A. $41.67 million
B. $375.00 million
C. $125.00 million
D. $62.50 million
16-20
57. Eradicate Company has $16,000 in cash, $8,000 in marketable securities, $29,000 in
account receivable, $30,000 in inventories, and $34,000 in current liabilities. The company's
current assets consist of cash, marketable securities, accounts receivable, and inventory. The
company's acid-test ratio is closest to:
A. 0.85
B. 2.44
C. 1.56
D. 1.32
58. Frawner Company had $140,000 in sales on account last year. The beginning accounts
receivable balance was $12,000 and the ending accounts receivable balance was $10,000. The
company's accounts receivable turnover was closest to:
A. 11.67
B. 6.36
C. 14.00
D. 12.73
59. Grast Company had $170,000 in sales on account last year. The beginning accounts
company's average collection period was closest to:
A. 32.21 days
B. 30.06 days
C. 64.41 days
D. 34.35 days
60. Harrison Company, a retailer, had cost of goods sold of $180,000 last year. The beginning
inventory balance was $26,000 and the ending inventory balance was $24,000. The
company's inventory turnover was closest to:
A. 7.20
B. 6.92
C. 3.60
D. 7.50
16-21
61. Irawan Company, a retailer, had cost of goods sold of $200,000 last year. The beginning
company's average sale period was closest to:
A. 41.98 days
B. 83.95 days
C. 43.80 days
D. 40.15 days
62. Naser Corporation's total current assets are $390,000, its noncurrent assets are $500,000,
its total current liabilities are $330,000, its long-term liabilities are $370,000, and its
stockholders' equity is $190,000. Working capital is:
A. $130,000
B. $60,000
C. $190,000
D. $390,000
63. Cintron Corporation's total current assets are $370,000, its noncurrent assets are $740,000,
stockholders' equity is $380,000. The current ratio is closest to:
A. 0.81
B. 0.70
C. 0.50
D. 1.23
16-22
64. Data from Sawin Corporation's most recent balance sheet appear below:
The company's acid-test ratio is closest to:

A. 0.12
B. 0.39
C. 0.70
D. 0.87
65. Dondero Corporation has provided the following data:
The accounts receivable turnover for this year is closest to:

A. 1.02
B. 0.98
C. 6.62
D. 6.70
16-23
66. Data from Alf Corporation's most recent balance sheet and income statement appear
below:
The average collection period for this year is closest to:

A. 78.5 days
B. 74.3 days
C. 40.6 days
D. 36.2 days
67. Olea Corporation has provided the following data:
The inventory turnover for this year is closest to:

A. 2.50
B. 1.08
C. 0.92
D. 2.41
16-24
68. Data from Waisner Corporation's most recent balance sheet and income statement appear
below:
The average sale period for this year is closest to:

A. 134.7 days
B. 15.2 days
C. 14.0 days
D. 137.7 days
69. Last year Jack Company had a net income of $270,000, income tax expense of $50,000,
and interest expense of $20,000. The company's times interest earned was closest to:
A. 17.00
B. 10.00
C. 13.50
D. 14.50
70. The times interest earned ratio of McHugh Company is 4.5. The interest expense for the
year was $20,000, and the company's tax rate is 40%. The company's net income is:
A. $22,000
B. $42,000
C. $54,000
D. $66,000
71. Kramer Company has total assets of $180,000 and total liabilities of $60,000. The
company's debt-to-equity ratio is closest to:
A. 0.25
B. 0.33
C. 0.50
D. 0.67
16-25
72. Pauk Corporation has provided the following data from its most recent income statement:
The times interest earned ratio is closest to:

A. 2.49
B. 3.55
C. 1.03
D. 1.49
73. Biancuzzo Corporation has provided the following data from its most recent balance
sheet:
The debt-to-equity ratio is closest to:

A. 5.60
B. 0.85
C. 6.60
D. 0.18
16-26
Lesmerises Corporation's most recent balance sheet and income statement appear below:
16-27
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred
stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $2.85
per share.
74. The gross margin percentage for Year 2 is closest to:

A. 53.4%
B. 671.4%
C. 34.8%
D. 14.9%
75. The earnings per share of common stock for Year 2 is closest to:
A. $0.69
B. $0.35
C. $0.30
D. $0.50
76. The price-earnings ratio for Year 2 is closest to:

A. 5.70
B. 8.14
C. 4.13
D. 9.50
77. The dividend payout ratio for Year 2 is closest to:

A. 66.7%
B. 33.3%
C. 83.3%
D. 57.1%
16-28
78. The dividend yield ratio for Year 2 is closest to:

A. 1.75%
B. 7.02%
C. 80.00%
D. 8.77%
79. The return on total assets for Year 2 is closest to:

A. 4.27%
B. 5.85%
C. 5.83%
D. 4.26%
80. The return on common stockholders' equity for Year 2 is closest to:
A. 5.94%
B. 7.69%
C. 6.59%
D. 6.93%
81. The book value per share at the end of Year 2 is closest to:
A. $0.30
B. $4.60
C. $5.10
D. $8.20
82. The working capital at the end of Year 2 is:

A. $1,020 thousand
B. $280 thousand
C. $650 thousand
D. $990 thousand
16-29
83. The current ratio at the end of Year 2 is closest to:

A. 0.95
B. 0.38
C. 0.40
D. 1.76
84. The acid-test ratio at the end of Year 2 is closest to:

A. 1.76
B. 1.24
C. 1.05
D. 1.41
85. The accounts receivable turnover for Year 2 is closest to:

A. 6.14
B. 5.74
C. 0.88
D. 1.14
86. The average collection period for Year 2 is closest to:

A. 1.1 days
B. 0.9 days
C. 63.6 days
D. 59.4 days
87. The inventory turnover for Year 2 is closest to:

A. 0.87
B. 6.77
C. 6.29
D. 1.15
16-30
88. The average sale period for Year 2 is closest to:

A. 35.1 days
B. 237.9 days
C. 58.0 days
D. 53.9 days
89. The times interest earned for Year 2 is closest to:

A. 5.29
B. 2.70
C. 1.89
D. 3.70
90. The debt-to-equity ratio at the end of Year 2 is closest to:

A. 0.67
B. 0.61
C. 0.34
D. 0.25
16-31
Guynn Corporation's most recent balance sheet and income statement appear below:
16-32
per share.

A. 1054.5%
B. 45.3%
C. 82.9%
D. 9.5%
A. $0.79
B. $0.50
C. $1.14
D. $0.55

A. 12.82
B. 8.92
C. 6.18
D. 14.10
16-33

A. 20.0%
B. 30.0%
C. 1000.0%
D. 18.2%

A. 2.13%
B. 0.71%
C. 66.67%
D. 1.42%

A. 5.56%
B. 5.70%
C. 3.85%
D. 3.94%
A. 7.33%
B. 6.67%
C. 5.88%
D. 6.47%
A. $8.70
B. $0.50
C. $7.70
D. $14.30
16-34
Selected financial data (in thousands of dollars) for Barnstable Company appear below:
99. For Year 2, the gross margin as a percentage of sales was:

A. 5%
B. 60%
C. 10%
D. 40%
100. For Year 2, the net income before taxes as a percentage of sales was:
A. 10%
B. 3%
C. 8%
D. 5%
101. For Year 2, the net operating income as a percentage of sales was:
A. 70%
B. 8%
C. 10%
D. 40%
102. Between Year 1 and Year 2, the times interest earned ratio:
A. increased
B. decreased
C. remained the same
D. cannot be determined from the data provided
16-35
Financial statements for Oram Company appear below:
16-36
Dividends during Year 2 totaled $161 thousand, of which $10 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2 was $610.
103. Oram Company's earnings per share of common stock for Year 2 was closest to:
A. $36.38
B. $4.28
C. $37.63
D. $53.75
104. Oram Company's dividend yield ratio on December 31, Year 2 was closest to:
A. 2.9%
B. 3.3%
C. 0.4%
D. 3.1%
105. Oram Company's return on total assets for Year 2 was closest to:
A. 12.1%
B. 13.3%
C. 14.6%
D. 13.9%
16-37
106. Oram Company's current ratio at the end of Year 2 was closest to:
A. 1.24
B. 0.37
C. 1.20
D. 0.47
107. Oram Company's accounts receivable turnover for Year 2 was closest to:
A. 22.6
B. 15.8
C. 14.9
D. 10.4
108. Oram Company's average sale period for Year 2 was closest to:
A. 23.1 days
B. 16.1 days
C. 35.1 days
D. 24.6 days
109. Oram Company's times interest earned for Year 2 was closest to:
A. 10.8
B. 11.8
C. 19.5
D. 7.5
16-38
Lisa Inc.'s balance sheet appears below:
The company's sales for the year were $300 thousand, its cost of goods sold was $220
thousand, and its net income was $35 thousand. All sales were on credit. Preferred dividends
for the year were $5 thousand.
16-39
110. Lisa Inc.'s acid-test ratio at December 31, Year 2, was closest to:
A. 0.6
B. 1.1
C. 1.8
D. 2.0
111. Lisa Inc.'s accounts receivable turnover for Year 2 was closest to:
A. 4.9
B. 5.9
C. 6.7
D. 8.0
112. Lisa Inc.'s inventory turnover for Year 2 was closest to:
A. 3.7
B. 4.0
C. 4.4
D. 5.0
113. Lisa Inc.'s book value per share of common stock at December 31, Year 2, was closest
to:
A. $10.00
B. $11.25
C. $19.33
D. $18.33
114. Lisa Inc.'s return on common stockholders' equity for Year 2 was closest to:
A. 7.8%
B. 10.6%
C. 10.9%
D. 12.4%
16-40
Financial statements for Larkins Company appear below:
16-41
115. Larkins Company's earnings per share of common stock for Year 2 was closest to:
A. $25.00
B. $17.50
C. $7.21
D. $16.83
116. Larkins Company's price-earnings ratio on December 31, Year 2 was closest to:
A. 8.91
B. 8.57
C. 20.79
D. 6.00
117. Larkins Company's dividend payout ratio for Year 2 was closest to:
A. 42.9%
B. 24.6%
C. 40.6%
D. 14.8%
16-42
118. Larkins Company's dividend yield ratio on December 31, Year 2 was closest to:
A. 4.6%
B. 5.0%
C. 2.1%
D. 4.1%
119. Larkins Company's return on total assets for Year 2 was closest to:
A. 13.6%
B. 16.0%
C. 15.3%
D. 17.0%
120. Larkins Company's return on common stockholders' equity for Year 2 was closest to:
A. 23.5%
B. 25.9%
C. 26.9%
D. 24.4%
121. Larkins Company's book value per share at the end of Year 2 was closest to:
A. $10.00
B. $23.33
C. $70.00
D. $76.67
16-43
The Dawson Corporation projects the following for the upcoming year:
122. The expected dividend per share of common stock is:

A. $2.10
B. $2.70
C. $1.80
D. $3.90
123. If Dawson Corporation's common stock has a price-earnings ratio of eight, the market
price per share (to the nearest dollar) would be:
A. $125
B. $56
C. $72
D. $68
16-44
The following information relates to Poblano Company for last year:
124. What is Poblano's price-earnings ratio for last year?

A. 8
B. 10
C. 12.5
D. 15.625
125. What is Poblano's dividend yield ratio for last year?

A. 1.6%
B. 2.5%
C. 6.4%
D. 10.0%
16-45
Dadisman Corporation's most recent balance sheet and income statement appear below:
16-46
per share.
A. $1.25
B. $0.70
C. $0.50
D. $1.00

A. 13.50
B. 5.40
C. 9.64
D. 6.75

A. 42.9%
B. 100.0%
C. 60.0%
D. 2,000.0%

A. 2.97%
B. 4.44%
C. 60.00%
D. 7.41%

A. 4.64%
B. 4.61%
C. 5.76%
D. 5.79%
16-47
A. 7.95%
B. 4.63%
C. 6.48%
D. 5.68%
A. $8.90
B. $0.50
C. $15.20
D. $10.90
16-48
Excerpts from Stys Corporation's most recent balance sheet and income statement appear
below:
per share.
A. $1.10
B. $1.57
C. $1.85
D. $1.00
16-49

A. 5.22
B. 7.45
C. 8.20
D. 4.43

A. 60.0%
B. 1000.0%
C. 45.5%
D. 50.0%

A. 6.10%
B. 83.33%
C. 7.32%
D. 1.22%

A. 8.15%
B. 9.60%
C. 9.67%
D. 8.21%
A. 13.02%
B. 11.83%
C. 13.42%
D. 14.77%
16-50
A. $8.70
B. $13.50
C. $1.00
D. $7.70
16-51
Financial statements for Marcalo Company appear below:
16-52
140. Marcalo Company's working capital (in thousands of dollars) at the end of Year 2 was
closest to:
A. $220
B. $580
C. $360
D. $1,580
141. Marcalo Company's current ratio at the end of Year 2 was closest to:
A. 0.42
B. 0.40
C. 1.24
D. 1.61
142. Marcalo Company's acid-test ratio at the end of Year 2 was closest to:
A. 1.08
B. 2.05
C. 0.49
D. 0.32
16-53
143. Marcalo Company's accounts receivable turnover for Year 2 was closest to:
A. 12.4
B. 12.2
C. 8.5
D. 17.8
144. Marcalo Company's average collection period for Year 2 was closest to:
A. 20.6 days
B. 29.4 days
C. 30.0 days
D. 42.9 days
145. Marcalo Company's inventory turnover for Year 2 was closest to:
A. 12.4
B. 12.2
C. 17.8
D. 8.5
146. Marcalo Company's average sale period for Year 2 was closest to:
A. 20.6 days
B. 29.4 days
C. 30.0 days
D. 42.9 days
16-54
The following financial data have been taken from the records of CPZ Enterprises.
147. The current ratio for CPZ Enterprises is:

A. 1.68
B. 2.14
C. 5.00
D. 5.29
148. What is the company's acid-test ratio?

A. 0.68
B. 1.68
C. 2.14
D. 2.31
149. What will happen to the ratios below if CPZ Enterprises uses cash to pay 50 percent of
its accounts payable?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
16-55
Mccaughey Corporation's most recent balance sheet and income statement appear below:
16-56

A. $80 thousand
B. $740 thousand
C. $780 thousand
D. $340 thousand

A. 0.34
B. 0.30
C. 1.31
D. 1.12

A. 1.31
B. 0.92
C. 0.88
D. 1.04

A. 1.15
B. 9.62
C. 0.87
D. 8.93

A. 1.2 days
B. 0.9 days
C. 40.9 days
D. 37.9 days
16-57

A. 1.20
B. 0.83
C. 6.64
D. 7.30

A. 55.0 days
B. 50.0 days
C. 29.2 days
D. 213.2 days
Excerpts from Shelton Corporation's most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,320 and the cost of goods sold was $890.

A. $370 thousand
B. $1,010 thousand
C. $910 thousand
D. $680 thousand
16-58

A. 0.43
B. 0.85
C. 2.19
D. 0.36

A. 1.55
B. 2.19
C. 1.81
D. 1.17

A. 5.50
B. 0.92
C. 1.09
D. 5.28

A. 1.1 days
B. 69.1 days
C. 0.9 days
D. 66.4 days

A. 6.59
B. 7.42
C. 1.25
D. 0.80
16-59

A. 246.1 days
B. 49.2 days
C. 55.4 days
D. 33.2 days
Excerpts from Deandrade Corporation's most recent balance sheet appear below:

A. $400
B. $70
C. $750
D. $700

A. 0.35
B. 1.21
C. 1.13
D. 0.39
16-60

A. 0.89
B. 1.21
C. 0.82
D. 0.55

A. 0.80
B. 15.11
C. 17.00
D. 1.25

A. 0.93
B. 6.15
C. 1.08
D. 6.38
Data from Gofman Corporation's most recent balance sheet appear below:
16-61

A. $320
B. $500
C. $1,210
D. $1,070

A. 0.32
B. 0.72
C. 2.78
D. 0.23

A. 1.39
B. 2.78
C. 1.44
D. 0.94

A. 0.9 days
B. 39.3 days
C. 36.5 days
D. 1.2 days

A. 97.3 days
B. 89.2 days
C. 67.4 days
D. 252.7 days
16-62
Financial statements for Nardella Company appear below:
16-63
174. Nardella Company's times interest earned for Year 2 was closest to:
A. 7.8
B. 4.8
C. 12.8
D. 6.8
175. Nardella Company's debt-to-equity ratio at the end of Year 2 was closest to:
A. 0.31
B. 0.23
C. 0.70
D. 0.54
16-64
Juncker Corporation's most recent balance sheet and income statement appear below:
16-65

A. 11.75
B. 16.79
C. 10.75
D. 7.50

A. 0.24
B. 0.05
C. 0.09
D. 0.26
16-66
Data from Karmely Corporation's most recent balance sheet and the company's income
statement appear below:

A. 6.11
B. 7.11
C. 10.16
D. 4.29

A. 0.28
B. 0.77
C. 0.60
D. 0.37
16-67
Essay Questions
180. Shull Corporation's most recent balance sheet and income statement appear below:
16-68
per share.
Required:
Compute the following for Year 2:

a. Gross margin percentage.
b. Earnings per share (of common stock).
c. Price-earnings ratio.
d. Dividend payout ratio.
e. Dividend yield ratio.
f. Return on total assets.
g. Return on common stockholders' equity.
h. Book value per share.
i. Working capital.
j. Current ratio.
k. Acid-test ratio.
l. Accounts receivable turnover.
m. Average collection period.
n. Inventory turnover.
o. Average sale period.
p. Times interest earned.
q. Debt-to-equity ratio.
16-69
181. Walp Corporation's most recent balance sheet and income statement appear below:
16-70
per share.
Required:

16-71
182. Dickey Corporation's most recent income statement appears below:
Required:
Compute the gross margin percentage.
16-72
183. Financial statements for Praven Company appear below:
16-73
Required:

a. Earnings per share of common stock.
b. Price-earnings ratio.
c. Dividend payout ratio.
d. Dividend yield ratio.
e. Return on total assets.
f. Return on common stockholders' equity.
g. Book value per share.
h. Working capital.
i. Current ratio.
j. Acid-test ratio.
k. Accounts receivable turnover.
l. Average collection period.
m. Inventory turnover.
n. Average sale period.
o. Times interest earned.
p. Debt-to-equity ratio.
16-74
184. Condensed financial statements of Miller Company at the beginning and at the end of the
current year are given below:
The company paid total dividends of $15,000 during the year, of which $5,000 were to
preferred stockholders. The market price of a share of common stock at the end of the year
was $30.
Required:
On the basis of the information given above, fill in the blanks with the appropriate figures.
16-75
Example: The current ratio at the end of the current year would be computed by dividing
$270,000 by $100,000
a. The acid-test ratio at the end of the current year would be computed by dividing
_______________ by _________________.
b. The inventory turnover for the year would be computed by dividing _______________ by
_________________.
c. The debt-to-equity ratio at the end of the current year would be computed by dividing
_______________ by _________________.
d. The earnings per share of common stock would be computed by dividing

_______________ by _________________.
e. The accounts receivable turnover for the year would be computed by dividing
_______________ by _________________.
f. The times interest earned for the year would be computed by dividing _______________ by
_________________.
g. The return on common stockholders' equity for the year would be computed by dividing
_______________ by _________________.
h. The dividend yield would be computed by dividing _______________ by

_________________.
16-76
185. Shelzo Inc., a manufacturer of construction equipment is considering the purchase of one
of its suppliers, Raritron Industries. The purchase has been given preliminary approval by
Shelzo's Board of Directors, and several discussions have taken place between the
management of both companies. Raritron has submitted financial data for the past several
years. Shelzo's controller has analyzed Raritron's financial statements and prepared the
following ratio analysis comparing Raritron's performance with the industry averages.
Required:
Using the information provided above for Raritron Industries:

a. 1. Identify the two ratios from the above list that would be of most interest to short-term
creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?
b. 1. Identify the three ratios from the above list that would be of most interest to
stockholders.
Explain what these three ratios measure.
What do these three ratios indicate about Shelzo Inc.?
c. 1. Identify the two ratios from the above list that would be of most interest to long-term
creditors.
16-77
186. Financial statements for Qiang Company appear below:
16-78
Required:

c. Dividend yield ratio.
d. Return on total assets.
e. Return on common stockholders' equity.
f. Book value per share.
16-79
187. Dowlen Corporation's most recent balance sheet and income statement appear below:
16-80
stock totaled $10 thousand. The market price of common stock at the end of Year 2 was
$10.74 per share.
Required:

a. Earnings per share (of common stock).
16-81
188. Tedder Corporation has provided the following financial data (in thousands of dollars):
Net income for Year 2 was $80 thousand. Interest expense was $16 thousand. The tax rate
was 30%. Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2
was $6.79 per share.
Required:

16-82
189. Leckbee Corporation's net income for the most recent year was $3,270,000. A total of
preferred stock were $1.10 per share.
Required:
Compute the earnings per share of common stock. Show your work!
190. Odegaard Corporation's net income last year was $1,811,000. The dividend on common
outstanding.
Required:
Compute the price-earnings ratio. Show your work!
16-83
191. Spina Corporation's net income last year was $5,472,000. The dividend on common
outstanding.
Required:
Compute the dividend payout ratio. Show your work!
192. Last year, Iurato Corporation's dividend on common stock was $8.20 per share and the
dividend on preferred stock was $3.40 per share. The market price of common stock at the
end of the year was $50.70 per share.
Required:
Compute the dividend yield ratio. Show your work!
16-84
193. Petrosino Corporation's most recent income statement appears below:
Required:
Compute the return on total assets. Show your work!
16-85
194. Excerpts from Thi Corporation's most recent balance sheet appear below:
dividends on preferred stock were $23,000 in total.
Required:
Compute the return on common stockholders' equity. Show your work!
16-86
195. Data from Colinger Corporation's most recent balance sheet appear below:
outstanding at the end of the year.
Required:
Compute the book value per share. Show your work!
16-87
196. Financial statements for Raridan Company appear below:
16-88
Required:

a. Current ratio.
b. Acid-test ratio.
c. Average collection period.
d. Inventory turnover.
e. Times interest earned.
f. Debt-to-equity ratio.
16-89
197. Vasconcelos Corporation's most recent balance sheet and income statement appear
below:
16-90
Required:

a. Working capital.
b. Current ratio.
c. Acid-test ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
16-91
198. Excerpts from Dinis Corporation's most recent balance sheet (in thousands of dollars)
appear below:
Sales on account during the year totaled $1,240 thousand. Cost of goods sold was $770
thousand.
Required:

a. Working capital.
b. Current ratio.
c. Acid-test ratio.
16-92
199. Ducey Corporation's total current assets are $250,000, its noncurrent assets are $580,000,
stockholders' equity is $200,000.
Required:
Compute the company's working capital. Show your work!
200. Gattuso Corporation's total current assets are $270,000, its noncurrent assets are
$760,000, its total current liabilities are $130,000, its long-term liabilities are $400,000, and
its stockholders' equity is $500,000.
Required:
Compute the company's current ratio. Show your work!
16-93
201. Data from Panganiban Corporation's most recent balance sheet appear below:
Required:
Compute the company's acid-test ratio. Show your work!
202. Kapinos Corporation has provided the following data:
Required:
Compute the accounts receivable turnover for this year. Show your work!
16-94
203. Data from Shamp Corporation's most recent balance sheet and income statement appear
below:
Required:
Compute the average collection period for this year:
204. Wynkoop Corporation has provided the following data:
Required:
Compute the inventory turnover for this year:
16-95
205. Data from Sligh Corporation's most recent balance sheet and income statement appear
below:
Required:
Compute the average sale period for this year:
16-96
206. Kerson Corporation's most recent balance sheet and income statement appear below:
16-97
Required:

a. Times interest earned.
b. Debt-to-equity ratio.
207. Trusillo Corporation's net operating income last year was $103,000; its interest expense
was $17,000; its total stockholders' equity was $1,260,000; and its total liabilities were
$380,000.
Required:

16-98
208. Authement Corporation has provided the following data from its most recent income
statement:
Required:
Compute the times interest earned ratio. Show your work!
209. Hacking Corporation has provided the following data from its most recent balance sheet:
Required:
Compute the debt-to-equity ratio. Show your work!
16-99
Chapter 016, "How Well Am I Doing?" Financial Statement AnalysisKey
True / False Questions
1. In determining whether a company's financial condition is improving or deteriorating over

time, vertical analysis of financial statement data would be more useful than horizontal
analysis.
FALSE
AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Learning Objective: 1
Level: Medium
2. Trend percentages state several years' financial data in terms of a base year. For example,
sales for every year would be stated as a percentage of the sales in the base year.
TRUE

Level: Easy
3. The gross margin percentage is computed taking the difference between sales and cost of
goods and then dividing the result by sales.
TRUE

Level: Easy
16-100
4. The gross margin percentage is computed by dividing net income before interest and taxes
by sales.
FALSE

Level: Medium
5. The price-earnings ratio is determined by dividing the price of a product by its profit
margin.
FALSE

Level: Easy
6. The price-earnings ratio is computed by dividing the market price per share by the current
earnings per share.
TRUE

Level: Easy
7. When computing the return on total assets, the after-tax effect of interest expense must be
subtracted from net income.
FALSE

Level: Medium
16-101
8. If the assets in which funds are invested have a rate of return lower than the fixed rate of
return paid to the supplier of the funds, then financial leverage is positive.
FALSE

Level: Medium
9. If the market value of a share of stock is greater than its book value, the stock is probably
overpriced.
FALSE

Level: Easy
10. Assuming that a company has a current ratio greater than 1.0, repaying a short-term note
payable will increase the current ratio.
TRUE

Level: Medium
11. The acid-test ratio is a test of the quality of accounts receivable--in other words, whether
they are likely to be collected.
FALSE

Level: Medium
16-102
12. When computing the acid-test ratio, prepaid expenses are ignored.
TRUE

Level: Medium
13. Only credit sales (i.e., sales on account) are included in the computation of the accounts
TRUE

Level: Easy
14. Net operating income will always increase when a company increases its accounts
FALSE

Level: Hard
15. The inventory turnover ratio is equal to the average inventory balance divided by the cost
of goods sold.
FALSE

Level: Easy
16-103
16. Working capital equals current assets, plus noncurrent liabilities and stockholders' equity,
less total assets.
TRUE

Level: Hard
Multiple Choice Questions
17. Horizontal analysis of financial statements is accomplished through:

A. placing statement items on an after-tax basis.
B. common-size statements.
C. computing both earnings per share and the price-earnings ratio.
D. trend percentages.

Level: Easy
18. Earnings per share of common stock will immediately increase as a result of:
A. the sale of additional shares of common stock by the company.
B. an increase in the dividends paid to common stockholders by the company.
C. an increase in the company's net income.
D. the issuance of bonds by the company to finance construction of new buildings.

Level: Medium
16-104
19. What effect will a year-end increase in the market price of a corporation's common stock
have on the following ratios?
A. Choice A
B. Choice B
C. Choice C
D. Choice D

Level: Medium
20. An increase in the market price of a company's common stock will immediately affect its:
A. dividend yield ratio.
B. debt-to-equity ratio.
C. earnings per share of common stock.
D. dividend payout ratio.

Level: Medium
Source: CMA, adapted
16-105
21. Which of the following is true regarding the calculation of return on total assets?
A. The numerator of the ratio consists only of net income.
B. The denominator of the ratio consists of the balance of total assets at the end of the period
under consideration.
C. The numerator of the ratio consists of net income plus interest expense times the tax rate.
D. The numerator of the ratio consists of net income plus interest expense times one minus the
tax rate.

Level: Medium
22. If a company's bonds bear an interest rate of 8%, the tax rate is 30%, and the company's
assets are generating an after-tax return of 7%, then the leverage would be:
A. positive.
B. negative.
C. neither positive or negative.
D. impossible to determine without knowing the return on common stockholders' equity.

Level: Medium
23. A company's current ratio and acid-test ratios are both greater than 1. If obsolete inventory
is written off, this would:
A. decrease the acid-test ratio.
B. increase the acid-test ratio.
C. increase net working capital.
D. decrease the current ratio.

Level: Medium
16-106
24. If a company converts a short-term note payable into a long-term note payable, this
transaction would:
A. decrease working capital and increase the current ratio.
B. decrease working capital and decrease the current ratio.
C. decrease the current ratio and decrease the acid-test ratio.
D. increase working capital and increase the current ratio.

Level: Medium
25. Which one of the following would increase the working capital of a company?
A. Cash payment of payroll taxes payable.
B. Refinancing a short-term note payable with a two year note payable.
C. Cash collection of accounts receivable.
D. Payment of a 20-year mortgage payable with cash.

Level: Hard
26. If a company has a high current ratio but a low acid-test ratio, one can conclude that:
A. the company has a large outstanding accounts receivable balance.
B. the company has a large investment in inventory.
C. the company has a large amount of current liabilities.
D. the company's financial leverage is very high.

Level: Medium
16-107
27. Desktop Co. presently has a current ratio of 1.2 and an acid-test ratio of 0.8. Prepaying
next year's office rent of $50,000 will:
A. have no effect on either the company's current ratio or its acid-test ratio.
B. have no effect on the company's current ratio but will decrease its acid-test ratio.
C. decrease the company's current ratio and decrease its acid-test ratio.
D. increase the company's current ratio and increase its acid-test ratio.

Level: Hard
28. The Miller Company paid off some of its accounts payable using cash. The company's
current ratio is greater than 1. The company's current ratio would:
A. increase.
B. decrease.
C. remain unchanged.
D. impossible to determine from the information given.

Level: Medium
29. Rahner Company has a current ratio of 1.75. This ratio will decrease if Rahner Company:
A. borrows cash using a six-month note.
B. pays the taxes payable which have been a current liability.
C. pays the following month's rent on the last day of the year.
D. sells inventory for more than their cost.

Level: Hard
16-108
30. VIM Company purchased $100,000 in inventory from its suppliers on credit terms. The
company's acid-test ratio would most likely:
A. increase.
B. decrease.
C. be unchanged.
D. impossible to determine without more information.

Level: Medium
31. Which of the following accounts would be included in the calculation of the acid-test
ratio?
A. Choice A
B. Choice B
C. Choice C
D. Choice D

Level: Easy
16-109
32. Allen Company's average collection period for accounts receivable was 40 days last year,
but increased to 60 days this year. Which of the following would most likely account for this
change?
A. a decrease in accounts receivable relative to sales.
B. a decrease in sales.
C. a relaxation of credit policies.
D. an increase in sales.

Level: Medium
33. Which of the following would cause a corporation's inventory turnover ratio to increase?
A. an increase in the accounts receivable turnover.
B. an increase in sales price per unit without a reduction in the number of units sold.
C. a switch from the immediate cash payment of inventory purchases to the credit purchase of
inventory with payment due in 60 days (sales are unaffected).
D. none of these.

Level: Medium
16-110
34. Litten Corporation's most recent income statement appears below:
The gross margin percentage is closest to:

A. 92.0%
B. 416.5%
C. 24.0%
D. 47.9%
Gross margin percentage = Gross margin Sales = $379,000 $791,000 = 47.9%
AACSB: Analytic
Level: Easy
35. Craston Company's net income last year was $70,000. The company paid preferred
dividends of $10,000 and its average common stockholders' equity was $480,000. The
company's return on common stockholders' equity for the year was closest to:
A. 12.5%
B. 14.6%
C. 16.7%
D. 2.1%
Return on common stockholders' equity = (Net income - Preferred dividends) (Average

total stockholders' equity - Average preferred stock) = ($70,000 - $10,000) $480,000 =
$60,000 $480,000 = 12.5%
AACSB: Analytic
Level: Easy
16-111
36. Fulton Company's price-earnings ratio is 8.0 and the market price of a share of common
stock is $32. The company has 3,000 shares of preferred stock outstanding with each share
receiving a dividend of $3 per share. The earnings per share of common stock is:
A. $10
B. $7
C. $4
D. $3
Price-earnings ratio = Market price per share Earnings per share = $32 Earnings per share
=8
Earnings per share = $4
AACSB: Analytic
Level: Hard
37. Arston Company's net income last year was $300,000. The company has 150,000 shares
of common stock and 60,000 shares of preferred stock outstanding. There was no change in
the number of common or preferred shares outstanding during the year. The company
declared and paid dividends last year of $1.50 per share on the common stock and $0.60 per
share on the preferred stock. The earnings per share of common stock is closest to:
A. $2.00
B. $1.76
C. $0.50
D. $2.24
Earnings per share = (Net income - Preferred dividends) Average number of common
shares outstanding = ($300,000 - $36,000*) 150,000 = $264,000 150,000 = $1.76
*60,000 x $0.60 = $36,000
AACSB: Analytic
Level: Medium
16-112
38. The following data have been taken from your company's financial records for the current
year:
The price-earnings ratio is:

A. 1.67
B. 15.0
C. 9.0
D. 7.0
Price-earnings ratio = Market price per share Earnings per share = $90 $10 = 9
AACSB: Analytic
Level: Easy
39. The Herald Company has 50,000 shares of common stock outstanding. Earnings per share
of common stock for the year is $15.00. The dividend paid to the preferred stockholders
during the year was $2.00 per share. Common stockholders received dividends totaling
$150,000. The dividend payout ratio for the year was closest to:
A. 38.4%
B. 33.3%
C. 23.1%
D. 20.0%
Dividend payout ratio = Dividends per share Earnings per share = $3.00* $15.00 = 20%
*$150,000 50,000 = $3.00
AACSB: Analytic
Level: Medium
16-113
40. Information concerning the common stock of Morris Company as of the end of the
company's fiscal year is presented below.
The dividend yield ratio is closest to:

A. 50.0%
B. 33.3%
C. 120.0%
D. 11.1%
Dividend yield ratio = Dividends per share Market price per share = $6.00 $54.00 =
11.1%
AACSB: Analytic
Level: Medium
41. Bracken Company's net income last year was $85,000 and its interest expense was
$10,000. Total assets at the beginning of the year were $660,000 and total assets at the end of
the year were $600,000. The company's income tax rate was 30%. The company's return on
total assets for the year was closest to:
A. 14.6%
B. 14.0%
C. 13.5%
D. 15.1%
Return on total assets = {Net income + [Interest expense x (1 - Tax rate)]} Average total
assets = ($85,000 + $7,000*) $630,000** = $92,000 $630,000** = 14.6%
*$10,000 x (1 - 0.30) = $7,000
**$1,260,000 ($660,000 + $600,000) 2 = $630,000
AACSB: Analytic
Level: Medium
16-114
42. The total assets of the Philbin Company on January 1 were $2.3 million and on December
31 were $2.5 million. Net income was $188,000. Dividends totaled $75,000, interest expense
totaled $70,000, and the tax rate was 30%. The return on total assets was closest to:
A. 9.5%
B. 6.8%
C. 9.9%
D. 10.8%
Return on total assets = {Net income + [Interest expense x (1 - Tax rate)]} Average total
assets = ($188,000 + $49,000*) $2,400,000** = $237,000 $2,400,000** = 9.9%
*$70,000 x (1 - 0.30) = $49,000
**($2,300,000 + $2,500,000) 2 = $4,800,000 2 = $2,400,000
AACSB: Analytic
Level: Medium
43. The following account balances have been provided for the end of the most recent year:
The book value per share is:

A. $28
B. $25
C. $36
D. $34
Book value per share = (Total stockholders' equity - Preferred stock) Number of common
shares outstanding = ($150,000 - $10,000) 5,000 = $140,000 5,000 = $28
AACSB: Analytic
Level: Medium
16-115
44. Wernett Corporation's net income for the most recent year was $1,509,000. A total of
preferred stock were $1.35 per share. The earnings per share of common stock is closest to:
A. $1.92
B. $7.55
C. $6.87
D. $2.60
shares outstanding = ($1,509,000 - $135,000*) 200,000 = $1,374,000 200,000 = $6.87
*100,000 x $1.35 = $135,000
AACSB: Analytic
Level: Easy
45. Leonhardt Corporation's net income last year was $3,800,000. The dividend on common
outstanding. The price-earnings ratio is closest to:
A. 9.54
B. 7.03
C. 7.38
D. 10.19
Price-earnings ratio = Market price per share Earnings per share = $53.40 $7.24* = 7.38
*Earnings per share = (Net income - Preferred dividends) Average number of common
shares outstanding = ($3,800,000 - $180,000**) 500,000 = $3,620,000 500,000 = $7.24
**100,000 x $1.80 = $180,000
AACSB: Analytic
Level: Easy
16-116
46. Iffert Corporation's net income last year was $4,040,000. The dividend on common stock
was $6.40 per share and the dividend on preferred stock was $2.30 per share. The market
price of common stock at the end of the year was $43.30 per share. Throughout the year,
300,000 shares of common stock and 100,000 shares of preferred stock were outstanding. The
dividend payout ratio is closest to:
A. 0.50
B. 0.91
C. 1.02
D. 0.48
Dividend payout ratio = Dividends per share Earnings per share = $6.40 $12.70* = 0.50
shares outstanding = ($4,040,000 - $230,000**) 300,000 = $3,810,000 300,000 = $12.70
**100,000 x $2.30 = $230,000
AACSB: Analytic
Level: Easy
47. Last year, Bartberger Corporation's dividend on common stock was $10.20 per share and
the dividend on preferred stock was $3.60 per share. The market price of common stock at the
end of the year was $51.70 per share. The dividend yield ratio is closest to:
A. 0.74
B. 0.07
C. 0.20
D. 0.27
Dividend yield = Dividends per share Market price per share = $10.20 $51.70 = 0.20
AACSB: Analytic
Level: Easy
16-117
48. Montgomery Corporation's most recent income statement appears below:
The return on total assets is closest to:
A. 17.4%
B. 21.2%
C. 24.8%
D. 30.3%
Return on total assets = {Net income + [Interest expense (1 - Tax rate)]} Average total
assets = ($126,000 + $28,000*) $725,000** = $154,000 $725,000** = 21.2%
*$40,000 x (1 - 0.30) = $28,000
**($720,000 + $730,000) 2 = $1,450,000 2 = $725,000
AACSB: Analytic
Level: Easy
16-118
49. Excerpts from Melby Corporation's most recent balance sheet appear below:
dividends on preferred stock were $11,000 in total. The return on common stockholders'
equity for Year 2 is closest to:
A. 7.8%
B. 7.4%
C. 4.8%
D. 8.8%
Return on common stockholders' equity = (Net income - Preferred dividends) (Average

total stockholders' equity - Average preferred stock) = ($94,000 - $11,000) ($1,265,000* -
$200,000**) = $83,000 $1,065,000 = 7.8%
*(1,240,000 + $1,290,000) 2 = $2,530,000 2 = $1,265,000
**($200,000 + $200,000) 2 = $400,000 2 = $200,000
AACSB: Analytic
Level: Easy
16-119
50. Data from Murrish Corporation's most recent balance sheet appear below:
outstanding at the end of the year. The book value per share is closest to:
A. $5.00
B. $5.70
C. $2.65
D. $4.70
shares outstanding = ($1,140,000 - $200,000) 200,000 = $940,000 200,000 = $4.70
AACSB: Analytic
Level: Easy
16-120
51. Centerville Company's debt-to-equity ratio is 0.60 Total assets are $320,000, current
assets are $170,000 and working capital is $80,000. Centerville's long-term liabilities must
be:
A. $30,000
B. $80,000
C. $90,000
D. $120,000
Given that total assets are $320,000, liabilities and stockholders' equity must also total
$320,000. Working capital is current assets minus current liabilities, knowing that current
assets are $170,000 and working capital is $80,000, current liabilities must be $90,000
($170,000 - $80,000). Long-term liabilities plus stockholders' equity must equal $230,000
($320,000 - $90,000) given that liabilities and stockholders' equity totals $320,000 and we
know that current liabilities are $90,000.
Long-term liabilities = X
Debt-to-equity ratio = Total liabilities Stockholders' equity = ($90,000 + X) ($230,000 -
X) = 0.60
X= $30,000
AACSB: Analytic
Level: Hard
16-121
52. Selected data from Sheridan Corporation's year-end financial statements are presented
below. The difference between average and ending inventory is immaterial.
Sheridan's sales for the year were:

A. $800,000
B. $480,000
C. $1,200,000
D. $240,000
The acid-test ratio is 0.50 lower than the current ratio; the difference in the numerators of the
two ratios is inventory, the current ratio numerator includes inventory whereas the acid-test
ratio numerator doesn't include inventory. The inventory is therefore $60,000 (Inventory
$120,000 = 0.50). The inventory turnover is 8 and is calculated by dividing cost of goods
sold by average inventory; cost of goods sold must be $480,000 (Cost of goods sold
$60,000 = 8). The gross profit percentage is 40% of sales, so cost of goods sold must be
60% of sales, sales are therefore $800,000 (Sales x 0.60 = $480,000).
AACSB: Analytic
Level: Hard
16-122
53. Draper Company's working capital is $12,000 and its current liabilities are $71,000. The
company's current ratio is closest to:
A. 0.83
B. 1.17
C. 6.92
D. 0.17
Working capital = Current assets - Current liabilities

$12,000 = Current assets - $71,000
Current assets = $83,000
Current ratio = Current assets Current liabilities = $83,000 $71,000 = 1.17
AACSB: Analytic
Level: Medium
54. Starrs Company has current assets of $300,000 and current liabilities of $200,000. Which
of the following transactions would increase its working capital?
A. Prepayment of $50,000 of next year's rent
B. Refinancing $50,000 of short-term debt with long-term debt
C. Acquisition of land valued at $50,000 by issuing new common stock
D. Purchase of $50,000 of marketable securities for cash
Transaction B is the only transaction that either increases total current assets or decreases total
current liabilities.
AACSB: Analytic
Level: Hard
16-123
55. Harwichport Company has a current ratio of 3.5 and an acid-test ratio of 2.8. Current
assets equal $175,000 of which $5,000 consists of prepaid expenses. The remainder of current
assets consists of cash, accounts receivable, marketable securities, and inventory. Harwichport
Company's inventory must be:
A. $30,000
B. $40,000
C. $50,000
D. $35,000
Current ratio = Current assets Current liabilities

3.5 = $175,000 Current liabilities
Current liabilities = $50,000
Acid-test ratio = (Cash + Marketable securities + Accounts receivable + Short-term notes
receivable) Current liabilities
2.8 = (Cash + Marketable securities + Accounts receivable + Short-term notes receivable)
$50,000
(Cash + Marketable securities + Accounts receivable + Short-term notes receivable) =
$140,000
The $35,000 ($175,000 - $140,000) difference between current assets and the acid-test ratio
numerator is attributable to inventory and prepaid expenses; the inventory must be $30,000
($35,000 - $5,000) given that prepaid expenses are $5,000.
AACSB: Analytic
Level: Hard
16-124
56. Marcy Corporation's current ratio is currently 1.75. The firm's current ratio cannot fall
below 1.5 without violating agreements with its bondholders. If current liabilities are
presently $250 million, the maximum new short-term debt that can be issued to finance an
equivalent amount of inventory expansion is:
A. $41.67 million
B. $375.00 million
C. $125.00 million
D. $62.50 million
Current ratio = Current assets Current liabilities

1.75 = Current assets $250 million
Current assets = $437.5 million
Current ratio = (Current assets + new short-term debt) (Current liabilities + new short-term
debt)
1.5 = ($437.5 + new short-term debt) ($250 + new short-term debt)
New short-term debt = $125 million
AACSB: Analytic
Level: Hard
57. Eradicate Company has $16,000 in cash, $8,000 in marketable securities, $29,000 in
account receivable, $30,000 in inventories, and $34,000 in current liabilities. The company's
current assets consist of cash, marketable securities, accounts receivable, and inventory. The
company's acid-test ratio is closest to:
A. 0.85
B. 2.44
C. 1.56
D. 1.32

receivable) Current liabilities = ($16,000 + $8,000 + $29,000) $34,000 = $53,000
$34,000 = 1.56
AACSB: Analytic
Level: Easy
16-125
58. Frawner Company had $140,000 in sales on account last year. The beginning accounts
company's accounts receivable turnover was closest to:
A. 11.67
B. 6.36
C. 14.00
D. 12.73
Accounts receivable turnover = Sales on account Average accounts receivable balance =

$140,000 $11,000* = 12.73
*($12,000 + $10,000) 2 = $22,000 2 = $11,000
AACSB: Analytic
Level: Easy
59. Grast Company had $170,000 in sales on account last year. The beginning accounts
company's average collection period was closest to:
A. 32.21 days
B. 30.06 days
C. 64.41 days
D. 34.35 days

$170,000 $15,000* = 11.33
*($14,000 + $16,000) 2 = $30,000 2 = $15,000
Average collection period = 365 days Accounts receivable turnover = 365 days 11.33 =
32.21 days
AACSB: Analytic
Level: Easy
16-126
60. Harrison Company, a retailer, had cost of goods sold of $180,000 last year. The beginning
company's inventory turnover was closest to:
A. 7.20
B. 6.92
C. 3.60
D. 7.50
Inventory turnover = Cost of goods sold Average inventory balance = $180,000 $25,000*
= 7.2
*($26,000 + $24,000) 2 = $50,000 2 = $25,000
AACSB: Analytic
Level: Easy
61. Irawan Company, a retailer, had cost of goods sold of $200,000 last year. The beginning
company's average sale period was closest to:
A. 41.98 days
B. 83.95 days
C. 43.80 days
D. 40.15 days
Inventory turnover = Cost of goods sold Average inventory balance = $200,000 $23,000*
= 8.7
*($24,000 + $22,000) 2 = $46,000 2 = $23,000
Average sale period = 365 days Inventory turnover = 365 days 8.7 = 41.96 days
AACSB: Analytic
Level: Easy
16-127
62. Naser Corporation's total current assets are $390,000, its noncurrent assets are $500,000,
stockholders' equity is $190,000. Working capital is:
A. $130,000
B. $60,000
C. $190,000
D. $390,000
Working Capital = Current assets - Current liabilities = $390,000 - $330,000 = $60,000
AACSB: Analytic
Level: Easy
63. Cintron Corporation's total current assets are $370,000, its noncurrent assets are $740,000,
stockholders' equity is $380,000. The current ratio is closest to:
A. 0.81
B. 0.70
C. 0.50
D. 1.23
AACSB: Analytic
Level: Easy
16-128
64. Data from Sawin Corporation's most recent balance sheet appear below:
The company's acid-test ratio is closest to:

A. 0.12
B. 0.39
C. 0.70
D. 0.87

receivable) Current liabilities = ($12,000 + $27,000 + $31,000) $100,000 = $70,000
$100,000 = 0.70
AACSB: Analytic
Level: Easy
16-129
65. Dondero Corporation has provided the following data:
The accounts receivable turnover for this year is closest to:

A. 1.02
B. 0.98
C. 6.62
D. 6.70

$821,000 $122,500* = 6.70
*($124,000 + $121,000) 2 = $245,000 2 = $122,500
AACSB: Analytic
Level: Easy
16-130
66. Data from Alf Corporation's most recent balance sheet and income statement appear
below:
The average collection period for this year is closest to:

A. 78.5 days
B. 74.3 days
C. 40.6 days
D. 36.2 days

$614,000 $132,000* = 4.65
*($139,000 + $125,000) 2 = $264,000 2 = $132,000
Average collection period = 365 days Accounts receivable turnover = 365 days 4.65 =
78.5 days
AACSB: Analytic
Level: Easy
16-131
67. Olea Corporation has provided the following data:
The inventory turnover for this year is closest to:

A. 2.50
B. 1.08
C. 0.92
D. 2.41
Inventory turnover = Cost of goods sold Average inventory = $407,000 $162,500* = 2.50
*($156,000 + $169,000) 2 = $325,000 2 = $162,500
AACSB: Analytic
Level: Easy
16-132
68. Data from Waisner Corporation's most recent balance sheet and income statement appear
below:
The average sale period for this year is closest to:

A. 134.7 days
B. 15.2 days
C. 14.0 days
D. 137.7 days
Inventory turnover = Cost of goods sold Average inventory balance = $435,000

$160,500* = 2.71
*($157,000 + $164,000) 2 = $321,000 2 = $160,500
Average sale period = 365 days Inventory turnover = 365 days 2.71 = 134.7 days
AACSB: Analytic
Level: Easy
69. Last year Jack Company had a net income of $270,000, income tax expense of $50,000,
and interest expense of $20,000. The company's times interest earned was closest to:
A. 17.00
B. 10.00
C. 13.50
D. 14.50
Times interest earned = (Earnings before interest expense and income taxes) Interest
expense = $340,000* $20,000 = 17
*$270,000 + $20,000 + $50,000 = $340,000
AACSB: Analytic
Level: Easy
16-133
70. The times interest earned ratio of McHugh Company is 4.5. The interest expense for the
year was $20,000, and the company's tax rate is 40%. The company's net income is:
A. $22,000
B. $42,000
C. $54,000
D. $66,000
expense = (Earnings before interest expense and income taxes) $20,000 = 4.5
Earnings before interest expense and income taxes = $90,000
Given that interest expense is $20,000, earnings and income taxes (income before taxes) must
total $70,000 (= $90,000 - $20,000). Therefore net income is $42,000 {= $70,000 x 0.60 (1 -
0.40)}
AACSB: Analytic
Level: Hard
71. Kramer Company has total assets of $180,000 and total liabilities of $60,000. The
company's debt-to-equity ratio is closest to:
A. 0.25
B. 0.33
C. 0.50
D. 0.67
Assets = Liabilities + Stockholders' equity

$180,000 = $60,000 + $120,000
Debt-to-equity ratio = Total liabilities Stockholders' equity = $60,000 $120,000 = 0.50
AACSB: Analytic
Level: Easy
16-134
72. Pauk Corporation has provided the following data from its most recent income statement:
The times interest earned ratio is closest to:

A. 2.49
B. 3.55
C. 1.03
D. 1.49
Times interest earned = Earnings before interest expense and income taxes Interest expense
= ($36,000 + $35,000 + $16,000) $35,000 = $87,000 $35,000 = 2.49
AACSB: Analytic
Level: Easy
73. Biancuzzo Corporation has provided the following data from its most recent balance
sheet:
The debt-to-equity ratio is closest to:

A. 5.60
B. 0.85
C. 6.60
D. 0.18
Debt-to-equity ratio = Total liabilities Stockholders' equity = $560,000 $100,000 = 5.60
AACSB: Analytic
Level: Easy
16-135
Lesmerises Corporation's most recent balance sheet and income statement appear below:
16-136
per share.

A. 53.4%
B. 671.4%
C. 34.8%
D. 14.9%
Gross margin percentage = Gross margin Sales = $470 $1,350 = 34.8%
AACSB: Analytic
Level: Medium
A. $0.69
B. $0.35
C. $0.30
D. $0.50
shares outstanding = ($70 - $10) 200* = $60 200* = $0.30
* Number of common shares outstanding = Common stock Par value per share = $200 $1
= 200 shares outstanding (this is the average number of shares outstanding throughout the
year given that the common stock account balance is the same on both dates)
AACSB: Analytic
Level: Medium
16-137

A. 5.70
B. 8.14
C. 4.13
D. 9.50
* Earnings per share = (Net income - Preferred dividends) Average number of common
shares outstanding = ($70 - $10) 200** = $60 200** = $0.30
** Number of common shares outstanding = Common stock Par value per share = $200
$1 = 200 shares outstanding (this is the average number of shares outstanding throughout
the year given that the common stock account balance is the same on both dates)
AACSB: Analytic
Level: Medium

A. 66.7%
B. 33.3%
C. 83.3%
D. 57.1%
Dividend payout ratio = Dividends per share Earnings per share = $0.20* $0.30** =
66.7%
*$40 (common stock dividends) 200 shares of common stock = $0.20
**Earnings per share = (Net income - Preferred dividends) Average number of common
shares outstanding = ($70 - $10) 200*** = $60 200 = $0.30
***Number of common shares outstanding = Common stock Par value per share = $200
AACSB: Analytic
Level: Medium
16-138

A. 1.75%
B. 7.02%
C. 80.00%
D. 8.77%
Dividend yield = Dividends per share Market price per share = $0.20* $2.85 = 7.02%
*$40 (common stock dividends) 200 shares of common stock = $0.20
AACSB: Analytic
Level: Medium

A. 4.27%
B. 5.85%
C. 5.83%
D. 4.26%
assets = ($70 + $25.90*) $1,645** = $95.90 $1,645 = 5.83%
*$37 x (1 - 0.30) = $37 x 0.70 = $25.90
**($1,650 + $1,640) 2 = $1,645
AACSB: Analytic
Level: Medium
16-139
A. 5.94%
B. 7.69%
C. 6.59%
D. 6.93%
Return on common stockholders' equity = (Net income - Preferred dividends) Average

common stockholders' equity = ($70 - $10) $910* = $60 $910 = 6.59%
*Average total stockholders' equity - *Average preferred stockholders' equity
*{($1,000 + $1,020) 2} - {($100 + $100) 2} = $1,010 - $100 = $910
AACSB: Analytic
Level: Medium
A. $0.30
B. $4.60
C. $5.10
D. $8.20
shares outstanding = ($1,020 - $100) 200* = $920 200 = $4.60
*$200 (common stock) $1 par value per share = 200
AACSB: Analytic
Level: Medium
16-140

A. $1,020 thousand
B. $280 thousand
C. $650 thousand
D. $990 thousand
Working Capital = Current assets - Current liabilities = $650 - $370 = $280
AACSB: Analytic
Level: Medium

A. 0.95
B. 0.38
C. 0.40
D. 1.76
Current ratio = Current assets Current liabilities = $650 $370 = 1.76
AACSB: Analytic
Level: Medium

A. 1.76
B. 1.24
C. 1.05
D. 1.41

receivable) Current liabilities = ($240 + 220) $370 = $460 $370 = 1.24
AACSB: Analytic
Level: Medium
16-141

A. 6.14
B. 5.74
C. 0.88
D. 1.14

$1,350 $235* = 5.74
*($250 + $220) 2 = $470 2 = $235
AACSB: Analytic
Level: Medium

A. 1.1 days
B. 0.9 days
C. 63.6 days
D. 59.4 days
Average collection period = 365 days Accounts receivable turnover = 365 days 5.74* =
63.6 days
*Accounts receivable turnover = Sales on account Average accounts receivable balance =
$1,350 $235** = 5.74
**($250 + $220) 2 = $470 2 = $235
AACSB: Analytic
Level: Medium
16-142

A. 0.87
B. 6.77
C. 6.29
D. 1.15
Inventory turnover = Cost of goods sold Average inventory = $880 $140* = 6.29
*($150 + $130) 2 = $280 2 = $140
AACSB: Analytic
Level: Medium

A. 35.1 days
B. 237.9 days
C. 58.0 days
D. 53.9 days
Average sale period = 365 days Inventory turnover = 365 days 6.29* = 58.0 days
*Inventory turnover = Cost of goods sold Average inventory = $880 $140** = 6.29
**($150 + $130) 2 = $280 2 = $140
AACSB: Analytic
Level: Medium
16-143

A. 5.29
B. 2.70
C. 1.89
D. 3.70
expense = ($70 + $37 + $30) $37 = $137 $37 = 3.70
AACSB: Analytic
Level: Medium

A. 0.67
B. 0.61
C. 0.34
D. 0.25
Debt-to-equity ratio = Total liabilities Stockholders' equity = $620 $1,020 = 0.61
AACSB: Analytic
Level: Medium
16-144
Guynn Corporation's most recent balance sheet and income statement appear below:
16-145
per share.

A. 1054.5%
B. 45.3%
C. 82.9%
D. 9.5%
Gross margin percentage = Gross margin Sales = $580 $1,280 = 45.3%
AACSB: Analytic
Level: Medium
16-146
A. $0.79
B. $0.50
C. $1.14
D. $0.55
shares outstanding) = ($55 - $5) 100* = $50 100* = $0.50
AACSB: Analytic
Level: Medium

A. 12.82
B. 8.92
C. 6.18
D. 14.10
shares outstanding) = ($55 - $5) 100** = $50 100** = $0.50
the year given that the common stock account balance is the same in both balance sheets)
AACSB: Analytic
Level: Medium
16-147

A. 20.0%
B. 30.0%
C. 1000.0%
D. 18.2%
Dividend payout ratio = Dividends per share Earnings per share = $0.10** $0.50* =
20.0%
shares outstanding) = ($55 - $5) 100** = $50 100 = $0.50
Common stock dividends ($10) divided by the number of common shares (100) is equal to
dividends per share ($0.10)
AACSB: Analytic
Level: Medium

A. 2.13%
B. 0.71%
C. 66.67%
D. 1.42%
Dividend yield ratio = Dividends per share Market price per share = $0.10* $7.05 =
1.42%
*Number of common shares outstanding = Common stock Par value per share = $100 $1
Common stock dividends ($10) divided by the number of common shares (100) is equal to
AACSB: Analytic
Level: Medium
16-148

A. 5.56%
B. 5.70%
C. 3.85%
D. 3.94%
assets = ($55 + $24.50*) $1,395** = $79.50 $1,395 = 5.70%
*$35 x (1 - 0.30) = $35 x 0.70 = $24.50
**($1,360 + $1,430) 2 = $2,790 2 = $1,395
AACSB: Analytic
Level: Medium
A. 7.33%
B. 6.67%
C. 5.88%
D. 6.47%

*Average common stockholders' equity = Average total stockholders' equity - Average
preferred stockholders' equity = {($830 + $870) 2} - {($100 + $100) 2} = $850– $100 =
$750
AACSB: Analytic
Level: Medium
16-149
A. $8.70
B. $0.50
C. $7.70
D. $14.30
shares outstanding = ($870 - $100) 100* = $770 100 = $7.70
= 100
AACSB: Analytic
Level: Medium
Selected financial data (in thousands of dollars) for Barnstable Company appear below:
99. For Year 2, the gross margin as a percentage of sales was:

A. 5%
B. 60%
C. 10%
D. 40%
Gross margin percentage = Gross margin Sales = $600* $1,500 = 40%

*Gross margin = Sales - Cost of goods sold = $1,500 - $900 = $600
AACSB: Analytic
Level: Easy
16-150
100. For Year 2, the net income before taxes as a percentage of sales was:
A. 10%
B. 3%
C. 8%
D. 5%
($1,500 - $450 - $75 - $900) $1,500 = $75 $1,500 = 5%
AACSB: Analytic
Level: Easy
101. For Year 2, the net operating income as a percentage of sales was:
A. 70%
B. 8%
C. 10%
D. 40%
($1,500 - $450 - $900) $1,500 = $150 $1,500 = 10%
AACSB: Analytic
Level: Easy
102. Between Year 1 and Year 2, the times interest earned ratio:
A. increased
B. decreased
C. remained the same
D. cannot be determined from the data provided
= Year 1: ($1,200 - $400 - $720) $30 = $80 $30 = 2.7
Year 2: ($1,500 - $450 - $900) $75 = $150 $75 = 2.0
AACSB: Analytic
Level: Medium
16-151
Financial statements for Oram Company appear below:
16-152
103. Oram Company's earnings per share of common stock for Year 2 was closest to:
A. $36.38
B. $4.28
C. $37.63
D. $53.75
shares outstanding) = ($301 - $10) 8* = $291 8 = $36.38
* Number of common shares outstanding = Common stock Par value per share = $160
$20 = 8 shares outstanding (this is the average number of shares outstanding throughout the
AACSB: Analytic
Level: Medium
16-153
104. Oram Company's dividend yield ratio on December 31, Year 2 was closest to:
A. 2.9%
B. 3.3%
C. 0.4%
D. 3.1%
Dividend yield = Dividends per share Market price per share = $18.88* $610 = 3.1%
*$151 8** = $18.88
**Number of common shares outstanding = Common stock Par value per share = $160
$20 = 8
AACSB: Analytic
Level: Medium
105. Oram Company's return on total assets for Year 2 was closest to:
A. 12.1%
B. 13.3%
C. 14.6%
D. 13.9%
assets = ($301 + $28*) $2,255** = $329 $2,255 = 14.6%
*$40 x (1 - 0.30) = $40 x 0.70 = $28
**($2,200 + $2,310) 2 = $4,510 2 = $2,255
AACSB: Analytic
Level: Medium
16-154
106. Oram Company's current ratio at the end of Year 2 was closest to:
A. 1.24
B. 0.37
C. 1.20
D. 0.47
AACSB: Analytic
Level: Medium
107. Oram Company's accounts receivable turnover for Year 2 was closest to:
A. 22.6
B. 15.8
C. 14.9
D. 10.4
Accounts receivable turnover = Sales on account Average accounts receivable = $2,600

$175* = 14.9
*($160 + $190) 2 = $350 2 = $175
AACSB: Analytic
Level: Medium
16-155
108. Oram Company's average sale period for Year 2 was closest to:
A. 23.1 days
B. 16.1 days
C. 35.1 days
D. 24.6 days
*Inventory turnover = Cost of goods sold Average inventory = $1,820 $115** = 15.8
**($110 + $120) 2 = $230 2 = $115
AACSB: Analytic
Level: Medium
109. Oram Company's times interest earned for Year 2 was closest to:
A. 10.8
B. 11.8
C. 19.5
D. 7.5
= ($301 + $40 + $129) $40 = $470 $40 = 11.8
AACSB: Analytic
Level: Medium
16-156
Lisa Inc.'s balance sheet appears below:
The company's sales for the year were $300 thousand, its cost of goods sold was $220
thousand, and its net income was $35 thousand. All sales were on credit. Preferred dividends
for the year were $5 thousand.
16-157
110. Lisa Inc.'s acid-test ratio at December 31, Year 2, was closest to:
A. 0.6
B. 1.1
C. 1.8
D. 2.0

receivable) Current liabilities = ($30 + $20 + $45) $85 = $95 $85 = 1.1
AACSB: Analytic
Level: Medium
111. Lisa Inc.'s accounts receivable turnover for Year 2 was closest to:
A. 4.9
B. 5.9
C. 6.7
D. 8.0

$300 $37.50* = 8.0
*($30 + $45) 2 = $75 2 = $37.50
AACSB: Analytic
Level: Medium
16-158
112. Lisa Inc.'s inventory turnover for Year 2 was closest to:
A. 3.7
B. 4.0
C. 4.4
D. 5.0
Inventory turnover = Cost of goods sold Average inventory = $220 $55* = 4

*($50 + $60) 2 = $110 2 = $55
AACSB: Analytic
Level: Medium
113. Lisa Inc.'s book value per share of common stock at December 31, Year 2, was closest
to:
A. $10.00
B. $11.25
C. $19.33
D. $18.33
$10 = 15
AACSB: Analytic
Level: Medium
16-159
114. Lisa Inc.'s return on common stockholders' equity for Year 2 was closest to:
A. 7.8%
B. 10.6%
C. 10.9%
D. 12.4%

common stockholders' equity = ($35 - $5) $282.50* = $30 $282.50 = 10.6%
preferred stockholders' equity = {($375 + $390) 2} - {($100 + $100) 2} = $382.50 - $100
= $282.50
AACSB: Analytic
Level: Medium
16-160
Financial statements for Larkins Company appear below:
16-161
115. Larkins Company's earnings per share of common stock for Year 2 was closest to:
A. $25.00
B. $17.50
C. $7.21
D. $16.83
AACSB: Analytic
Level: Medium
16-162
116. Larkins Company's price-earnings ratio on December 31, Year 2 was closest to:
A. 8.91
B. 8.57
C. 20.79
D. 6.00
Price-earnings ratio = Market price per share Earnings per share = $150 $16.83* = 8.91
shares outstanding) = ($315 - $12) 18** = $303 18** = $16.83
AACSB: Analytic
Level: Medium
117. Larkins Company's dividend payout ratio for Year 2 was closest to:
A. 42.9%
B. 24.6%
C. 40.6%
D. 14.8%
40.6%
$10 = 18 shares outstanding
Common stock dividends ($123) divided by the number of common shares (18) equals
AACSB: Analytic
Level: Medium
16-163
118. Larkins Company's dividend yield ratio on December 31, Year 2 was closest to:
A. 4.6%
B. 5.0%
C. 2.1%
D. 4.1%
Dividend yield = Dividends per share Market price per share = $6.83* $150 = 4.6%
= 18 shares outstanding
AACSB: Analytic
Level: Medium
119. Larkins Company's return on total assets for Year 2 was closest to:
A. 13.6%
B. 16.0%
C. 15.3%
D. 17.0%
assets = ($315 + $35*) $2,060** = $350 $2,060 = 17%
*$50 x (1 - 0.30) = $50 x 0.70 = $35
**($2,010 + $2,110) 2 = $4,120 2 = $2,060
AACSB: Analytic
Level: Medium
16-164
120. Larkins Company's return on common stockholders' equity for Year 2 was closest to:
A. 23.5%
B. 25.9%
C. 26.9%
D. 24.4%

common stockholders' equity = ($315 - $12) $1,170* = $303 $1,170 = 25.9%
preferred stockholders' equity = {($1,200 + $1,380) 2} - {($120 + $120) 2} = $1,290 -
$120 = $1,170
AACSB: Analytic
Level: Medium
121. Larkins Company's book value per share at the end of Year 2 was closest to:
A. $10.00
B. $23.33
C. $70.00
D. $76.67
shares outstanding = ($1,380 - $120) 18* = $1,260 18 = $70.00
= 18
AACSB: Analytic
Level: Medium
16-165
The Dawson Corporation projects the following for the upcoming year:
122. The expected dividend per share of common stock is:

A. $2.10
B. $2.70
C. $1.80
D. $3.90
Net income = ($35 - $5) x (1 - 40%) = $30 x 60% = $18

shares outstanding) = ($18 - $4) 2 = $14 2 = $7
Dividend payout ratio = Dividends per share Earnings per share =Dividends per share $7
= 0.30
Dividends per share = $2.10
AACSB: Analytic
Level: Hard
16-166
123. If Dawson Corporation's common stock has a price-earnings ratio of eight, the market
price per share (to the nearest dollar) would be:
A. $125
B. $56
C. $72
D. $68
Price-earnings ratio = Market price per share Earnings per share = Market price per share
$7* = 8
Market price per share = $56
*Net income = ($35 - $5) x (1 - 40%) = $30 x 60% = $18
shares outstanding) = ($18 - $4) 2 = $7
AACSB: Analytic
Level: Hard
The following information relates to Poblano Company for last year:
124. What is Poblano's price-earnings ratio for last year?

A. 8
B. 10
C. 12.5
D. 15.625
Price-earnings ratio = Market price per share Earnings per share = $75.00 $6.00 = 12.5
AACSB: Analytic
Level: Medium
16-167
125. What is Poblano's dividend yield ratio for last year?

A. 1.6%
B. 2.5%
C. 6.4%
D. 10.0%
Dividend yield ratio = Dividends per share Market price per share = $1.20 $75.00 = 1.6%
AACSB: Analytic
Level: Medium
16-168
Dadisman Corporation's most recent balance sheet and income statement appear below:
16-169
per share.
A. $1.25
B. $0.70
C. $0.50
D. $1.00
AACSB: Analytic
Level: Medium

A. 13.50
B. 5.40
C. 9.64
D. 6.75
**Number of common shares outstanding = Common stock Par value per share = $200 $2
AACSB: Analytic
Level: Medium
16-170

A. 42.9%
B. 100.0%
C. 60.0%
D. 2,000.0%
60.0%
AACSB: Analytic
Level: Medium

A. 2.97%
B. 4.44%
C. 60.00%
D. 7.41%
4.44%
Common stock dividends ($30) divided by the number of common shares outstanding (100)
equals dividends per share ($0.30)
AACSB: Analytic
Level: Medium
16-171

A. 4.64%
B. 4.61%
C. 5.76%
D. 5.79%
assets = ($70 + $17.50*) $1,510** = $87.50 $1,510 = 5.79%
*$25 x (1 - 0.30) = $25 x 0.70 = $17.50
**($1,500 + $1,520) 2 = $3,020 2 = $1,510
AACSB: Analytic
Level: Medium
A. 7.95%
B. 4.63%
C. 6.48%
D. 5.68%

preferred stockholders' equity = *{($1,070 + $1,090) 2} - {($200 + $200) 2} = *$1,080 -
$200 = $880
AACSB: Analytic
Level: Medium
16-172
A. $8.90
B. $0.50
C. $15.20
D. $10.90
shares outstanding = ($1,090 - $200) 100* = $890 100* = $8.90
= 100
AACSB: Analytic
Level: Medium
16-173
Excerpts from Stys Corporation's most recent balance sheet and income statement appear
below:
per share.
16-174
A. $1.10
B. $1.57
C. $1.85
D. $1.00
AACSB: Analytic
Level: Medium

A. 5.22
B. 7.45
C. 8.20
D. 4.43
AACSB: Analytic
Level: Medium
16-175

A. 60.0%
B. 1000.0%
C. 45.5%
D. 50.0%
50.0%
AACSB: Analytic
Level: Medium

A. 6.10%
B. 83.33%
C. 7.32%
D. 1.22%
6.10%
Common stock dividends ($50) divided by the number of common shares outstanding (100)
equals dividends per share ($0.50)
AACSB: Analytic
Level: Medium
16-176

A. 8.15%
B. 9.60%
C. 9.67%
D. 8.21%
assets = ($110 + $19.60*) $1,340** = $129.60 $1,340 = 9.67%
*$28 x (1 - 0.30) = $28 x 0.70 = $19.60
**($1,330 + $1,350) 2 = $2,680 2 = $1,340
AACSB: Analytic
Level: Medium
A. 13.02%
B. 11.83%
C. 13.42%
D. 14.77%

preferred stockholders' equity = {($820 + $870) 2} - {($100 + $100) 2} = $845 - $100 =
$745
AACSB: Analytic
Level: Medium
16-177
A. $8.70
B. $13.50
C. $1.00
D. $7.70
Book value per share = Total stockholders' equity - Preferred stock) Number of common
= 100
AACSB: Analytic
Level: Medium
16-178
Financial statements for Marcalo Company appear below:
16-179
140. Marcalo Company's working capital (in thousands of dollars) at the end of Year 2 was
closest to:
A. $220
B. $580
C. $360
D. $1,580
AACSB: Analytic
Level: Medium
141. Marcalo Company's current ratio at the end of Year 2 was closest to:
A. 0.42
B. 0.40
C. 1.24
D. 1.61
AACSB: Analytic
Level: Medium
16-180
142. Marcalo Company's acid-test ratio at the end of Year 2 was closest to:
A. 1.08
B. 2.05
C. 0.49
D. 0.32

receivable) Current liabilities = ($200 + $190) $360 = $390 $360 = 1.08
AACSB: Analytic
Level: Medium
143. Marcalo Company's accounts receivable turnover for Year 2 was closest to:
A. 12.4
B. 12.2
C. 8.5
D. 17.8

$175* = 12.2
*($160 + $190) 2 = $350 2 = $175
AACSB: Analytic
Level: Medium
16-181
144. Marcalo Company's average collection period for Year 2 was closest to:
A. 20.6 days
B. 29.4 days
C. 30.0 days
D. 42.9 days
30 days
*Accounts receivable turnover = Sales on account Average accounts receivable = $2,130
$175** = 12.2
**($160 + $190) 2 = $350 2 = $175
AACSB: Analytic
Level: Medium
145. Marcalo Company's inventory turnover for Year 2 was closest to:
A. 12.4
B. 12.2
C. 17.8
D. 8.5
Inventory turnover = Cost of goods sold Average inventory = $1,490 $120* = 12.4
*($120 + $120) 2 = $240 2 = $120
AACSB: Analytic
Level: Medium
16-182
146. Marcalo Company's average sale period for Year 2 was closest to:
A. 20.6 days
B. 29.4 days
C. 30.0 days
D. 42.9 days
Average sale period = 365 days Inventory turnover = 365 days 12.4* = 29.4
*Inventory turnover = Cost of goods sold Average inventory = $1,490 $120** = 12.4
**($120 + $120) 2 = $240 2 = $120
AACSB: Analytic
Level: Medium
16-183
The following financial data have been taken from the records of CPZ Enterprises.
147. The current ratio for CPZ Enterprises is:

A. 1.68
B. 2.14
C. 5.00
D. 5.29
Current ratio = Current assets Current liabilities = $740,000* $140,000** = 5.29

*$200,000 + $100,000 + $440,000 = $740,000
**$80,000 + $10,000 + $50,000 = $140,000
AACSB: Analytic
Level: Medium
16-184
148. What is the company's acid-test ratio?

A. 0.68
B. 1.68
C. 2.14
D. 2.31

receivable) Current liabilities = $300,000* $140,000** = 2.14
*$200,000 + $100,000 = $300,000
**$80,000 + $10,000 + $50,000 = $140,000
AACSB: Analytic
Level: Medium
149. What will happen to the ratios below if CPZ Enterprises uses cash to pay 50 percent of
its accounts payable?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
Given that both ratios are greater than one, using cash to pay an account payable will result in
an increase in both ratios. The ratios increase because the percentage decrease in the
denominator is greater than the percentage decrease in the numerator.
AACSB: Analytic
Level: Hard
16-185
Mccaughey Corporation's most recent balance sheet and income statement appear below:
16-186

A. $80 thousand
B. $740 thousand
C. $780 thousand
D. $340 thousand
AACSB: Analytic
Level: Medium

A. 0.34
B. 0.30
C. 1.31
D. 1.12
AACSB: Analytic
Level: Medium

A. 1.31
B. 0.92
C. 0.88
D. 1.04

receivable) Current liabilities = ($100 + 130) $260 = $230 $260 = 0.88
AACSB: Analytic
Level: Medium
16-187

A. 1.15
B. 9.62
C. 0.87
D. 8.93

$140* = 8.93
*($150 + 130) 2 = $280 2 = $140
AACSB: Analytic
Level: Medium

A. 1.2 days
B. 0.9 days
C. 40.9 days
D. 37.9 days
40.9 days
$140** = 8.93
**($150 + 130) 2 = $280 2 = $140
AACSB: Analytic
Level: Medium
16-188

A. 1.20
B. 0.83
C. 6.64
D. 7.30
*($120 + $100) 2 = $220 2 = $110
AACSB: Analytic
Level: Medium

A. 55.0 days
B. 50.0 days
C. 29.2 days
D. 213.2 days
**($120 + $100) 2 = $220 2 = $110
AACSB: Analytic
Level: Medium
16-189
Excerpts from Shelton Corporation's most recent balance sheet appear below:

A. $370 thousand
B. $1,010 thousand
C. $910 thousand
D. $680 thousand
Working capital = Current assets - Current liabilities = $680 - $310 = $370
AACSB: Analytic
Level: Easy

A. 0.43
B. 0.85
C. 2.19
D. 0.36
AACSB: Analytic
Level: Easy
16-190

A. 1.55
B. 2.19
C. 1.81
D. 1.17

AACSB: Analytic
Level: Easy

A. 5.50
B. 0.92
C. 1.09
D. 5.28

$240* = 5.50
*($230 + $250) 2 = $480 2 = $240
AACSB: Analytic
Level: Easy
16-191

A. 1.1 days
B. 69.1 days
C. 0.9 days
D. 66.4 days
66.4 days
$240** = 5.50
**($230 + $250) 2 = $480 2 = $240
AACSB: Analytic
Level: Easy

A. 6.59
B. 7.42
C. 1.25
D. 0.80
*($150 + $120) 2 = $270 2 = $135
AACSB: Analytic
Level: Easy
16-192

A. 246.1 days
B. 49.2 days
C. 55.4 days
D. 33.2 days
**($150 + $120) 2 = $270 2 = $135
AACSB: Analytic
Level: Easy
Excerpts from Deandrade Corporation's most recent balance sheet appear below:
16-193

A. $400
B. $70
C. $750
D. $700
AACSB: Analytic
Level: Easy

A. 0.35
B. 1.21
C. 1.13
D. 0.39
AACSB: Analytic
Level: Easy

A. 0.89
B. 1.21
C. 0.82
D. 0.55

AACSB: Analytic
Level: Easy
16-194

A. 0.80
B. 15.11
C. 17.00
D. 1.25

$90* = 15.11
*($100 + $80) 2 = $180 2 = $90
AACSB: Analytic
Level: Easy

A. 0.93
B. 6.15
C. 1.08
D. 6.38
*($140 + $130) 2 = $270 2 = $135
AACSB: Analytic
Level: Easy
16-195
Data from Gofman Corporation's most recent balance sheet appear below:

A. $320
B. $500
C. $1,210
D. $1,070
AACSB: Analytic
Level: Easy

A. 0.32
B. 0.72
C. 2.78
D. 0.23
AACSB: Analytic
Level: Easy
16-196

A. 1.39
B. 2.78
C. 1.44
D. 0.94

AACSB: Analytic
Level: Easy

A. 0.9 days
B. 39.3 days
C. 36.5 days
D. 1.2 days
Average collection period = 365 days Accounts receivable turnover = 365 days 10* =
36.5 days
$130** = 10
**($120 + $140) 2 = $260 2 = $130
AACSB: Analytic
Level: Easy
16-197

A. 97.3 days
B. 89.2 days
C. 67.4 days
D. 252.7 days
**($200 + $240) 2 = $440 2 = $220
AACSB: Analytic
Level: Easy
16-198
Financial statements for Nardella Company appear below:
16-199
174. Nardella Company's times interest earned for Year 2 was closest to:
A. 7.8
B. 4.8
C. 12.8
D. 6.8
expense = ($238 + $50 + $102) $50 = $390 $50 = 7.80
AACSB: Analytic
Level: Medium
175. Nardella Company's debt-to-equity ratio at the end of Year 2 was closest to:
A. 0.31
B. 0.23
C. 0.70
D. 0.54
AACSB: Analytic
Level: Medium
16-200
Juncker Corporation's most recent balance sheet and income statement appear below:
16-201

A. 11.75
B. 16.79
C. 10.75
D. 7.50
expense = ($90 + $12 + $39) $12 = $141 $12 = 11.75
AACSB: Analytic
Level: Medium

A. 0.24
B. 0.05
C. 0.09
D. 0.26
AACSB: Analytic
Level: Medium
16-202
Data from Karmely Corporation's most recent balance sheet and the company's income
statement appear below:

A. 6.11
B. 7.11
C. 10.16
D. 4.29
expense = ($150 + $35 + $64) $35 = $249 $35 = 7.11
AACSB: Analytic
Level: Easy
16-203

A. 0.28
B. 0.77
C. 0.60
D. 0.37
Debt-to-equity ratio = Total liabilities Stockholders' equity = $530 $890 = 0.60
AACSB: Analytic
Level: Easy
16-204
Essay Questions
180. Shull Corporation's most recent balance sheet and income statement appear below:
16-205
per share.
Required:

i. Working capital.
j. Current ratio.
k. Acid-test ratio.
l. Accounts receivable turnover.
m. Average collection period.
n. Inventory turnover.
o. Average sale period.
p. Times interest earned.
q. Debt-to-equity ratio.
16-206
a. Gross margin percentage = Gross margin Sales = $430 $1,130 = 38.1%
b. Earnings per share = (Net Income - Preferred Dividends)

Average number of common shares outstanding*
= ($110 - $10) (200 shares + 200 shares)/2 = $0.50 per share
*Number of common shares outstanding = Common stock Par value = $400 $2 per
share = 200 shares
c. Price-earnings ratio = Market price per share Earnings per share (see above)
= $9.80 $0.50 = 19.6
d. Dividend payout ratio = Dividends per share* Earnings per share (see above)
= $0.20 $0.50 = 40.0%
*Dividends per share = Common dividends Common shares (see above)
= $40 200 shares = $0.20 per share
e. Dividend yield ratio = Dividends per share (see above) Market price per share
= $0.20 $9.80 = 2.04%
f. Return on total assets = Adjusted net income* Average total assets**

= $130.3 $1,385 = 9.41%
*Adjusted net income = Net income + [Interest expense x (1-Tax rate)]
= $110 + [$29 x (1-0.30)] = $130.3
**Average total assets = ($1,400 + $1,370) 2 = $1,385
g. Return on common stockholders' equity = (Net income - Preferred dividends)

Average common stockholders' equity* = ($110 - $10) $700 = 14.29%
*Average common stockholders' equity = ($730 + $670) 2 = $700
h. Book value per share = Common stockholders' equity Number of common shares
outstanding* = $730 200 shares = $3.65 per share
*Number of common shares outstanding = Common stock Par value
= $400 $2 per share = 200 shares
i. Working capital = Current assets - Current liabilities

= $620 - $250 = $370 thousand
j. Current ratio = Current assets Current liabilities

= $620 $250 = 2.48
k. Acid-test ratio = Quick assets* Current liabilities

= $380 $250 = 1.52
*Quick assets = Cash + Marketable securities + Accounts receivable + Short-term notes
receivable = $180 + $0 + $200 = $380
l. Accounts receivable turnover = Sales on account Average accounts receivable* = $1,130
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$195 = 5.79
*Average accounts receivable = ($200 + $190) 2 = $195
m. Average collection period = 365 days Accounts receivable turnover (see above) = 365
days 5.79 = 63.0 days
n. Inventory turnover = Cost of goods sold Average inventory*

= $700 $140 = 5.00
*Average inventory = ($140 + $140) 2 = $140
o. Average sale period = 365 days Inventory turnover (see above)

= 365 days 5.00 = 73.0 days
p. Times interest earned = Net operating income Interest expense

= $186 $29 = 6.41
q. Debt-to-equity ratio = Liabilities Stockholders' equity

= $470 $930 = 0.51
AACSB: Analytic
Level: Medium
16-208
181. Walp Corporation's most recent balance sheet and income statement appear below:
16-209
per share.
Required:

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a. Gross margin percentage = Gross margin Sales

= $600 $1,330 = 45.1%
b. Earnings per share = (Net Income - Preferred Dividends)

c. Price-earnings ratio = Market price per share Earnings per share (see above)
= $7.75 $0.50 = 15.5
d. Dividend payout ratio = Dividends per share* Earnings per share (see above)
= $0.20 $0.50 = 40.0%
e. Dividend yield ratio = Dividends per share (see above) Market price per share
= $0.20 $7.75 = 2.58%
f. Return on total assets = Adjusted net income* Average total assets**

= $81.0 $1,325 = 6.11%
= $60 + [$30 x (1-0.30)] = $81.0
g. Return on common stockholders' equity = (Net income - Preferred dividends)

Average common stockholders' equity*
= ($60 - $10) $715 = 6.99%
h. Book value per share = Common stockholders' equity

Number of common shares outstanding* = $730 100 shares = $7.30 per share
AACSB: Analytic
Level: Medium
16-211
182. Dickey Corporation's most recent income statement appears below:
Required:
Compute the gross margin percentage.
Gross margin percentage = Gross margin Sales = $243,000 $569,000 = 42.7%
AACSB: Analytic
Level: Easy
16-212
183. Financial statements for Praven Company appear below:
16-213
Required:

h. Working capital.
i. Current ratio.
j. Acid-test ratio.
k. Accounts receivable turnover.
l. Average collection period.
m. Inventory turnover.
n. Average sale period.
o. Times interest earned.
p. Debt-to-equity ratio.
16-214
a. Earnings per share = (Net Income - Preferred Dividends) Average number of common
shares outstanding* = ($189 - $18) 24 = $7.13
*Number of common shares outstanding = Common stock Par value = $240 $10 = 24
b. Price-earnings ratio = Market price per share Earnings per share (see above)
= $130 $7.13 = 18.2
c. Dividend payout ratio = Dividends per share* Earnings per share (see above)
= $2.96 $7.13 = 41.5%
*Dividends per share = Common dividends Common shares** = $71 24 = $2.96

**See above
d. Dividend yield ratio = Dividends per share* Market price per share
= $2.96 $130.00 = 2.28%
*See above
e. Return on total assets = Adjusted net income* Average total assets**

= $217 $1,910 = 11.36%

= $189 + [$40 x (1 - 0.30)] = $217
f. Return on common stockholders' equity = (Net income - Preferred dividends)

*Average common stockholders' equity = ($1,000 + $900) 2 = $950
g. Book value per share = Common stockholders' equity Number of common shares
outstanding* = $1,000 24 = $41.67

= $240 $10 = 24
h. Working capital = Current assets - Current liabilities = $560 - $460 = $100
i. Current ratio = Current assets Current liabilities = $560 $460 = 1.22
j. Acid-test ratio = Quick assets* Current liabilities = $340 $460 = 0.74

receivable = $150 + $190 = $340
16-215
k. Accounts receivable turnover = Sales on account Average accounts receivable* =

$1,700 $175 = 9.71
l. Average collection period = 365 days Accounts receivable turnover*

= 365 9.71 = 37.6 days
*See above
m. Inventory turnover = Cost of goods sold Average inventory*

= $1,190 $175 = 6.80
*Average inventory = ($170 + $180) 2= $175
n. Average sale period = 365 days Inventory turnover* = 365 6.80 = 53.7 days
*See above
o. Times interest earned = Net operating income Interest expense

= $310 $40 = 7.75
p. Debt-to-equity ratio = Liabilities Stockholders' equity

= $860 $1,120 = 0.77
AACSB: Analytic
Level: Medium
16-216
184. Condensed financial statements of Miller Company at the beginning and at the end of the
current year are given below:
The company paid total dividends of $15,000 during the year, of which $5,000 were to
preferred stockholders. The market price of a share of common stock at the end of the year
was $30.
Required:
On the basis of the information given above, fill in the blanks with the appropriate figures.
16-217
Example: The current ratio at the end of the current year would be computed by dividing
$270,000 by $100,000
a. The acid-test ratio at the end of the current year would be computed by dividing
_______________ by _________________.
b. The inventory turnover for the year would be computed by dividing _______________ by
_________________.
c. The debt-to-equity ratio at the end of the current year would be computed by dividing
_______________ by _________________.
d. The earnings per share of common stock would be computed by dividing

_______________ by _________________.
e. The accounts receivable turnover for the year would be computed by dividing
_______________ by _________________.
f. The times interest earned for the year would be computed by dividing _______________ by
_________________.
g. The return on common stockholders' equity for the year would be computed by dividing
_______________ by _________________.
h. The dividend yield would be computed by dividing _______________ by

_________________.
a. $120,000; $100,000
b. $350,000; $125,000
c. $175,000; $375,000
d. $45,000; 10,000 shares
e. $650,000; $100,000
f. $100,000; $10,000
g. $45,000; $307,500
h. $1; $30
AACSB: Analytic
Level: Medium
16-218
185. Shelzo Inc., a manufacturer of construction equipment is considering the purchase of one
of its suppliers, Raritron Industries. The purchase has been given preliminary approval by
Shelzo's Board of Directors, and several discussions have taken place between the
management of both companies. Raritron has submitted financial data for the past several
years. Shelzo's controller has analyzed Raritron's financial statements and prepared the
following ratio analysis comparing Raritron's performance with the industry averages.
Required:
Using the information provided above for Raritron Industries:

a. 1. Identify the two ratios from the above list that would be of most interest to short-term
creditors.
b. 1. Identify the three ratios from the above list that would be of most interest to
stockholders.
Explain what these three ratios measure.
What do these three ratios indicate about Shelzo Inc.?
c. 1. Identify the two ratios from the above list that would be of most interest to long-term
creditors.
16-219
a. 1. Two ratios that would be of most interest to short-term creditors would be the average
sale period and the current ratio.
2. The average sale period relates the average amount of inventory to the cost of goods sold.
This ratio measures the length of time it takes on average to sell inventory and is a gauge of
how well the company manages its inventory. The current ratio is calculated by dividing
current assets by current liabilities. This ratio measures short-run solvency, i.e., the ability to
meet current obligations.
3. For Shelzo Inc., the average sale period has been increasing and is well above the industry
average, while the current ratio has been below the industry average. Both of these ratios
indicate that there may be problems with the company's liquidity position. This could be
caused by poor inventory control.
b. 1. The three ratios that would be of most interest to common stockholders are the return on
common stockholders' equity, the price-earnings ratio, and the dividend yield ratio.
2. The return on common stockholders' equity is a measure of how effectively the company
has used the stockholders' investment in the company to generate profits. The price-earnings
ratio provides a measure of how the stock market perceives the company's future earnings
prospects. The higher the ratio, the more favorable the future looks for the company. The
dividend yield ratio tells us what proportion of the company's profits are paid out as cash
dividends to common stockholders.
3. These three ratios are close to the industry averages and there are no discernible significant
trends.
c. 1. The two ratios that would be of most interest to long-term creditors are times interest
earned and the debt-to-equity ratio.
2. Times interest earned is earnings before interest expense and taxes divided by interest
expense. This ratio measures debt paying ability. If stable, the company will be able to
refinance or obtain new funds at reasonable rates. The debt-to-equity ratio measures the
relative proportions of debt and equity in the company's capital structure. The lower the level
of the debt-to-equity ratio, the more security long-term debtors have.
3. For Shelzo Inc., times interest earned has been improving and is currently above the
industry average, indicating that the company should be able to borrow additional funds if
needed. The company's debt-to-equity ratio is below the industry average which also indicates
the company has the capacity to perhaps take on additional debt.
AACSB: Analytic
Level: Hard
16-220
186. Financial statements for Qiang Company appear below:
16-221
Required:

c. Dividend yield ratio.
d. Return on total assets.
e. Return on common stockholders' equity.
f. Book value per share.
16-222
a. Earnings per share = (Net Income - Preferred Dividends)

Average number of common shares outstanding* = ($161 - $12) 36 = $4.14

= $180 $5 = 36
= $50 $4.14 = 12.1
c. Dividend yield ratio = Dividends per share* Market price per share
= $1.36 $50.00 = 2.72%
*Dividends per share = Common dividends Common shares**

= $49 36 = $1.36
**See above
d. Return on total assets = Adjusted net income* Average total assets**

= $189 $2,365 = 7.99%

= $161 + [$40 x (1 - 0.30)] = $189
e. Return on common stockholders' equity = (Net income - Preferred dividends) Average

common stockholders' equity* = ($161 - $12) $1,530 = 9.74%
*Average common stockholders' equity = ($1,580 + $1,480) 2 = $1,530
f. Book value per share = Common stockholders' equity Number of common shares
outstanding* = $1,580 36 = $43.89
*Number of common shares outstanding = Common stock Par value = $180 $5 = 36
AACSB: Analytic
Level: Medium
16-223
187. Dowlen Corporation's most recent balance sheet and income statement appear below:
16-224
stock totaled $10 thousand. The market price of common stock at the end of Year 2 was
$10.74 per share.
Required:


*Number of common shares outstanding
= Common stock Par value = $400 $2 per share = 200 shares
= $10.74 $0.60 = 17.9
= $0.30 $0.60 = 50.0%
d. Dividend yield ratio = Dividends per share (see above) Market price per share = $0.30
$10.74 = 2.79%

= $147.5 $1,560 = 9.46%
= $130 + [$25 x (1-0.30)] = $147.5

*Average common stockholders' equity = ($1,020 + $960) 2 = $990
g. Book value per share = Common stockholders' equity

Number of common shares outstanding* = $1,020 200 shares = $5.10 per share
16-225
AACSB: Analytic
Level: Medium
16-226
188. Tedder Corporation has provided the following financial data (in thousands of dollars):
Net income for Year 2 was $80 thousand. Interest expense was $16 thousand. The tax rate
was 30%. Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2
was $6.79 per share.
Required:

16-227

Average number of common shares outstanding* = ($80 - $10) (100 shares + 100
shares)/2 = $0.70 per share
= $6.79 $0.70 = 9.7
= $0.40 $0.70 = 57.1%
d. Dividend yield ratio = Dividends per share (see above) Market price per share = $0.40
$6.79 = 5.89%

= $91.2 $1,355 = 6.73%
= $80 + [$16 x (1-0.30)] = $91.2

g. Book value per share = Common stockholders' equity

Number of common shares outstanding*
AACSB: Analytic
Level: Easy
16-228
189. Leckbee Corporation's net income for the most recent year was $3,270,000. A total of
preferred stock were $1.10 per share.
Required:
Compute the earnings per share of common stock. Show your work!
Earnings per share = (Net Income - Preferred Dividends) Average number of common
shares outstanding = ($3,270,000 - $220,000) 500,000 shares = $6.10 per share
AACSB: Analytic
Level: Easy
190. Odegaard Corporation's net income last year was $1,811,000. The dividend on common
outstanding.
Required:
Compute the price-earnings ratio. Show your work!
Price-earnings ratio = Market price per share Earnings per share* = $50.20 $5.37 =
9.35
*Earnings per share = (Net Income - Preferred Dividends) Average number of common
shares outstanding = ($1,811,000 - $200,000) 300,000 shares = $5.37 per share
AACSB: Analytic
Level: Easy
16-229
191. Spina Corporation's net income last year was $5,472,000. The dividend on common
outstanding.
Required:
Compute the dividend payout ratio. Show your work!
Dividend payout ratio = Dividends per share Earnings per share*

= $10.70 $12.93 = 0.83
*Earnings per share = (Net Income - Preferred Dividends)
Average number of common shares outstanding = ($5,472,000 - $300,000) 400,000
shares = $12.93 per share
AACSB: Analytic
Level: Easy
192. Last year, Iurato Corporation's dividend on common stock was $8.20 per share and the
dividend on preferred stock was $3.40 per share. The market price of common stock at the
end of the year was $50.70 per share.
Required:
Compute the dividend yield ratio. Show your work!
Dividend yield ratio = Dividends per share Market price per share
= $8.20 $50.70 = 0.16
AACSB: Analytic
Level: Easy
16-230
193. Petrosino Corporation's most recent income statement appears below:
Required:
Compute the return on total assets. Show your work!
Return on total assets = Adjusted net income* Average total assets**

= $98,000 $735,000 = 13.3%
= $84,000 + [$20,000 x (1-0.30))] = $98,000
AACSB: Analytic
Level: Easy
16-231
194. Excerpts from Thi Corporation's most recent balance sheet appear below:
dividends on preferred stock were $23,000 in total.
Required:
Compute the return on common stockholders' equity. Show your work!
Return on common stockholders' equity = (Net income - Preferred dividends)

Average common stockholders' equity* = ($143,000 - $23,000) $910,000 = 13.2%
*Average common stockholders' equity = ($940,000 + $880,000) 2 = $910,000
AACSB: Analytic
Level: Easy
16-232
195. Data from Colinger Corporation's most recent balance sheet appear below:
outstanding at the end of the year.
Required:
Compute the book value per share. Show your work!
Book value per share = Common stockholders' equity Number of common shares
outstanding = $1,280,000 200,000 shares = $6.40 per share
AACSB: Analytic
Level: Easy
16-233
196. Financial statements for Raridan Company appear below:
16-234
Required:

a. Current ratio.
b. Acid-test ratio.
c. Average collection period.
d. Inventory turnover.
e. Times interest earned.
f. Debt-to-equity ratio.
16-235
a. Current ratio = Current assets Current liabilities

= $500 $270 = 1.85
b. Acid-test ratio = Quick assets* Current liabilities

= $330 $270 = 1.22

receivable = $140 + $190 = $330
c. Accounts receivable turnover = Sales on account Average accounts receivable* =

$1,900 $180 = 10.56
Average collection period = 365 days Accounts receivable turnover

= 365 10.56 = 34.6 days
d. Inventory turnover = Cost of goods sold Average inventory*

= $1,330 $105 = 12.67
e. Times interest earned = Net operating income Interest expense

= $350 $30 = 11.67
f. Debt-to-equity ratio = Liabilities Stockholders' equity

= $550 $1,490 = 0.37
AACSB: Analytic
Level: Medium
16-236
197. Vasconcelos Corporation's most recent balance sheet and income statement appear
below:
16-237
Required:

a. Working capital.
b. Current ratio.
c. Acid-test ratio.
a. Working capital = Current assets - Current liabilities

= $590 - $270 = $320 thousand
b. Current ratio = Current assets Current liabilities

= $590 $270 = 2.19
c. Acid-test ratio = Quick assets* Current liabilities

= $400 $270 = 1.48
receivable = $160 + $0 + $240 = $400
d. Accounts receivable turnover = Sales on account Average accounts receivable* =

$1,240 $270 = 4.59
e. Average collection period = 365 days Accounts receivable turnover (see above) = 365
days 4.59 = 79.5 days
f. Inventory turnover = Cost of goods sold Average inventory*

= $820 $130 = 6.31
g. Average sale period = 365 days Inventory turnover (see above)

= 365 days 6.31 = 57.8 days
AACSB: Analytic
Level: Medium
16-238
198. Excerpts from Dinis Corporation's most recent balance sheet (in thousands of dollars)
appear below:
Sales on account during the year totaled $1,240 thousand. Cost of goods sold was $770
thousand.
Required:

a. Working capital.
b. Current ratio.
c. Acid-test ratio.
16-239
a. Working capital = Current assets - Current liabilities

= $470 - $240 = $230 thousand
b. Current ratio = Current assets Current liabilities

= $470 $240 = 1.96
c. Acid-test ratio = Quick assets* Current liabilities

= $300 $240 = 1.25
receivable = $140 + $0 + $160 = $300
d. Accounts receivable turnover = Sales on account Average accounts receivable* =

$1,240 $170 = 7.29
e. Average collection period = 365 days Accounts receivable turnover (see above) = 365
days 7.29 = 50.1 days
f. Inventory turnover = Cost of goods sold Average inventory*

= $770 $95 = 8.11
g. Average sale period = 365 days Inventory turnover (see above)

= 365 days 8.11 = 45.0 days
AACSB: Analytic
Level: Easy
16-240
199. Ducey Corporation's total current assets are $250,000, its noncurrent assets are $580,000,
stockholders' equity is $200,000.
Required:
Compute the company's working capital. Show your work!
Working capital = Current assets - Current liabilities = $250,000 - $160,000 = $90,000
AACSB: Analytic
Level: Easy
200. Gattuso Corporation's total current assets are $270,000, its noncurrent assets are
$760,000, its total current liabilities are $130,000, its long-term liabilities are $400,000, and
its stockholders' equity is $500,000.
Required:
Compute the company's current ratio. Show your work!
AACSB: Analytic
Level: Easy
16-241
201. Data from Panganiban Corporation's most recent balance sheet appear below:
Required:
Compute the company's acid-test ratio. Show your work!
Acid-test ratio = Quick assets* Current liabilities = $77,000 $101,000 = 0.76

receivable = $10,000 + $30,000 + $37,000 = $77,000
AACSB: Analytic
Level: Easy
16-242
202. Kapinos Corporation has provided the following data:
Required:
Compute the accounts receivable turnover for this year. Show your work!
Accounts receivable turnover = Sales on account Average accounts receivable*

= $628,000 $114,500 = 5.48
*Average accounts receivable = ($109,000 + $120,000) 2 = $114,500
AACSB: Analytic
Level: Easy
16-243
203. Data from Shamp Corporation's most recent balance sheet and income statement appear
below:
Required:
Compute the average collection period for this year:
Average collection period = 365 days Accounts receivable turnover*

= 365 days 7.73 = 47.2 days
*Accounts receivable turnover = Sales on account Average accounts receivable** =
$788,000 $102,000 = 7.73
**Average accounts receivable = ($104,000 + $100,000) 2 = $102,000
AACSB: Analytic
Level: Easy
16-244
204. Wynkoop Corporation has provided the following data:
Required:
Compute the inventory turnover for this year:
Inventory turnover = Cost of goods sold Average inventory*

= $468,000 $165,500 = 2.83
*Average inventory = ($163,000 + $168,000) 2 = $165,500
AACSB: Analytic
Level: Easy
16-245
205. Data from Sligh Corporation's most recent balance sheet and income statement appear
below:
Required:
Compute the average sale period for this year:
Average sale period = 365 days Inventory turnover*

= 365 days 3.75 = 97.3 days
*Inventory turnover = Cost of goods sold Average inventory*
= $669,000 $178,500 = 3.75
**Average inventory = ($164,000 + $193,000) 2 = $178,500
AACSB: Analytic
Level: Easy
16-246
206. Kerson Corporation's most recent balance sheet and income statement appear below:
Required:
16-247

a. Times interest earned = Net operating income Interest expense

= $112 $33 = 3.39
b. Debt-to-equity ratio = Liabilities Stockholders' equity

= $510 $710 = 0.72
AACSB: Analytic
Level: Medium
207. Trusillo Corporation's net operating income last year was $103,000; its interest expense
was $17,000; its total stockholders' equity was $1,260,000; and its total liabilities were
$380,000.
Required:

a. Times interest earned = Net operating income Interest expense = $103,000 $17,000 =
6.06
b. Debt-to-equity ratio = Liabilities Stockholders' equity = $380,000 $1,260,000 = 0.30
AACSB: Analytic
Level: Easy
16-248
208. Authement Corporation has provided the following data from its most recent income
statement:
Required:
Compute the times interest earned ratio. Show your work!
Times interest earned = Net operating income Interest expense = $90,000 $49,000 =
1.84
AACSB: Analytic
Level: Easy
209. Hacking Corporation has provided the following data from its most recent balance sheet:
Required:
Compute the debt-to-equity ratio. Show your work!
Debt-to-equity ratio = Liabilities Stockholders' equity = $540,000 $200,000 = 2.70
AACSB: Analytic
Level: Easy
16-249

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Chapter 016, "How Well Am I Doing?

" Financial Statement Analysis

LO1: Trend and common -size analyses

LO2: Ratios for common stockholders

LO3: Ratios for short -term creditors

LO4: Ratios for long -term creditors

Professional Exam Adapted

Question Type ID Origin CMA/CPA origin

40 M/C M x 6/e:18-61 Authors

69 M/C E x 12/27/95,J2 E.N.

208 Problem E x 11/1/2004 Problem X3 E.N.

True / False Questions

1. In determining whether a company's financial condition is improving or deteriorating over

Multiple Choice Questions

17. Horizontal analysis of financial statements is accomplished through:

34. Litten Corporation's most recent income statement appears below:

The gross margin percentage is closest to:

The price-earnings ratio is:

The dividend yield ratio is closest to:

The book value per share is:

48. Montgomery Corporation's most recent income statement appears below:

Sheridan's sales for the year were:

The company's acid-test ratio is closest to:

65. Dondero Corporation has provided the following data:

The accounts receivable turnover for this year is closest to:

The average collection period for this year is closest to:

67. Olea Corporation has provided the following data:

The inventory turnover for this year is closest to:

The average sale period for this year is closest to:

The times interest earned ratio is closest to:

The debt-to-equity ratio is closest to:

74. The gross margin percentage for Year 2 is closest to:

76. The price-earnings ratio for Year 2 is closest to:

77. The dividend payout ratio for Year 2 is closest to:

78. The dividend yield ratio for Year 2 is closest to:

79. The return on total assets for Year 2 is closest to:

82. The working capital at the end of Year 2 is:

83. The current ratio at the end of Year 2 is closest to:

84. The acid-test ratio at the end of Year 2 is closest to:

85. The accounts receivable turnover for Year 2 is closest to:

86. The average collection period for Year 2 is closest to:

87. The inventory turnover for Year 2 is closest to:

88. The average sale period for Year 2 is closest to:

89. The times interest earned for Year 2 is closest to:

90. The debt-to-equity ratio at the end of Year 2 is closest to:

91. The gross margin percentage for Year 2 is closest to:

93. The price-earnings ratio for Year 2 is closest to:

94. The dividend payout ratio for Year 2 is closest to:

95. The dividend yield ratio for Year 2 is closest to:

96. The return on total assets for Year 2 is closest to:

99. For Year 2, the gross margin as a percentage of sales was:

Financial statements for Oram Company appear below:

Lisa Inc.'s balance sheet appears below:

Financial statements for Larkins Company appear below:

122. The expected dividend per share of common stock is:

The following information relates to Poblano Company for last year:

124. What is Poblano's price-earnings ratio for last year?

125. What is Poblano's dividend yield ratio for last year?

127. The price-earnings ratio for Year 2 is closest to:

128. The dividend payout ratio for Year 2 is closest to:

129. The dividend yield ratio for Year 2 is closest to:

130. The return on total assets for Year 2 is closest to:

134. The price-earnings ratio for Year 2 is closest to: