L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

FINALS EXAMINATION – FIN 2 Financial Analysis and Reporting

1st Semester, AY 2019– 2020
Prepared by: Amie Jane R. Miranda, CPA

Name:_____________________________________ Score:____________________

Student No.: _______________ Year/Section:___________ Date of Exam: ____________

I. MULTIPLE CHOICE: Choose the best answer from the choices and encircle your answer. Strictly “NO
ERASURES”.

1. Which of the following will most likely cause the debt-to-equitry ratio to increase?
a. Sale of inventories at a higher price tham its cost
b. Purchasing merchandise on account
c. Purchasing merchandise for cash
d. All of the above
2. What will happen to the current and acid-test ratios, respectively, if a particular Company uses to
pay 50 percent of its accounts payable?
a. Increase and increase
b. Decrease and decrease
c. Increase and decrease
d. Decrease and increase
3. Which of the following will most likely affect working capital?
a. Recovery of previously written-off receivables
b. Collection of Accounts Receivable
c. Selling of Marketable Securities
d. None of the above
Items 4-7 are based on the following information:
La Bekha Corporation asked you to interpret the following ratios provided by its accountant:
Acid test ratio 1.2
Times interest earned 8
Gross margin ratio 40%
Inventory turnover 6 times
Debt-to-equity ratio 0.9:1
Ratio of operating expenses to sales 15%
Total shareholder’s equity on December 31, 2019 was 900,000. Gross margin for 2019 amounted
to 600,000. Beginning balance of the merchandise inventory was 200,000. The company’s long-
term liabilities consisted of bonds payable with interest at 15%. You decided to reconstruct the
company’s financial statements based on the limited information given to serve as basis for
further analysis.
4. Operating income was computed at
a. 525,000
b. 300,000
c. 375,000
d. None of the above
5. Bonds payable totalled
a. 312,500
b. 350,000
c. 400,000
d. None of the above
6. Total current liabilities would be
a. 462,500

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 b. 497,500
c. 504,500
d. None of the above
7. The company’s total current assets amounted to:
a. 317,500
b. 597,000
c. 697,000
d. None of the above
8. San Juan Corporation’s cash conversion cycle is 72 days while it’s Receivable and Inventory
turnovers are 12 times and 5 times, respectively. If San Juan’s accounts payable averaged 50,000,
how much is the company’s total purchases? (Use 360 days)
a. 250,000
b. 600,000
c. 3,600,000
d. None of the above
9. Selected information from the accounting records of the Blackwood Co. is as follows:
Net A/R at December 31, 2018 900,000
Net A/R at December 31, 2019 1,000,000
Accounts receivable turnover 5 to 1
Inventories at December 31, 2018 1,100,000
Inventories at December 31, 2019 1,200,000
Inventory turnover 4 to 1
What was the gross margin for 2019?
a. 150,000
b. 200,000
c. 300,000
d. 400,000
10. Assume you are given the following relationships for the Orange Company:
Sales/ Total assets 1.5X
Return on Assets (ROA) 3%
Return of Equity (ROE) 5%
The Orange Company’s debt ratio is?
a. 40%
b. 60%
c. 35%
d. 65%
11. Net sales are 6,000,000, beginning total assets are 2,800,000, and the asset turnover is 3.0. what
is the ending total asset balance?
a. 2,000,000
b. 1,200,000
c. 2,800,000
d. 1,600,000
12. Given an acid test ratio of 2.0, current assets of 5,000 an inventory of 2,000, the value of current
liabilities is
a. 1,500
b. 2,500
c. 3,500
d. 6,000
13. Windham has current assets of 400,000 and current liabilities of 500,000. Windham Company’s
current ratio would be increased by:
a. The purchase of 100,000 of inventory on account.
b. The payment of 100,000 of accounts payable
c. The collection of 100,000 of accounts receivable
d. Refinancing of 100,000 long-term loans with short-term debt.
Tosh Enterprise reported the following account information:
Accounts Receivable 400,000
Accounts Payable 160,000
Bonds Payable, due in 10 years 600,000

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 Cash 200,000
Interest Payable, due in 3 months 20,000
Inventory 800,000
Land 500,000
Notes Payable, due in 6 months 100,000
Prepaid Expenses 80,000
The company has a normal operating cycle of 6 months.
14. The current ratio of Tosh Enterprise is
a. 1.68
b. 2.14
c. 5.00
d. 5.29
15. What is the company’s quick (acid-test) ratio?
a. 0.68
b. 1.68
c. 2.14
d. 2.31
16. The amount of working capital is
a. 600,000
b. 1,120,000
c. 1,200,000
d. 1,220,000
17. Accounts receivable turnover ratio will normally decrease as a result of
a. The write-off of an uncollectible account (assume the use of the allowance method)
b. A significant sales volume decrease near the end of the accounting period.
c. An increase in cash sales in proportion to credit sales
d. A change in credit policy to lengthen the period for cash discout
The selected data pertain to a company at December 31
Quick assets 205,000
Acid Test Ratio 2.6 to 1
Current Ratio 3.5 to 1
Net sales for the year 1,800,000
Cost of sales for the year 990,000
Average total assets for the year 1,200,000
18. The company’s current liabilities at December 31, equal:
a. 59,429
b. 80,000
c. 134,857
d. 187,200
19. The company’s inventory balance at December 31 is
a. 72,000
b. 187,200
c. 231,111
d. 282,857
20. The company’s asset turn over ratio for the year is
a. .675
b. .825
c. 1.21
d. 1.50
21. Based on the data presented below, what is Beta Corporation’s cost of sales for the year?
Current Ratio 3.5
Acid test Ratio 3.0
Year-end current liabilities 600,000
Beginning inventory 500,000
Inventory turnover 8.0
a. 1,600,000
b. 2,400,000
c. 3,200,000

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 d. 6,400,000
22. Watson’s Corporation computed the following itmes from its financial records for the year:
Price-earnings ratio 12
Pay-out ratio .6
Asset Turnover ratio .9
The dividend yield on Watson’s common stock is
a. 5.0%
b. 7.2%
c. 7.5%
d. 10.8%
23. The following information is provided about the common stock of evergreen Inc. at the end of
the fiscal year:
Number of shares outstanding 1,800,000
Par value per share 10.00
Dividends paid per share (last 12 months) 12.00
Market price per share 108.00
Basic earnings per share 36.00
Diluted earnings per share 24.00
The price-earnings ratio for Evergreen’s common stock is
a. 3.0 times
b. 4.5 times
c. 9.0 times
d. 10.8 times
24. Baylor Company paid out one-half of last year’s earnings in dividends. Baylor’s earnings increased
by 20% and the amount of its dividends increased by 15% in the current year. Baylor’s dividend
pay-out ratio for the current year was
a. 50%
b. 57.5%
c. 47.9%
d. 78%
25. Marko Corporation uses the allowance method for bad-debts. During 2019, Marko charged-
30,000 to bad debts expense and wrote-off 25,200 of uncollectible accounts receivable. These
transactions resulted in a decrease in working capital of
a. None
b. 4,800
c. 25,200
d. 30,000
26. Selected information from the Vigor Company’s accounting records is as follows:
Net Accounts Receivable at December 31, 2018 900,000
Net Accounts Receivable at December 31, 2019 1,000,000
Inventories at December 31, 2018 1,100,000
Inventories at December 31, 2019 1,200,000
Accounts Receivable Turnover 5 to 1
Inventory Turnover 4 to 1
What was Vigor’s gross margin for 2019?
a. 150,000
b. 200,000
c. 300,000
d. 400,000
27. Selected information for 2019 for the Prince Company is as follows:
Cost of Goods Sold 5,400,000
Average Inventory 1,800,000
Net Sales 7,200,000
Average Receivables 960,000
Net Income 720,000
Assuming a business year consisting of 360 days, what was the average number of days in
operating cycle for 2019?
a. 72 days

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 b. 84 days
c. 144 days
d. 168 days
28. Royal Company’s net accounts receivable were 500,000 at December 31, 2019 and 600,000 at
December 31, 2020. Net cash sales for 2020were 200,000. The accounts receivable turnover for
2020 was 5.0. What was Royal’s net sale for 2020?
a. 2,950,000
b. 3,000,000
c. 3,200,000
d. 5,500,000
29. During 2019, Red Incorporated purchased 2,000,000 of inventory. The cost of goods sold for
2019 was 2,200,000 and the ending inventory at December 31, 2019 was 400,000. What was the
Inventory turnover for 2019?
a. 4.0 times
b. 4.4 times
c. 5.5 times
d. 11.0 times
30. At December 31, 2018, Richmond Company had 100,000 sahres of 10 par value common stock
issued and outstanding. There was no change in the number of shares outstanding during 2019.
Total stockholder’s equity at December 31, 2019 was 2,800,000. The net income for the year
ended December 31, 2019 was 800,000. During 2019, Richmond paid 3.00 per share in dividends
on its common stock. The qouted market value of Richmond’s common stock on the National
Stock exchanges was 24 on December 31, 2019. What was the price-earnings ratio on common
stock for 2019?
a. 3.0 to 1
b. 3.5 to 1
c. 4.8 to 1
d. 8.0 to 1
31. A frim has a total interest expense of 16,000 per year, sales of 600,000 per year, a tax arte of 30%
and a net profit after tax of 56,000. What is the firm’s times interest earbed ratio?
a. 6
b. 5
c. 4.5
d. 3.5
32. Francis Company’s debt to equity ratio is 0.6 to 1. Current liabilities total 120,000 and long term
liabilities total 360,000. If Francis Company has working capital equal to 140,000, total assets
must equal
a. 600,000
b. 1,200,000
c. 800,000
d. 1,280,000
33. A company reported 10,000 of income for 2010, 12,000 for year 2011, and 13,000 for 2012. The
percentage change in net income from 2011 to 2012 was:
a. 10.0%
b. 8.3%
c. 7.7%
d. 8.0%
34. A firm has total interest charges of 20,000 per year, sales of 2 million a tax rate of 40% and a
profit margin of 6%. What is the firm’s times interest earned ratio?
a. 10
b. 11
c. 12
d. 13
35. You are given the following information: Stockholders’ equity= 1,250; price/earnings ratio= 5;
shares outstanding= 25; and market/ book ratio= 1.5. Calculate the market price of a share of the
company’s stock.
a. 33.33
b. 75.00

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 c. 10.00
d. 166.67
36. Given the following information, calculate the market price per share of WAM Inc.
Net Income 200,000.00
Earnings per share 2.00
Stockholders’equity 2,000,000.00
Market/Book ratio 0.20
a. 20
b. 8
c. 4
d. 2
37. A firm has a profit margin of 15 percent on sales of 20,000,000.00. If the firm has debt of
7,500,000, total assets of 22,500,000, and an after-tax interest cost on total debt of 5 percent,
what is the firm’s ROA?
a. 8.4%
b. 10.9%
c. 12.0%
d. 13.3%
38. Culver Inc. has earnings after interest but before taxes of 300. The company’s times interest
earned ratio is 7.00. Calculate the company’s interest charges.
a. 42.86
b. 50.00
c. 40.00
d. 60.00
39. Tapley Dental Supply Company has the following data:
Net Income 240
Sales 10,000
Total Assets 6,000
Debt ratio 75%
TIE ratio 2.0
Current ratio 1.2
BEP ratio 13.33%
If Tapley could streamline operations, cut opearting costs, and raise net income to 300 without
affecting sales or the balance sheet (the additional profits will be paid out as dividends), by how
much would its ROE increase?
a. 3.00%
b. 3.50%
c. 4.00%
d. 4.25%
40. Selzer Inc. sells all its merchandise on credit. It has a profit margin of 4 percent, days sales
outstanding equal to 60 days, receivables of 150,000, total assets of 3 million, and a debt ratio of
0.64. What is the firm’s return on equity (ROE)? Assume a 365-day year.
a. 7.1%
b. 33.4%
c. 3.4%
d. 71.0%

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II. COMPUTATION: Show your complete solutions (10 pts)

Company M Company B Company G

Earnings per share 10 25 ________
Market value of share 20 ________ 80
Dividends per share 5 5 ________
Dividends Payout ________ ________ 60%
Dividends Yield ________ ________ 10%
Price-Earnings Ratio ________ 3 times ________

ajmiranda
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Goodluck and Godbless

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, FRIAcc

Dean, College of Business Education

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