2.1 HORIZONTAL ANALYSIS.

1) Which one of the following is not a tool in financial statement analysis?

A. Horizontal analysis C. Circular analysis
B. Vertical analysis D. Ratio analysis

2) Horizontal analysis is analysis

A. Of percentage changes over several years.
B. In which all items are presented as a percentage of one selected item on a financial statement.
C. In which a statistic is calculated for the relationship between two items on a single financial statement
or for two items on different financial statements.
D. Of all ratios that increased or decreased over past accounting periods.

3) Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time
A. That has been arrange from the highest amount to the lowest amount.
B. That has been arrange from lowest amount to the highest amount.
C. To determine which items are in error
D. To determine the amount and (or) percentage increase or decrease that has taken place.

4) In horizontal analysis, each item is expressed as a percentage of the

A. Retained earnings figure C. Net income figure
B. Total assets figure D. Base year figure

5) Last year, a business had no long term investments; this year, long term investments amount to
P500,000. In a horizontal analysis, the change in long term investments should be expressed as
A. An absolute value of P500,000 and an increase of 100%
B. An absolute value of P500,000 and an increase of 1,000%
C. An absolute value of P500,000 and no value for a percentage change.
D. No change in any terms because there was no investment in previous year.

6) Assume the following sales data for a company:

Year Sales
2021 P 800,000
2020 750,000
2019 625,000
2018 400,000
What is the percentage increase in sales from 2018 to 2019, assuming that 2018 is the base year?
A. 50.00%
B. 56.25%
C. 60.00%
D. 62.50%
7) Assume the following sales data for a company:
2023 - P 1,800,000
2022 - 1,500,000
2021 - 1,000,000
If 2021 is the base year, what is the percentage increase in sales from 2021 to 2023?
A. 100.0%
B. 180.0%
C. 80.0%
D. 55.5%

8) Kaemil Corporation reported the following requires:

2021 2020
Cash and cash equivalents 2,450,000 2,094,000
Receivables 1,813,000 1,611,000
Inventory 1,324,000 1,060,000
Prepaid expense 1,709,000 2,210,000
Total current assets 7,296,000 6,885,000
Other assets 18,500,000 15,737,000
Total assets 25,796,000 22,622,000

Total current liabilities 7,230,000 8,467,000

Long term liabilities 4,798,000 3,792,000
Common stock 6,568,000 4,363,000
Retained earnings 7,200,000 6,000,000
Total liabilities and equity 25,796,000 22,622,000

Sales 20,941,000
Cost of sales 7,055,000
Operating expenses 7,065,000
Operating income 6,821,000
Interest expense 210,000
Income tax 2,563,000
Net income 4,048,000

Horizontal analysis of Kaemil’s balance sheet for 2021 would report

A. Cash as 9.5% of total asset C. Current ratio of 1.01
B. 17% increase in cash D. Inventory turnover of 6 times
2.2 VERTICAL ANALYSIS.

9) The type of analysis that is concerned with the relationship among the components of the financial
statements is to prepare a
A. Vertical analysis C. Profitability analysis
B. Trend analysis D. Ratio analysis

10) In financial statements analysis, expressing figures for a single year as a percentage of a base amount
on the financial statement (for example, total assets in a balance sheet or sales in an income statement)
is called
A. Trend analysis C. Horizontal analysis
B. Variance analysis D. Vertical common size analysis

11) In vertical analysis, line items on the balance sheet are generally expressed as a percentage of
A. Total liabilities C. Total assets
B. Net income D. Cost of goods sold

12) In vertical analysis, line items on the income statement are generally expressed as a percentage of
A. Net income C. Cost of goods sold
B. Net sales D. Total assets

13) Vertical analysis is a technique that expresses each item in a financial statement
A. In dollar and cents
B. As a percentage of the item in the previous year.
C. As a percent of a base amount
D. Starting with the highest value down to the lowest value.

14) Which of the following is not revealed on a common size balance sheet?
A. The debt structure of a firm
B. The capital structure of a firm
C. The peso amount of assets and liabilities
D. The distribution of assets in which funds are invested

Use the following information for the next two (2) questions:
Kaemil Corporation reported the following requires:

2021 2020
Cash and cash equivalents 2,450,000 2,094,000
Receivables 1,813,000 1,611,000
Inventory 1,324,000 1,060,000
Prepaid expense 1,709,000 2,210,000
Total current assets 7,296,000 6,885,000
Other assets 18,500,000 15,737,000
Total assets 25,796,000 22,622,000
 Total current liabilities 7,230,000 8,467,000
Long term liabilities 4,798,000 3,792,000
Common stock 6,568,000 4,363,000
Retained earnings 7,200,000 6,000,000
Total liabilities and equity 25,796,000 22,622,000

Sales 20,941,000
Cost of sales 7,055,000
Operating expenses 7,065,000
Operating income 6,821,000
Interest expense 210,000
Income tax 2,563,000
Net income 4,048,000

15) Vertical analysis of Kaemil’s balance sheet for 2021 would report
A. Cash as 9.5% of total asset C. Current ratio of 1.01
B. 17% increase in cash D. Inventory turnover of 6 times

16) A common size income statement for Kaemil would report (amounts rounded)
A. Net income of 19% C. Cost of sales at 34%
B. Sales of 100% D. All of the above

2.3 LIQUIDITY RATIO.

Use the following information for the next two (2) questions:
The following are taken from the balance sheet of Ava Company as of December 31, 2021:

Current assets:
Cash on hand and in banks 341,600
Accounts receivable 200,000
Merchandise inventory 308,400 850,000

Current liabilities
Notes payable 280,800
Accounts payable 781,700 1,062,500
Long term liabilities 3,000,000

17) What is the company’s current ratio?

A. 0.80
B. 0.51 CA/CL
C. 0.21
D. 3.03
18) What is the company’s quick (acid test) ratio?
A. 0.51
B. 0.80 CA-Inventory /CL
C. 1.93
D. 0.32
Use the following information for the next six (2) questions:
Compute the requested ratios using the following selected financial and operating data taken from financial
statements of Anthony Corporation:

Balance Sheet As of
December 31, 2022 December 31, 2021
Cash CA 80,000 640,000
Notes and accounts receivable, net CA 400,000 1,200,000
CA
Merchandise inventory 720,000 1,200,000
Marketable securities – short term CA 240,000 80,000
Land and building – net NCA 2,720,000 2,880,000
NCL
Bonds payable – long term 2,160,000 2,240,000
Accounts payable – trade CL 560,000 880,000
CL
Notes payable – short term 160,000 320,000

Income Statement for the year ended

December 31, 2022 December 31, 2021
Sales (20% cash, 80% credit sales) 18,400,000 19,200,000
Cost of goods sold 8,000,000 11,200,000

19) Current ratio as of December 31, 2022:

A. 0.5 to 1 1,440,000 / 720,000 = 2
B. 2.0 to 1
C. 2.6 to 1
D. 1: to 2.6

20) Quick ratio as of December 31, 2022:

A. 2.0 to 1 720,000 / 720,000 = 1
B. 0.5 to 1
C. 1 to 1
D. 0.7 to 1

21) Swanson Company had P250,000 of current assets and P90,000 of current liabilities before borrowing
P60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on
Swanson Company’s current ratio?
A. The ratio remained unchanged 250,000/90,000 = 2.77
B. The change in the current ratio cannot be determined. 250,000/150,000= 1.66
 C. The ratio decreased.
D. The ratio increased.

22) Eagle Company has P9,000 in cash, P11,000 in marketable securities, P26,000 in current receivables,
P34,000 in inventories, and P40,000 in current liabilities. The company’s quick ratio is closest to
A. 1.35
B. 1.15
9,000 + 11,000 + 26,000 /40,000 = 1.15
C. 2.00
D. 1.73

23) Dart Company has a quick ratio of 2.5 to 1. It has current liabilities of P40,000 and non current assets
of P70,000. If Dart’s current ratio is 3.1 to 1, its inventory and prepaid expenses must be
A. 12,400
130,000-Preference / 610,000 = 21.3%
B. 24,000 ? / 40,000 = 2.5 100,000/40,000 =2.5
C. 30,000 ? / 40,000 = 3.1 124,000 /40,000 = 3.1
D. 40,000 24,000

24) For KOBE 24 Company has a 2 to 1 acid test ratio. This ratio would decrease to less than 2 to 1 if the
company.
A. Paid an account payable.
B. Collected an account receivable.
C. Purchased inventory on open account.
D. Sold merchandise on open account that earned a normal gross margin.
25) Mamba Forever Company has a current ratio of 2 to 1. The ratio will decrease if the company
A. Borrow cash on a 6-month note.
B. Pays a large account payable which had been a current liability.
C. Receives 5% stock dividend on one of its marketable securities.
D. Sells merchandise for more than cost and records the sale using the perpetual inventory method.

Use the following information for the next three (3) questions:
Burn Down Company has a current ratio is 2.5 to 1; the acid-test ratio is 0.9 to 1; cash and receivables are
P270,000. The current assets are composed of cash, receivables, and inventory.

26) How much is the current liabilities of Burn Down based on the above ratios?
A. 421,875
quick ratio
B. 243,000
270,000 / ? = .9 270,000/300,000 = .9
C. 300,000 270,000/.9 = 300,000
D. 108,000

27) How much is the current asset of Burn Down based on the above ratios?
A. 421,875
B. 480,000 Current ratio
C. 270,000 ?/300,000 = 2.5 750,000/300,000 =2.5
D. 750,000
2.5 x 300,000

28) How much is the inventory of the company?

P150 x 15,000 shares = 2,250,000
362,000/20 = 16.08% 750,000-270,000 = 480,000
 A. 300,000
B. 151,875
C. 480,000
D. 30,000

29) Pray For Australia Company has a quick ratio of 3.25 to 1. It has current liabilities of P90,000 and non
current assets of P560,000. If the company’s current ratio is 4 to 1, its inventory and prepaid expense
must be
A. 67,500 Quick ratio
?/90,000 = 3.25 292,500/90,000 = 3.25 360,000-292,500
B. 16,875
=67,500
C. 292,500
Current Ratio
D. 360,000 ?/90,000 = 4 360,000/90,000 = 4

30) The following data were taken form the comparative balance sheets of Avery Company:

December 31, 2022 December 31, 2021

Cash CA 35,000 33,125
CA
Marketable securities 16,375 15,125
Notes and accounts receivable, net CA 49,375 48,000
Inventories CA 71,250 69,375
Prepaid expenses CA 2,375 5,000
Notes and accounts payable (short term) CL 31,250 35,625
CL
Accrued liabilities 7,500 10,500
Bonds payable, due 2035 NCL 100,000 100,000

The company’s working capital increased (decreased) from 2021 to 2022 by:
A. 135,625
B. 124,500 2022 = 135,625
2021 = 124,500
C. (11,125) Difference = 11,125
D. 11,125

6,000
2.4 ASSET MANAGEMENT RATIO.

Use the following information for the next two (2) questions:
Jordan River Company’s net sales for the year is P15,000,000 and average accounts receivable is
P3,000,000. Use 365 days to answer the following:
31) What is the receivable turnover ratio?
A. 5 times
B. 20%
C. 73 days
D. 4 times
32) How many days sales are in accounts receivable on the average (average age of receivable)?
A. 73 days 3,000,000/41,095 = 73 days
B. 5 days
C. 72 days
D. 90 days 15,000,000/365
Ave daily credit sales = 41,095

Use the following information for the next two (2) questions:
Nile River Company’s cost of goods sold is P7,200,000 and average inventory of merchandise is P600,000.
Use 365 days to answer the following:

33) What is the inventory turnover ratio?

A. 12 times 7,200,000/600,000 = 12
B. 12 days
C. 8.33%
D. 30.42 days

34) How many days sales are in inventory on the average (average age of inventory)?
A. 12 times
B. 12 days Ave. daily credit sales = 7,200,000/365 = 19,726
C. 8.33%
D. 30.42 days Ave. daily collection = 600,000/19,726 = 30.42 days

35) Toller Drug Store had net credit sales of P6,000,000 and cost of goods sold of P2,000,000 for the year.
The accounts receivable balances at the beginning and end of the year were P350,000 and P250,000,
respectively.
The accounts receivable turnover ratio was
A. 17.1 times
6,000,000/300,000 = 20
B. 10.0 times
C. 13.3 times 350,000+250,000 = 600,000 /2 = 300,000
D. 20.0 times

36) Afraid Company has an accounts receivable turnover ratio of 9. The average accounts receivable during
the period was P525,000.
What is the amount of net sales for the period?
A. 58,333
?/525,000 = 9
4,725,000/525,000 = 9
 B. 116,667
C. 2,362,500
D. 4,725,000

37) Milward Corporation’s books disclosed the following information for the year ended December 31, 2021:
Net credit sales P 1,500,000
Net cash sales 240,000
Accounts receivable, beginning 200,000
Accounts receivable, ending 400,000
Milward’s accounts receivable turnover is
A. 3.75 times
1,500,000 / 300,000 = 5
B. 5.00 times
C. 4.35 times 200,000+400,000 = 600,000 /2 = 300,000
D. 5.80 times
38) Winter Clothing Store had a balance in the Accounts Receivable account of P390,000 at the beginning
of the year and a balance of P410,000 at the end of the year. Net credit sales during the year amounted
to P4,000,000.
The average collection period of the receivable in terms of days was:
A. 30 days
B. 73 days
Ave. daily credit sales = 4,000,000/360 = 11,111
ave. daily collection = 400,000/11,111 = 36 days
C. 365 days
D. 36 days
39) Jackson Company, a retailer, had cost of goods sold of P140,000 last year. The beginning inventory
balance was P8,000 and the ending inventory balance was P11,000.
The company’s inventory turnover ratio was closed to
A. 12.73 times
B. 14.73 times
140,000/9,500 = 14.74 times
C. 7.37 times
8,000+11,000/2 = 9,500
D. 17.50 times
40) Winslow Department Store had net credit sales of P16,000,000 and cost of goods sold of P12,000,000
for the year. The average inventory for the year amounted to P2,000,000. Using 365 days:
What is the average age of inventory?
A. 91 days ave daily credit sales = 12,000,000 / 365 = 32,877
B. 36 days ave daily collection = 2,000,000 / 32,877 = 61 days
C. 61 days
COGS ang ginamit kasi credit sales lang ang available. dapat cash and
D. 26 days credit sales

41) Virus Company has an average inventory on hand of P23,000 and the days in inventory are 29.20
days. Use 365 days. What is the cost of goods sold?
A. 143,750
B. 287,500 ave daily credit sales ? / 365 = ?
C. 335,800 ave daily collecction 23,000 / ? = 29.20

D. 671,600 23,000 / 29.20 = 788

788 X 365 = 287,500
42) The following information pertains to Asher Company for 2022:
Inventory at December 31, 2022 P 16,000
Purchases of merchandise, all on credit 72,000
Cost of goods sold 80,000
The company’s merchandise inventory turnover for 2022 was
A. 4.0 months
B. 8.0 times 80,000/16,000
COGS / INVENTORY
C. 4.0 times why hindi inaverage? dahil ba on credit yung purchased?
D. 5.0 times
43) Selected information from the accounting records of Vassar Company is as follows:
Net accounts receivable at December 31, 2020 900,000
Net accounts receivable at December 31, 2021
00 = 21.3% 1,000,000 1M+900K /2 = 950,000
Accounts receivable turnover 5 times ?/950,000=5
5 x 950,000 = 4,750,000
Inventories at December 31, 2020 1,000,000
Inventories at December 31, 2021 1,200,000 1M+1.2M /2 =1.1M
Inventory turnover 4 times ?/ 1,100,000=4
4x1.1M = 4,400,000
What was Vassar’s gross margin for 2021?
A. 350,000
4,750,000 SALES
B. 400,000 4,400,000 COGS
C. 200,000 350,000 GP
D. 500,000
44) If accounts receivable should be collected in 40 days and inventory turns over six times per year. How
long is the operating cycle?
A. 46 days
B. 15 times 365/6 = 60 + 40 = 100 days
C. 15 days
D. 100 days
45) Gard Corporation’s sales last year were P38,000, and its total assets were P16,000. What was its total
asset turnover ratio?
A. 2.04
B. 2.14 38,000/16,000 = 2.375
C. 2.26
D. 2.38
46) The data presented below show actual figures for selected accounts of McKeon Company for the fiscal
year ended May 31, 2022, and selected budget figures for the 2023 fiscal year. MckKeon’s controller is
in the process of reviewing the 2022 budget. McKeon Company monitors yield or return ratios using the
average financial position of the company. (Round all calculations to three decimal places if necessary).
May 31, 2023 May 31, 2022
Current asset 210,000 180,000
Non current asset 275,000 255,000
Current liabilities 78,000 85,000
Long term debt 75,000 30,000
Common stock P30 par value 300,000 300,000
P150 x 15,000 shares = 2,250,000
362, 16.08%
 Retained earnings 32,000 20,000
2023 operation
Sales (all credit) Type text here 350,000
Cost of goods sold 160,000
Interest expense 3,000
Income taxes (40% tax rate) 48,000
Dividends declared and paid in 2023 60,000
Administrative expenses 67,000

Current Assets
May 31, 2023 May 31, 2022
Cash 20,000 10,000
Accounts receivable 100,000 70,000
Inventory 70,000 80,000
Other 20,000 20,000
McKeon Company’s total asset turnover for 2023 is
A. 0.805
B. 0.761 350,000/485,000 = .7216
C. 0.722
D. 0.348

2.5 DEBT MANAGEMENT RATIO.

Use the following information for the next three (3) questions:
Palma Oil Corporation processes palm oils. The following information pertains to its financial position as of
December 31, 2023:
Short term debt 30,000
Long term debt 40,000
Equity 70,000
Total assets 140,000
Palma also showed the following income statement for the year just ended:
Sales 60,000
Cost of sale 36,000
Gross profit 24,000
Operating expenses 9,000
Operating income 15,000
Interest expense 6,000
Income before taxes 9,000
Income tax (30%) 2,700
Net income 6,300

47) What is the company’s times interest earned ratio?

A. 2.5 times NI before tax and interest / interest
B. 1.5 times 15,000/6,000 = 2.5 times
P150 x 15,000 shares = 2,250,000
362,000/20000 = 16.08%
 C. 11.67 times
D. 1.05 times

48) The following data were abstracted from the records of Johnson Corporation for the year:
Sales P 1,800,000
Bond interest expense 60,000
Income taxes 300,000
Net income 400,000
How many times was bond interest earned?
A. 7.67 times 760,000/60,000 = 12.67 times
B. 11.67 times
C. 12.67 times
D. 13.67 times
49) Opis Company has total assets of P475,000 and total liabilities of P130,000. The company’s debt to
equity ratio is closest to
A. 0.32 Asset = Liabilities +Equity
B. 0.21 475,000 = 130,000 + ?
C. 0.38 475,000 = 130,000 + 345,000
debt to equity ratio = 130,000/345,000 = .38
D. 0.27
50) Jordan Manufacturing reports the following capital structure:
Current liabilities P 100,000
Long term debt 400,000
Deferred income taxes 10,000
Preferred stock 80,000
Common stock 100,000
Premium on common stock 180,000
Retained earnings 170,000
What is the debt ratio? Total Liab and equity 1,040,000
A. 0.48 therefore, Asset is also 1,040,000
510,000/1,040,000 = .49
B. 0.49
C. 0.93 Total debt/total asset
D. 0.96
51) The data presented below show actual figures for selected accounts of McKeon Company for the fiscal
year ended May 31, 2022, and selected budget figures for the 2023 fiscal year. MckKeon’s controller is
in the process of reviewing the 2022 budget. McKeon Company monitors yield or return ratios using the
average financial position of the company. (Round all calculations to three decimal places if necessary).
May 31, 2023 May 31, 2022
Current asset 210,000 180,000
Non current asset 275,000 255,000
Current liabilities 78,000 85,000
Long term debt 75,000 30,000
Common stock P30 par value 300,000 300,000
Retained earnings 32,000 20,000

2023 operation
Sales (all credit) 350,000
Cost of goods sold 160,000
Interest expense 3,000
Income taxes (40% tax rate) 48,000
Dividends declared and paid in 2023 60,000
Administrative expenses 67,000

Current Assets
May 31, 2023 May 31, 2022
Cash 20,000 10,000
Accounts receivable 100,000 70,000
Inventory 70,000 80,000
Other 20,000 20,000
52) McKeon Company’s debt to total asset ratio for 2023 is
A. 0.352
B. 0.315
C. 0.264 153,000/485,000=.315
D. 0.237

2.6 PROFITABILITY RATIO.

53) Selected data from Kim Company’s year-end financial statements are presented below. The difference
between average and ending inventory is immaterial.
Current ratio 2.0 ?/120,000 = 2
Acid – test ratio 1.5 240,000 /120,000 = 2
Current liabilities P 120,000 ?/120,000 = 1.5
Sales 800,000 180,000/120,000 =1.5
Inventory turnover 8 INVENTORY 60,000

What is the gross margin percentage (ratio)? ?COGS/INVENTORY?= 8

?COGS / 60,000 = 8
800,000 sales
480,000 cogs 480,0000/60,000 = 8
320,000 GP

320,000/800,000 = 40%
 A. 20%
B. 40%
C. 50%
D. 60%

54) Selected financial data from Maria Cabal Company for the most recent year appear below:
Sales 100,000
Cost of goods sold 60,000
Dividend declared and paid 5,000
Interest expense 8,000
Operating expense 18,000
The income tax rate is 30 percent.
The return on sales ratio (a.k.a. net profit margin) was closest to:
A. 14.0%
100,000-60,000-8,000-18,000 = 14,000/100,000 = 14%
B. 40.0% Net income should be pretax and before dividend payment
C. 9.8%
D. 5.8%

Use the following information for the next three (3) questions:
The following data are available from Lennon Shipping Company. No shares were issued in 2021:

Transactions during 2021

Net sales for 2021 6,360,000
Net income for 2021 398,000
Cash dividends – preferred 36,000
Cash dividends – common 120,000
Average market price per common share P150 per share

Average balances amounts:

Common stock – par value, P100 (15,000 shares outstanding) 1,500,000
Paid in capital in excess of par – common 100,000
Preferred stock – par value, P100, 6% (6,000 shares outstanding) 600,000
Retained earnings 500,000
Average Total Shareholders’ Equity 2,700,000

Calculate the following ratios:

55) Return on total equity

A. 14.7% 398,000/2,700,000 = 14.7%
B. 13.4%
C. 11.5%
D. 8.9%
2,700,000-600,000 preferred stock =
56) Return on common equity 2,100,000
A. 14.70% 398,000-36,000 = 362,000
362,000/2,100,000 = 17.23%
 B. 13.40%
C. 5.70%
D. 17.24%

57) The following information was made available by Goslier Company:

Net income 130,000
Dividends paid to preferred stockholders 42,000
Average common stockholders’ equity 610,000
What is the company’s return on common stockholders’ equity for the year?
A. 15.8%
B. 28.1%
130,000/610,000 =21.3%
C. 21.3% hindi na binawas yung42K kasi bawas na sa
D. 14.4% NI

58) Excerpt from Wuhan Corporation’s most recent balance sheet appear below:
December 31, 2022 December 31, 2021
Preferred stock 246,000 246,000
Common stock 246,000 246,000
Additional paid in capital – common stock 492,000 492,000
Retained earnings 602,700 541,200
Total shareholders’ equity 1,586,700 1,525,200

Net income for the year ended December 31, 2022 was P115,620. Dividends on common stock were
P40,590 in total and dividends on preferred stock were P13,530. The return on common stockholders’
equity for 2022 is closest to
A. 4.8%
B. 7.4%
C. 7.8% 115,620-13,530 = 102,090/? = 7.8%
D. 8.8%
102,090/ 1,340,700 = 7.6%
1,586,700 - 246,000 preferred stock???
59) For the year 2022, Lim Company’s return on common stockholders’ equity was 12.5%. Its average
stockholders’ equity for the same period was P500,000, inclusive of P50,000 par value of preferred stock
with a dividend rate of 8%.
How much was the company’s net income for 2022?
A. 60,250 RCS = net income - preferred dividend /ave common equity
B. 56,250 RCS = ?-4,000 / 450,000 = 12.5%
C. 58,500 (56,250) - 4,000/450,000 x 12.5%
D. 62,500 60,250 - 4,000 / 450,000 =12.5%
workback 56,250 +4,000
60) The following information was made available by Dowling Company:
Net income 40,000
Interest expense 8,000
Total assets, beginning 260,000
 Total assets, ending 315,000
Tax rate 35%
What is the company’s return on total assets for the year was closest to:
A. 14.5%
B. 15.7% NI /AVE ASEETS
C. 16.7% 40,000/287,500 =
D. 13.9%

61) The following ratios were computed from Siason Company’s financial statements for 2022:

Return on assets 24%

Asset turnover 1.6 times

What was the company’s profit margin ratio (a.k.a. return on sales)?
A. 38.4%
B. 6.0% NI / SALES
C. 15.0% RETURN ON ASSETS = NI /AVE ASSETS = 24%
ASSET TURN OVER = SALES / ASSETS = 1.6 TIMES
D. 24.0%
24/1.6 = 15%

62) Presented below are selected data from the financial statements of John Cena Company for 2022 and
2021:

December 31, 2022 December 31, 2021

Net income 100,000 123,000
Cash dividends paid on preferred stock 12,000 15,000
Cash dividends paid on common stock 48,000 38,000
Weighted average number of common shares outstanding 105,000 95,000

Earnings per share is reported on 2021 income statement as

A. 0.44 2022
B. 0.55 NI - PREFERRENCE DIVIDEND / WEIGHTED AVE NUMBER OF
C. 0.84 COMMON STOCK OUTSTANDING
100,000-12,000 / 105,000 = .84
D. 0.95

63) Wellston Company’s net income last year was P300,000. The company has 100,000 shares of common
stock and 30,000 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
P1.90 per share on the common stock and P1.70 per share on the preferred stock.
The earnings per share of common stock is closest to:
A. 2.49
B. 1.10
C. 3.51 300,000-51,000 /100,000 = 2.49 SINCE NO CHANGE IN
D. 3.00 NUMBER OF COMMON STOCK
64) The following data have been taken from your company’s financial records for the current year:
Earnings per share P 4.50
Market price per share 46.00
Dividend per share 3.00
Book value per share 31.00
The price-earnings ratio is
A. 10.2
B. 6.9 price per share / earnings per share
C. 1.5 46/4.50 = 10.2
D. 15.3

65) Following are selected data taken from the records of Jemson Company:

Income before tax 200,000

Income tax rate 40%
Dividend pay-out ratio 0.80
Number of common shares outstanding 10,000 shares

How much dividends per share was paid by the company during the year?
A. 9.60
dividend per share / earnings per share = dividend pay-out ratio
B. 6.40 ?/? = 0.80
C. 16.00 ? / 12 = .80
D. 15.00 9.6 / 12 = .80
earnings per share = 200,000 x 60% /10,000 = 12
66) M Corporation’s stockholders’ equity at December 31, 2021 consists of the following:
10% Cumulative preferred stock, P100 par, outstanding 2,000 shares 200,000
Common stock, P5 par, outstanding 20,000 shares 100,000
M’s net income for the first year ended December 31 was P1,880,000, but no dividends were declared.
How much was M’s book value per common share at December 31?
A. 90
B. 99
C. 98
D. 120

Use the following information for the next four (4) questions:
Lyn Merchandising has 1,000,000 common shares outstanding, with each shares priced at P8.00. In 2021,
the company declared dividends of P0.10 per share. The balance sheet at the end of 2021 showed
approximately the same amounts as that at the end of 2020. The financial statements for Lyn Merchandising
are as follows:

Sales 4,700,000
Cost of goods sold 2,300,000
Gross profit 2,400,000
 Operating expenses:
Depreciation 320,000
Others 1,230,000 1,550,000
Income before interest and taxes 850,000
Interest expense 150,000
Income before taxes 700,000
Income taxes 280,000
Net income 420,000

Cash 220,000 Accounts payable 190,000

Accounts receivable 440,000 Accrued expenses 180,000
Inventory 410,000 Total current liabilities 370,000
Total current assets 1,070,000 Long term debt 1,960,000
Plant and equipment 5,600,000 Common stock 1,810,000
Accumulated depreciation (2,100,000) Retained earnings 430,000
Total assets 4,570,000 Total Liabilities & Equity 4,570,000

67) What is the earnings per share ratio?

A. 0.42
B. 0.70 NI / COMMON SHARES OURSTANDING
C. 0.85 420,000/1,000,000 = .42
D. 19.05

68) What is the price-earnings ratio?

A. 19.05
B. 5.25% Price per share / earnings per share
C. 23.81% 8/.42 = 19.5
D. 1.25%

69) What is the dividend yield ratio?

A. 23.81%
B. 1.25% Dividends per share / price per share
C. P80 per share .10/8 = .0125 = 12.5%
D. P4.2 per share

70) What is the dividend pay-out ratio?

A. 23.81% Dividend per share / earnings per share
B. 32.81% .10/.42 = .2381 = 23.81%
C. 25.00%
D. 1.25%