# FINANCE 571- Which one of the following accounts is included in stockholders’ equity

1.Which one of the following

accounts is included in stockholders’ equity?

a) deferred taxes

b) accumulated retained earnings

c) plant and equipment

d) intangible assets

e) long-term debt

2.Net working capital is defined

as:

a) current assets minus current liabilities.

b) total assets minus total liabilities.

c) current assets plus fixed assets.

d) fixed assets minus long-term liabilities.

e) current assets plus stockholders’ equity.

3.Which one of the following is a

current liability?

a) amount due from a customer in 30 days

b) loan payment due in 13 months

c) debt payable to a mortgage company in nine months

d) estimated taxes just paid

e) amount due to a supplier in 18 months

4.If a

firm is currently profitable, then:

a)

its current cash inflows must exceed

its current cash outflows.

b)

the timing of the cash flows on

proposed projects is irrelevant.

c)

it will always have sufficient cash to

pay its bills in a timely manner.

d)

its reported sales exceed its costs.

e)

its cash flows are known with

certainty.

5.Which one of these is a

non-cash item?

a) current taxes

b) interest expense

c) dividends

d) depreciation

e) selling expenses

6.

Sankey, Inc., has current assets of $5,760,

net fixed assets of $25,500, current liabilities of $5,200, and long-term debt

of $12,500. (Do not round intermediate calculations.)

What is the value of the shareholders’

equity account for this firm?

Shareholders’ equity $

How much is net working capital?

Net

working capital $

7.

Shelton, Inc., has sales of $406,000, costs

of $194,000, depreciation expense of $59,000, interest expense of $40,000, and

a tax rate of 35 percent. (Do not round intermediate calculations.)

What is the net income for the firm?

Net

income $

Suppose the company paid out $49,000 in

cash dividends. What is the addition to retained earnings?

Addition to retained earnings $

8.

During the year, the Senbet Discount Tire

Company had gross sales of $1.07 million. The firm’s cost of goods sold and

selling expenses were $526,000 and $216,000, respectively. The firm also had

notes payable of $810,000. These notes carried an interest rate of 6 percent.

Depreciation was $131,000. The firm’s tax rate was 30 percent.

a.

What was the firm’s net income? (Do not

round intermediate calculations. Enter your answer in dollars, not millions of

dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g.,

32.)

Net

income $

b.

What was the firm’s operating cash flow?

(Do not round intermediate calculations. Enter your answer in dollars, not

millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole

number, e.g., 32.)

Operating cash flow $

10.

The debt-equity ratio is measured as:

a)

total equity divided by

long-term debt.

b)

total assets minus total debt,

divided by total equity.

c)

total debt divided by total

equity.

d)

long-term debt divided by total

equity.

e)

total equity divided by total

debt.

11.

If a firm produces a return on assets of 15 percent and also a

return on equity of 15 percent, then the firm:

a)

is using its assets as

efficiently as possible.

b)

has no net working capital.

c)

has no debt of any kind.

d)

has an equity multiplier of 2.

e)

also has a current ratio of 15.

12.

A firm has total debt of $1,250 and a

debt-equity ratio of .35. What is the value of the total assets?

a)

$4,385

b)

$1,688

c)

$3,571

d)

$3,500

e)

$4,821

13.

Al’s Sport Store has sales of $3,070, costs

of goods sold of $2,050, inventory of $544, and accounts receivable of $416.

How many days, on average, does it take the firm to sell its inventory assuming

that all sales are on credit?

a)

114.8

b)

64.7

c)

114.0

d)

95.5

e)

96.9

14.

The current ratio is measured as:

a)

current assets minus current

liabilities.

b)

current liabilities minus

inventory, divided by current assets.

c)

current liabilities divided by

current assets.

d)

current assets divided by

current liabilities.

e)

cash on hand divided by current

liabilities.

15.

The higher the inventory turnover, the:

a)

greater the amount of inventory

held by a firm.

b)

longer it takes a firm to sell

its inventory.

c)

less time inventory items

remain on the shelf.

d)

higher the inventory as a

percentage of total assets.

e)

lesser the amount of inventory

held by a firm.

16.

The quick ratio is measured as:

a)

cash on hand plus current

liabilities, divided by current assets.

b)

current liabilities divided by

current assets, plus inventory.

c)

current assets divided by

current liabilities.

d)

current assets minus inventory,

divided by current liabilities.

e)

current assets minus inventory

minus current liabilities.

17.

The inventory turnover ratio is measured

as:

a)

inventory times total sales.

b)

inventory divided by cost of

goods sold.

c)

total sales minus inventory.

d)

cost of goods sold divided by

inventory.

e)

inventory divided by sales.

18.

Ratios that measure how efficiently a

firm’s management uses its assets and equity to generate bottom line net income

are known as _______ ratios.

a)

market value

b)

asset management

c)

short-term solvency

d)

profitability

e)

long-term solvency

19.

The total asset turnover ratio measures the

amount of:

a)

total assets needed for every

$1 of sales.

b)

sales generated by every $1 in

total assets.

c)

fixed assets required for every

$1 of sales.

d)

net income generated by every

$1 in total assets.

e)

net income than can be

generated by every $1 of fixed assets.

20.

A firm has a debt-equity ratio of .37. What

is the total debt ratio?

a)

.59

b)

1.70

c)

.41

d)

.27

e)

1.37

21.

A firm has a total debt ratio of .47. This

means the firm has 47 cents in debt for every:

a)

$.53 in total assets.

b)

$1 in total equity.

c)

$.53 in total equity.

d)

$1 in fixed assets.

e)

$1 in current assets.

22.

Which statement expresses all accounts as a

percentage of total assets?

a)

statement of cash flows

b)

common-size income statement

c)

pro forma balance sheet

d)

pro forma income statement

e)

common-size balance sheet

23.

Galaxy United, Inc.

2009 Income Statement

($ in millions)

Net sales

$8,500

Less: Cost of goods

sold

7,240

Less: Depreciation

410

Earnings before

interest and taxes

850

Less: Interest paid

77

Taxable Income

773

Less: Taxes

270

Net income

$ 502

Galaxy United, Inc.

2008 and 2009 Balance Sheets

($ in millions)

2008

2009

2008

2009

Cash

$ 120

$ 150

Accounts payable

$1,120

$1,150

Accounts rec.

940

780

Long-term debt

930

1,209

Inventory

1,480

1,510

Common stock

$3,180

$2,980

Sub-total

$2,540

$2,440

Retained earnings

500

701

Net fixed assets

3,190

3,600

Total assets

$5,730

$6,040

Total liab.

&equity

$5,730

$6,040

What is the return

on equity for 2009?

rev: 01_14_2016_QC_CS-37830

a) 9 percent

b) 17 percent

c) 15 percent

d) 12 percent

e) 14 percent

24.

If Wilkinson, Inc., has an equity

multiplier of 1.65, total asset turnover of 1.7, and a profit margin of 4.5

percent, what is its ROE? (Do not round intermediate calculations and enter

your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

ROE __________%

25.

The financial ratio measured as

net income divided by sales is known as the firm’s:

a) return on assets.

b) earnings before interest and taxes.

c) asset turnover.

d) profit margin.

e) return on equity.

26.

The financial ratio that measures

the accounting profit per dollar of book equity is referred to as the:

a) market profit-to-book ratio.

b) equity turnover.

c) profit margin.

d) return on equity.

e) price-earnings ratio.

27.

Puffy’s Pastries generates five

cents of net income for every $1 in equity. Thus, Puffy’s has _______ of 5

percent.

a) a price-earnings ratio

b) an EV multiple

c) a profit margin

d) a return on assets

e) a return on equity

28.

If stockholders want to know how

much profit the firm is making on their entire investment in that firm, the

stockholders should refer to the:

a) return on assets.

b) earnings per share.

c) return on equity.

d) equity multiplier.

e) profit margin.

29.

The most effective method of directly

evaluating the financial performance of a firm is to compare the financial

ratios of the firm to:

a)

those of other firms located in

the same geographic area that are similarly sized.

b)

the average ratios of the

firm’s international peer group.

c)

the firm’s ratios from prior

time periods and to the ratios of firms with similar operations.

d)

the average ratios of all firms

within the same country over a period of time.

e)

those of the largest conglomerate

that has operations in the same industry as the firm.

30.

Which one of these equations is an accurate

expression of the balance sheet?

a)

Liabilities? Stockholders’ equity ?Assets

b)

Assets? Stockholders’ equity ?Liabilities

c)

Stockholders’ equity? Assets

+ Liabilities

d)

Stockholders’ equity? Assets ?Liabilities

e)

Assets? Liabilities ?Stockholders’ equity

31.

The financial statement summarizing a

firm’s accounting performance over a period of time is the:

a)

statement of equity.

b)

income statement.

c)

balance sheet.

d)

statement of cash flows.

e)

tax reconciliation statement.

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