101) Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

A) Return on equity

B) The acid test ratio

C) The operating profit margin

D) The fixed asset turnover

102) During the past year the growth corporation increased its sales from $1,000,000 to $2,000,000 and its EBIT from $250,000 to $400,000. The result of this growth will be

A) a higher operating profit margin and higher net income.

B) a lower operating profit margin and lower net income.

C) a lower operating profit margin and higher net income.

D) a higher P/E ratio.

103) CPR Corp. has cash of $100,000; short-term notes payable of $75,000, accounts receivable of $125,000; accounts payable of $140,000; inventories of $200,000; and accruals of $55,000. What is CPR’s current ratio?

A) 1.57

B) 2.71

C) 1.42

D) 0.64

104) Which of the following ratios would be the best way to determine how customers are paying for their purchases?

A) Inventory turnover

B) Total asset turnover

C) Current ratio

D) Average collection period

105) Secular Electric has total equity of $560,000; sales of $2,250,000; current assets of $700,000; and total liabilities of $435,000. What is Secular Electric’s total asset turnover?

A) 4.02

B) 3.21

C) 2.26

D) 5.51

106) Solid State, Inc. has a total equity of $560,000; sales of $2,250,000; total assets of $995,000; and current liabilities of $310,000. What is Solid State’s debt ratio?

A) 55.4%

B) 43.7%

C) 31.2%

D) 66.7%

107) Roxbury has sales of $2,250,000; a gross profit of $825,000; total operating costs of $620,000; income taxes of $74,800; total assets of $995,000; and interest expense of $18,000. What is Roxbury’s times interest earned ratio?

A) 1.3

B) 11.4

C) 8.1

D) 45.8

108) Which of the following has the most significant influence on return on equity?

A) Common dividends

B) Principal payments

C) Accruals

D) Operating income

109) S. Panya has total assets of $1,000,000; common equity of $400,000; a gross profit of $800,000; total operating expenses of $620,000; interest expense of $20,000; income taxes of $74,000; and preferred dividends of $30,000. What is S. Panya’s return on equity?

A) 7.5%

B) 20.0%

C) 21.5%

D) 14.0%

110) Assume that a firm issues a six-month note to purchase inventory. Which of the following is true if the current ratio before the purchase is 1.0?

A) the firm’s current ratio must decrease

B) the firm’s quick ratio will stay the same

C) the firm’s current ratio will increase

D) the firm’s quick ratio might decrease

111) Which of the following is true if a firm wishes to collect its accounts faster by imposing stricter credit terms on its customers?

A) the firm’s average collection period is likely to fall

B) the firm’s accounts receivable turnover might rise

C) the firm’s sales might decrease

D) all of the above

112) Anton’s Coffee Shop has a return on assets of 12%. Anton’s assets = $100 while Anton’s owner’s equity = $40 and its debt equals $60. What is Anton’s return on equity?

A) 18%

B) 20%

C) 30%

D) 12%

113) All of the following will improve a firm’s liquidity position except:

A) increase accounts receivable turnover.

B) increase inventory turnover.

C) increase the average collection period.

D) increase long-term debt and invest the money in marketable securities.

114) A company borrows $10,000 and puts the money into its checking account.  This transaction will increase the company’s current ratio if prior to the transaction the company’s current ratio was

A) equal to one.

B) greater than one.

C) less than one.

D) greater than or less than one, but not equal to one.

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