Multiple Choice

MA_U10_1-5: See attached file for problems

1. What type of analysis is indicated by the following?
Increase (Decrease*)
2007 2006 Amount Percent
Current assets $ 380,000 $ 500,000 $120,000* 24%*
Fixed assets 1,680,000 1,500,000 180,000 12%

vertical analysis
horizontal analysis
liquidity analysis
common-size analysis

2. Assume the following sales data for a company:
2007 750,000
2006 600,000

What is the percentage increase in sales from 2006 to 2007?
25%
125%
20%
167%

3. Based on the following data, what is the quick ratio, rounded to one decimal point?
Accounts payable $ 30,000
Accounts receivable 65,000
Accrued liabilities 7,000
Cash 20,000
Intangible assets 40,000
Inventory 72,000
Long-term investments 100,000
Long-term liabilities 75,000
Marketable securities 36,000
Notes payable (short-term) 20,000
Property, plant, and equipment 625,000
Prepaid expenses 2,000

2.4
3.4
2.1
1.5

4. Based on the following data for the current year, what is the number of days’ sales in inventory?
Net sales on account during year $1,204,500
Cost of merchandise sold during year 657,000
Accounts receivable, beginning of year 75,000
Accounts receivable, end of year 85,000
Inventory, beginning of year 81,600
Inventory, end of year 98,600

50.5
45.3
24.7
29.9

5. The following information pertains to Tanzi Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets

Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 215,000
Total Assets $310,000
Liabilities and Stockholders’ Equity

Current liabilities $ 60,000
Long-term liabilities 95,000
Stockholders’ equity-common 155,000
Total Liabilities and stockholders’ equity $310,000
Income Statement

Sales $ 90,000
Cost of goods sold 45,000
Gross margin 45,000
Operating expenses 20,000
Net income $ 25,000

Number of shares of common stock 6,000
Market price of common stock $20

What is the current ratio for this company?
1.42%
.78%
1.58%
.67%

Attachments

  • MA_U10_1-5.doc

Solution Preview

Please see the attachment

1. What type of analysis is indicated by the following?
Increase (Decrease*)
2007 2006 Amount Percent
Current assets $ 380,000 $ 500,000 $120,000* 24%*
Fixed assets 1,680,000 1,500,000 180,000 12%

vertical analysis
horizontal analysis
liquidity analysis
common-size analysis

In horizontal analysis we take the increase/decrease for the year in relation to a base year and express it in value and percent

2. Assume the following sales data for a company:
2007 750,000
2006 600,000

What is the percentage increase in sales from 2006 to 2007?
25%
125%
20%
167%

Percentage increase = (750,000-600,000)/600,000 = 25%

3. Based on the …

Solution Summary

The solution explains some multiple choice questions relating to ratio analysis

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