11) Carey's Department Store had net sales of $20 million and cost of goods sold of $14 million for the year. The beginning inventory for the year was $3 million. The ending inventory for the year was $5 million. What was the days' inventory outstanding?
A) 73
B) 78
C) 104
D) 130
12) Marie's Clothing Store had an accounts receivable balance of $420,000 at the beginning of the year and a year-end balance of $510,000. Net credit sales for the year totaled $2,100,000. The average collection period of the receivables was:
A) 41 days.
B) 52 days.
C) 81 days.
D) 91 days.
13) The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their accounts is the:
A) days' sales in receivables
B) current ratio.
C) accounts receivable turnover.
D) acid-test ratio.
14) The ratio that measures a company's success in using its assets to earn income for the persons who finance the business is the:
A) leverage.
B) rate of return on total assets.
C) debt ratio.
D) times-interest-earned ratio.
15) The ratio that measures the number of times that operating income can cover interest expense is the:
A) leverage.
B) rate of return on total assets.
C) debt ratio.
D) times-interest-earned ratio.
16) The amount of a company's net income earned for each share of its outstanding common stock is termed the:
A) return on equity.
B) price/earnings ratio.
C) earnings per share.
D) dividend yield.
17) XYZ Company has an inventory turnover of 20 times per year. The industry average is 5.0 times per year. What does a high inventory turnover mean?
A) The company has too much inventory on hand.
B) The company may have obsolete inventory on hand.
C) The company may not be keeping enough inventory on hand which can lead to lost sales.
D) The company is having a difficult time selling the inventory.
18) American Furniture Company has an accounts receivable turnover ratio of 20 while the industry average is 10. What can be said about American Furniture Company's accounts receivable turnover ratio?
A) American Furniture Company collects accounts receivable slower than the industry average.
B) American Furniture Company collects accounts receivable faster than the industry average.
C) American Furniture Company may have a credit policy that is too lenient in granting credit to new customers.
D) American Furniture Company may have a lax credit department.
19) What is accounts payable turnover?
A) A ratio calculated as Purchases divided by ending balance in Accounts Payable.
B) A ratio calculated as Cost of Goods Sold divided by average Accounts Payable.
C) A ratio calculated as Purchases divided by average Accounts Payable.
D) B and C
20) How is the cash conversion cycle computed?
A) days' inventory outstanding + days' sales outstanding - days' payable outstanding
B) days' inventory outstanding - days' sales outstanding - days' payable outstanding
C) days' inventory outstanding - days' sales outstanding + days' payable outstanding
D) days' inventory outstanding + days' sales outstanding + days' payable outstanding