41) The rate of return on net sales is calculated as:
A) gross margin / net sales
B) net income / net sales
C) operating income / net sales
D) dividends paid during the year / net sales
42) Cash is received in payment on account. How will this transaction affect working capital?
A) The working capital will increase.
B) The working capital will decrease.
C) The working capital may either increase or decrease.
D) The working capital will remain unchanged.
43) Which of the following ratios measures profitability?
A) rate of return on total assets
B) times-interest-earned ratio
C) inventory turnover
D) book value per share of common shares
44) Stocks with a high price/earnings ratio:
A) tend to be more risky
B) tend to be less risky
C) would typically be found in older, stable industries where little future growth is expected
D) are often purchased by smart investors who interpret an increase in the P/E ratio as a signal to buy a stock
45) The debt ratio is an indicator of a company's:
A) relationship between current liabilities and current assets
B) relationship between debt and interest expense
C) relationship between interest expense and income
D) percentage of assets financed with debt
46) All of the following ratios directly relate to the analysis of a given stock as an investment
except
the:
A) earnings per share
B) dividend yield
C) current ratio
D) book value per share of common shares
47) Which of the following statements about current ratios is most appropriate?
A) The determination of whether a current ratio is acceptable is best made by reference to industry norms.
B) A current ratio less than 1.5 is unacceptable.
C) A current ratio greater than 1.0 is excellent.
D) The determination of whether a current ratio is acceptable is best made by reference to industry norms, a current ratio less than 1.5 is unacceptable and a current ratio greater than 1.0 is excellent.
48) Trent Corporation has total current assets equal to $50,000 and working capital of $20,000. Fleming Company has the same amount of working capital, but it has total current assets of $300,000. The company with the better working capital position is:
A) Fleming Company
B) Trent Corporation
C) They both have equally good working capital positions.
D) indeterminable with the information given
49) If all else is held equal, an increase in the current ratio of a company is generally considered to be:
A) an indication that current assets have decreased
B) an indication that current liabilities have increased
C) an indication that the company will have increased difficulty meeting short-term obligations
D) an indication that the company will be better able to meet short-term debt obligations
50) Yukon Company has total current liabilities equal to $600,000 and working capital of $30,000. North Company has the same amount of working capital, but it has total current liabilities of $40,000. The company with the better working capital position is:
A) North Company
B) Yukon Company
C) They both have exactly the same working capital position.
D) indeterminable with the information given