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Exam 14: Capital Budgeting Decisions

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Question 51

Multiple Choice

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Spincic Corporation has provided the following data: The market price of common stock at the end of Year 2 was $4.13 per share.The company's price-earnings ratio for Year 2 is closest to:

A) 0.52
B) 8.10
C) 6.16
D) 12.52

E) A) and B)
F) A) and C)

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Question 52

Multiple Choice

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Accounts receivable turnover will normally decrease as a result of:

A) the write-off of an uncollectible account against the allowance for bad debts.
B) a significant sales volume decrease near the end of the accounting period.
C) an increase in cash sales in proportion to credit sales.
D) a change in credit policy to lengthen the period for cash discounts.

E) A) and B)
F) None of the above

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Question 53

Multiple Choice

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Frantic Corporation had $130,000 in sales on account last year.The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000.The corporation's accounts receivable turnover was closest to:

Mayfield Corporation has provided the following financial data: The company's current ratio is closest to:

Financial statements for Maraby Corporation appear below: Maraby Corporation's working capital (in thousands of dollars) at the end of Year 2 was closest to:

As the accounts receivable turnover ratio decreases,the average collection period increases.

Fraction Corporation has provided the following financial data: Required: a.What is the company's times interest earned for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2?

Lindboe Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $4,800.The market price of common stock at the end of Year 2 was $5.46 per share. Required: a.What is the company's times interest earned for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2? d.What is the company's net profit margin percentage for Year 2? e.What is the company's gross margin percentage for Year 2? f.What is the company's return on total assets for Year 2? g.What is the company's return on equity for Year 2?

Data from Dunshee Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. The average sale period for Year 2 is closest to:

A company's current ratio and an acid-test ratio are both greater than 1.Payment of an account payable would:

Freiman Corporation's most recent balance sheet and income statement appear below: The inventory turnover for Year 2 is closest to:

Perrett Corporation has provided the following financial data: Required: a.What is the company's net profit margin percentage for Year 2? b.What is the company's gross margin percentage for Year 2? c.What is the company's return on total assets for Year 2? d.What is the company's return on equity for Year 2?

Uhri Corporation has provided the following data: Dividends on common stock during Year 2 totaled $4,000.The market price of common stock at the end of Year 2 was $6.08 per share.The company's dividend payout ratio for Year 2 is closest to:

The times interest earned ratio is based on net income because that is the amount of earnings that is available for making interest payments.Interest expense is deducted before taxes are determined;creditors have first claim on the earnings before taxes are paid.

When computing the return on total assets,the interest expense is added back to net income to show what earnings would have been if the company had no debt.

Issuing common stock will decrease a company's financial leverage.

The gross margin percentage is computed by dividing sales by the gross margin.

Financial statements for Narstad Corporation appear below: Narstad Corporation's times interest earned for Year 2 was closest to:

Data from Yochem Corporation's most recent balance sheet appear below: Required: Compute the company's acid-test ratio.Show your work!

If the acid-test ratio is less than one,then paying off some current liabilities with cash will increase the acid-test (quick)ratio.