Accounting Quiz
Multiple Choice (80%)
1. Which of the following is not a category of financial statement ratios?
a. Financial leverage.
b. Liquidity.
c. Profitability.
d. Prospectus. 2. An individual interested in making a judgment about the profitability of a company should:
a. review the trend of working capital for several years.
b. calculate the company's ROI for the most recent year.
c. review the trend of the company's ROI for several years.
d. compare the company's ROI for the most recent year with the industry average ROI for the most recent year. 3. A potential creditor's judgment about granting credit would be most influenced by the potential customer's:
a. current ratio at the end of the prior fiscal year.
b. most recent acid-test …show more content…
requires knowledge of the inventory cost flow assumption being used.
5. If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:
a. less than 10.
b. between 10 and 25.
c. between 25 and 40.
d. over 40.
6. When a firm has financial leverage:
a. ROI will be greater than ROE.
b. ROI will usually be less than it would be without leverage.
c. risk is greater than if there isn't any leverage.
d. the firm will always have a higher ROE than it would without leverage.
7. If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:
a. the market value of the common stock would be $20.83 per share.
b. the market value of the common stock would be $25.00 per share.
c. an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share.
d. an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share. 8. When a corporation has both common stock and preferred stock outstanding:
a. dividends on preferred stock are paid only if the company has current …show more content…
XYZ Company incurred the following costs for the month of August when it observed an activity level of 10,000 units.
During October, the activity level was 16,000 units, and the total costs incurred were $150,000.
a. Calculate the variable costs, fixed costs, and mixed costs incurred during October.
b. Use the high-low method to calculate the cost formula for mixed costs.
c. If the activity level were expected to be 13,800 units for the month of December, what amount of total costs would be expected? 42. Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units.
(a) Calculate the operating income for July.
(b) Calculate the break-even point in units sold and total revenues.
(c) Management is considering the use of automated production equipment. If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month.
(1.) Calculate operating income at a volume of 12,000 units per month with the new cost
1. Which of the following is not a category of financial statement ratios?
a. Financial leverage.
b. Liquidity.
c. Profitability.
d. Prospectus. 2. An individual interested in making a judgment about the profitability of a company should:
a. review the trend of working capital for several years.
b. calculate the company's ROI for the most recent year.
c. review the trend of the company's ROI for several years.
d. compare the company's ROI for the most recent year with the industry average ROI for the most recent year. 3. A potential creditor's judgment about granting credit would be most influenced by the potential customer's:
a. current ratio at the end of the prior fiscal year.
b. most recent acid-test …show more content…
requires knowledge of the inventory cost flow assumption being used.
5. If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:
a. less than 10.
b. between 10 and 25.
c. between 25 and 40.
d. over 40.
6. When a firm has financial leverage:
a. ROI will be greater than ROE.
b. ROI will usually be less than it would be without leverage.
c. risk is greater than if there isn't any leverage.
d. the firm will always have a higher ROE than it would without leverage.
7. If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:
a. the market value of the common stock would be $20.83 per share.
b. the market value of the common stock would be $25.00 per share.
c. an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share.
d. an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share. 8. When a corporation has both common stock and preferred stock outstanding:
a. dividends on preferred stock are paid only if the company has current …show more content…
XYZ Company incurred the following costs for the month of August when it observed an activity level of 10,000 units.
During October, the activity level was 16,000 units, and the total costs incurred were $150,000.
a. Calculate the variable costs, fixed costs, and mixed costs incurred during October.
b. Use the high-low method to calculate the cost formula for mixed costs.
c. If the activity level were expected to be 13,800 units for the month of December, what amount of total costs would be expected? 42. Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units.
(a) Calculate the operating income for July.
(b) Calculate the break-even point in units sold and total revenues.
(c) Management is considering the use of automated production equipment. If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month.
(1.) Calculate operating income at a volume of 12,000 units per month with the new cost