20 MCQ's

1.  Increase productivity due to technology has.
a. increase corporation’s reliance on debt for capital expansion needs.
b. created larger asset values on the firm’s historical balance sheet.
c. made it chapter (in terms of interest cost) for firms borrow money.
d. helped to keep corporate in check.

2. Allen lumber company had earning after taxes $580,000in the year 2006 with 400,000 shares outstanding. On January 1, 2007 the firm issued 35000 new shares. Because of the proceeds from these new shares and other operating improvements, 2007 earning was 25 percent higher than in 2006. earnings per share for the 2007 was.
a. $1.67
b. $1.45
c. Approximately $1.81
d.  None of the above

3. Candy Company had sales $240,000 and cost of goods sold of $108,000. What is the gross profit margin ( ratio of gross profit of sales)?
a.  75%
b. 55%
c. 73.3%
d.  None of the above

4. Elgin Battery manufactures had sales $900,000 in 2006 and their cost of goods sold represented 65 percent of sales. Selling and administrative expenses were 9 percent of sales. Depreciation expenses was$10,000and interest expense for the year was $8,000. the firm txes rate is 130 percent. What is the dollar amount of taxes paid?
a. $151,200
b. $145,800
c.  more than 151,800
d. None of the above

1. A firm with earning per share of $5 and a price earning ratio a 15 will have a stock price of.
a. $20.00
b. $75.00
c. $3.00
d. the market assign stock price independence of EPS and the P/E ratio.

2. Reinvested funds from retained earning theoretically belong to:
a. bond holders.
b. common stockholders.
c. employees.
d.  all of the above.

3. How many of the following items are found of the balance sheet, rather than the income statement?
Account receivable
Retained earning
Income tax expense
Accrued expense
Cash
Selling and administrative expense
Plant and equipment
Operating expense
Marketing Securities
Interest expense
a. 3 of these items are found of the balance sheet.
b. 4 of these items are found of the balance sheet.
c. 5 of these items are found of the balance sheet.
d. 6 of these items are found of the balance sheet.

4. Total stockholder’s equity consist of
a. Preferred stock and common stock.
b.  Common and stock and retained earning.
c.  Common stock and capital paid in excess  paid in excess  par.
d. Preferred stock, common stock, capital paid in excess of par and retained earning.

1. How many of the following items decrease cash flow in the statement of cash flows?
 Increase in accounts receivable
Increase in notes payable
Depreciation expense
Increase in investment
Decrease in account payable
Decrease in prepaid expenses
Dividend payment
Increase in accrued expenses
a. 2 of these items decrease cash  flow
b. 3 pf these items decrease cash flow
c.  4 of these items decrease cash flow
d. 5 of these items decrease cash flow

2. Given the following, what is the free cash flow?
Cash flow from operating activities            $175,000
Capital expenditure                                            35,000
Dividends                                                             25,000
a. $115,000
b. $235,000
c. $185,000
d. $165,000

3. Farah Snack Co. has earning after taxes of $128,750 interest expense for the year was $20,000 preferred dividends paid were $18,750 and common dividends paid were $30,000. Taxes were $15,000. The firm has $10,000 shares of common stock outstanding. Earning per share on the common stock was.
a. $0.90
b. $1.10
c.  $0.75
d. 0.80

4. The Bubba Corp. had net income before taxes of $200,000 and sales of 2,000,000. If it is in the 15% tax bracket its after-tax profit margin is:
a. 5%
b. 12%
c. 20%
d. 25%

1.  ABC Co. has an average collection period of 60 days, total credit sales for he year $3,000,000. What is the balance in account receivable at the year end?
a.  $50,000
b. $100,000
c. $500,000
d. $80,000

2. A firm has current assets of $75,000 and total assets $375,000. A firm sales are $900,000. The firm fixed assets turnover is.
a.  3.0x
b. 12.0x
c. 2.4x
d. 5.0x

3. A firm’s long term assets =$75,000, total assets = $200,000, inventory =$25,000 and current liabilities =$50,000
a. Current ratio =0.5;quick ratio= 1.5
b. Current ratio=1.0; quick ratio= 2.0
c. Current ratio= 1.5;quick ratio= 2.0
d.  Current ratio= 2.5; quick ratio= 2.0

4. A firm has total assets of $2,000,000. It has $900,000in long term debt The stockholders equality is $900,000. What is the total debt to assets ratio?
a. 45%
b. 40%
c. 55%
d. None of the above

1. Depending upon the state of the economy, Ables manufacturing Crop. Expect to sell the following number of the prefabricated building. The probability of each state is indicated. What is the expected value of the total sales projection?

a. $4,500
b. $4,540
c. $12,800
d. None of these

2. A firm has beginning inventory of 300 units at a cost $11 each. Production during the period was 650 units at $12 each. If sales were 700 units. What is the cost of goods sold (assume FIFO)?
a. $9,000
b. $8,000
c. $77,00
d. 8,100

3. GS Cookie Co. forecast cash receipt or January and February of $9,000 and $10,000, respectively. Cash payment of $4,000 and $ 55,00 are expected in these two months. GS cookie’s Cash balance at the beginning of January was $5,000 a level that it attempts to maintain. At the beginning of the year. GS Cookie has a $13,000 balance Outstanding on its line of credit at the local bank. Based on its cash budget, how much of the line of credit can GS Cookie repay by the end of February ?
a. $10,000
b. $9,000
c. $4,000
d. None GS Cookie must increase borrowings.

4. If a firm has break even point of 20,000 units and the contribution margin on the firm’s single product is $3.00per unit and fixed costs are $60,000. What will the firm net income be at sales of 30,000 units?
 a. $90,000
b. $30,000
c. $15,000
d. $45,000