Financial Ratios(Quick Test #2)

1. The dividend payout ratios for growth companies are more likely to be __________ than the dividend payout ratios at mature companies.

2. The relationship of a corporation’s earnings to its cash flows from __________ activities is often used to assess the quality of earnings.

3. A highly profitable corporation with $30 million in bonds outstanding and $70 million in common stock outstanding will have a lower cost of capital than if it had $100 million of common stock outstanding.

4. A company’s inventory turnover ratio for the prior year was 9 times. This means that its inventory during the past year had on average approximately __________ days of sales on hand.

5. Debt service includes the payments for __________.

6. A company sells its merchandise with credit terms of net 60 days. If its customers pay according to the terms, the company’s receivables turnover ratio will be approximately __________ times per year.

7. The sale of inventory on credit will usually cause an increase in the __________ ratio.

8. The return on total assets can be viewed as the profit margin ratio multiplied by the total asset __________.

9. A retailer’s profit margin or net profit margin ratio is __________ __________ divided by net sales.

10. The return on total assets expresses the return earned by a corporation on its __________.

11. Which ratio best indicates a corporation’s financial leverage?

12. A corporation that issues 7% bonds in order to invest in assets earning 10% is said to be trading on __________.

13. A company having a gross profit ratio of 20% will have a mark-up ratio that is __________% of its cost of goods.

14. Selling, general and administrative (SG&A) expenses account for the difference between __________ profit and operating income.

15. Unrealized gains on publicly-traded equity securities with market values that are readily determinable will be included in the amount of the stockholders’ equity section known as __________ earnings.

16. Investments in publicly-traded equity securities with market values that are readily determinable will be reported on the balance sheet at their __________.

17. The amount of the accumulated other comprehensive income is reported on the __________ __________.

18. The difference between net income and comprehensive income is __________.

19. Other comprehensive income pertaining to only the most recent one-year period will appear on the statement of __________.

20. The use of LIFO during periods of increasing costs will mean a company’s inventory turnover ratio will be __________ favorable than if the company had used FIFO.

21. The use of LIFO during periods of increasing costs will mean a company’s profitability ratios will be __________ favorable than if the company had used FIFO.

22. A U.S. corporation whose common stock is publicly traded and has a complex capital structure is required to report 1) basic EPS (earnings per share) and 2) __________ EPS.

23. In the P/E ratio, the “P” represents the market __________ of one share of common stock.

24. The dividend payout ratio is the amount of the __________ dividends per share divided by the earnings per share.

25. A new growth corporation with significant profit potential will likely have a __________ dividend yield.

26. The calculation of a corporation’s debt ratio is the total of its __________ divided by its total assets.

27. Net fixed assets refers to the cost of property, plant and equipment minus the __________ depreciation associated with those assets.

28. The fixed asset turnover ratio is calculated by dividing a company’s annual net __________ by the average amount of its net fixed assets during the year.

29. The accounts receivable collection period is similar to the days’ __________ in accounts receivable.

30. The return on assets and the return on stockholders’ equity are two examples of __________ ratios.

31. The publication entitled Financial Ratio Benchmarks based on the financial statements of more than 200,000 companies was compiled and published by which of the following organizations?

32. The assumption that convertible bonds were converted into common stock is required when calculating __________ EPS.

33. A sole proprietor’s draw is not reported as an expense of a sole proprietorship. However, the salary of an owner of a regular corporation is reported as an expense of the corporation.

34. Financial statements showing projected amounts based on certain assumptions about the future are referred to as pro-__________ financial statements.

35. Income statements that report three years of amounts, and balance sheets that report two years of amounts, are referred to as __________ financial statements.

36. Delaying payments until after the date of the year-end balance sheet in order to increase the amount of cash reported is referred to as __________ dressing.

37. Current assets include cash and other financial resources that will either turn to cash, be used up, or be consumed within one year of the balance sheet date, or within the operating cycle, whichever is __________.

38. Under vertical analysis, the total of the current assets at December 31, 2023 would be presented as __________%. (Show the percentage to two decimal points, such as 51.43%.)

39. At December 31, 2023 the current ratio was __________:1. (Show the answer to two decimal points, such as 1.89:1.)

40. The amount of working capital at December 31, 2023 was $__________.

41. The quick ratio at December 31, 2023 was __________:1. (Show the answer to two decimal points, such as 1.89:1.)

42. The denominator that should be used to calculate the accounts receivable turnover ratio for the year 2023 is $__________.

43. The accounts receivable turnover ratio for the year 2023 was __________ times.

44. The inventory turnover ratio for the year 2023 was __________ times.

45. The number of days’ sales in inventory during the year 2023 was __________ days. (Rounded to nearest whole day.)

46. The total assets turnover ratio for the year 2023 was __________ times.

47. The debt-equity ratio at December 31, 2023 was __________:1. (Show your answer to two decimal points, such as 0.78:1.)

48. The after-tax return on stockholders’ equity for the year 2023 was __________.

49. The after-tax return on total assets for the year 2023 was __________.

50. The times interest earned or interest coverage for the year 2023 was __________ times.