101. Ramer Company and Matson Company
Assume the following information for Ramer Company, Matson Company, and for their common industry for a recent year.
|
Ramer
|
Matson
|
Industry Average
|
Current ratio
|
3.50
|
2.80
|
3.00
|
Accounts receivable turnover
|
5.00
|
8.10
|
6.00
|
Inventory turnover
|
6.20
|
8.00
|
6.10
|
Interest coverage ratio
|
9.00
|
12.30
|
10.40
|
Debt-equity ratio
|
0.70
|
0.40
|
0.55
|
Return on investment
|
0.15
|
0.12
|
0.15
|
Dividend payout ratio
|
0.80
|
0.60
|
0.55
|
Earnings per share
|
$3.00
|
$ 2.00
|
-
|
|
|
|
|
(CMA adapted, Jun 90 #19) Regarding the data for Ramer Company and Matson Company, which one of the following is correct if both companies have the same total assets and the same sales?
A. Ramer has more cash than Matson.
B. Ramer has fewer current liabilities than Matson.
C. Matson has less shareholders' equity than Ramer.
D. Matson has a shorter operating cycle than Ramer.
E. None of the above is correct.
102. Ramer Company and Matson Company
Assume the following information for Ramer Company, Matson Company, and for their common industry for a recent year.
|
Ramer
|
Matson
|
Industry Average
|
Current ratio
|
3.50
|
2.80
|
3.00
|
Accounts receivable turnover
|
5.00
|
8.10
|
6.00
|
Inventory turnover
|
6.20
|
8.00
|
6.10
|
Interest coverage ratio
|
9.00
|
12.30
|
10.40
|
Debt-equity ratio
|
0.70
|
0.40
|
0.55
|
Return on investment
|
0.15
|
0.12
|
0.15
|
Dividend payout ratio
|
0.80
|
0.60
|
0.55
|
Earnings per share
|
$3.00
|
$ 2.00
|
-
|
|
|
|
|
(CMA adapted, Jun 90 #18) Regarding the data for Ramer and Matson Company, if a company is profitable and is effectively using leverage, which one of the following ratios is likely to be the largest?
A. return on total assets
B. return on operating assets
C. return on common equity
D. return on investment
E. none of the above
103. (CMA adapted, Jun 90 #21) Regarding the information for Ramer Company and Matson Company, assume that some of the ratios and data for Ramer and Matson are affected by income taxes. Assuming no interperiod income tax allocation, which of the following items would be directly affected by income taxes for the period?
A. debt-equity ratio and dividend payout ratio
B. current ratio and debt-equity ratio
C. return on investment and earnings per share
D. interest coverage ratio and current ratio
E. none of the above
104. (CMA adapted, Jun 90 #20) Regarding the data for Ramer Company and Matson Company, the attitudes of both Ramer and Matson concerning risk are best explained by the
A. current ratio, accounts receivable turnover, and inventory turnover.
B. return on investment and dividend payout ratio.
C. current ratio and earnings per share.
D. debt-equity ratio and interest coverage ratio.
E. none of the above.
105. (CMA adapted, Dec 93 #17) Norton Inc. has a 2 to 1 current ratio. This ratio would increase to more than 2 to 1 if
A. a previously declared stock dividend were distributed.
B. the company wrote off an uncollectible receivable.
C. the company sold merchandise on open account that earned a normal gross margin.
D. the company purchased inventory on open account.
E. none of the above.
106. Mother's Company has current assets of $900,000 and current liabilities of $1,000,000. Mother's Company's current ratio would be increased by
A. borrowing $100,000 on a line-of-credit (short-term loan).
B. purchase of merchandise inventory costing $100,000 cash.
C. purchase of marketable equity securities for $100,000 cash.
D. paying $100,000 of wages payable.
E. none of the above.
107. A measure of short-term debt paying ability is a company's
A. return on shareholders' equity.
B. return on assets.
C. quick ratio.
D. profit margin ratio.
E. none of the above.
108. (CMA adapted, Dec 87 #1) When a balance sheet amount is related to an income statement amount in computing a ratio,
A. the balance sheet amount should be converted to an average for the year.
B. the income statement amount should be converted to an average for the year.
C. both amounts should be converted to market value.
D. the ratio loses its historical perspective because a beginning-of-the-year amount is combined with an end-of-the-year amount.
E. none of the above.
109. King Products Corporation
King Products Corporation
Statement of Financial Position
(in thousands)
|
|
|
|
|
|
Cash
|
$ 60
|
$ 50
|
Marketable securities (at market)
|
40
|
30
|
Accounts receivable (net)
|
90
|
60
|
Inventories (at lower of cost or market)
|
120
|
100
|
Prepaid items
|
|
|
Total current assets
|
|
|
Long-term investments (at cost)
|
50
|
40
|
Land (at cost)
|
150
|
150
|
Building (net)
|
160
|
180
|
Equipment (net)
|
190
|
200
|
Patents (net)
|
70
|
34
|
Goodwill (net)
|
|
|
Total long-term assets
|
|
|
Total assets
|
|
|
Notes payable
|
$ 46
|
$ 24
|
Accounts payable
|
94
|
56
|
Accrued interest
|
|
|
Total current liabilities
|
|
|
Notes payable, 10% due 12/31/Year 12
|
20
|
20
|
Bonds payable, 12% due 6/30/Year 15
|
|
|
Total long-term debt
|
|
|
Total liabilities
|
|
|
Preferred stock-5% cumulative, $100 par, non-participating, authorized, issued and outstanding, 2,000 shares
|
200
|
200
|
Common stock-$10 par, 40,000 shares authorized, 30,000 shares issued and outstanding
|
300
|
300
|
Additional paid-in capital--common
|
150
|
150
|
Retained earnings
|
|
|
Total shareholders' equity
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
King Products Corporation
Income Statement
For the year ended June 30
(in thousands)
|
|
|
|
Net sales
|
$600
|
Costs and expenses
|
|
Cost of goods sold
|
440
|
Selling, general, and administrative
|
60
|
Interest expense
|
|
Income before taxes
|
$ 90
|
Income taxes
|
|
Net income
|
|
|
|
|
|
(CMA adapted, Dec 96 #15) Refer to the King Products Corporation example. King Products Corporation's inventory turnover for the fiscal year ended at June 30, Year 6, was
A. 3.7
4.0
C. 4.4
D. 5.0
E. none of the above
110. King Products Corporation
King Products Corporation
Statement of Financial Position
(in thousands)
|
|
|
|
|
|
Cash
|
$ 60
|
$ 50
|
Marketable securities (at market)
|
40
|
30
|
Accounts receivable (net)
|
90
|
60
|
Inventories (at lower of cost or market)
|
120
|
100
|
Prepaid items
|
|
|
Total current assets
|
|
|
Long-term investments (at cost)
|
50
|
40
|
Land (at cost)
|
150
|
150
|
Building (net)
|
160
|
180
|
Equipment (net)
|
190
|
200
|
Patents (net)
|
70
|
34
|
Goodwill (net)
|
|
|
Total long-term assets
|
|
|
Total assets
|
|
|
Notes payable
|
$ 46
|
$ 24
|
Accounts payable
|
94
|
56
|
Accrued interest
|
|
|
Total current liabilities
|
|
|
Notes payable, 10% due 12/31/Year 12
|
20
|
20
|
Bonds payable, 12% due 6/30/Year 15
|
|
|
Total long-term debt
|
|
|
Total liabilities
|
|
|
Preferred stock-5% cumulative, $100 par, non-participating, authorized, issued and outstanding, 2,000 shares
|
200
|
200
|
Common stock-$10 par, 40,000 shares authorized, 30,000 shares issued and outstanding
|
300
|
300
|
Additional paid-in capital--common
|
150
|
150
|
Retained earnings
|
|
|
Total shareholders' equity
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
King Products Corporation
Income Statement
For the year ended June 30
(in thousands)
|
|
|
|
Net sales
|
$600
|
Costs and expenses
|
|
Cost of goods sold
|
440
|
Selling, general, and administrative
|
60
|
Interest expense
|
|
Income before taxes
|
$ 90
|
Income taxes
|
|
Net income
|
|
|
|
|
|
(CMA adapted, Dec 96 #16) Refer to the King Products Corporation example. King Products Corporation's accounts receivable turnover for the fiscal year ended at June 30, Year 6, was
A. 4.9
B. 5.9
C. 6.7
8.0
E. none of the above