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Exam 14: Managerial Accounting

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Question 81

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Blitzen Corporation had net income of $500,000 and paid dividends to common stockholders of $40,000 in 2017.The weighted average number of shares outstanding in 2017 was 60,000 shares.Blitzen Corporation's common stock is selling for $50 per share on the New York Stock Exchange.Blitzen Corporation's payout ratio for 2017 is

A) $8.33 per share.
B) 8%.
C) 12%.
D) 16%.

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

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Question 82

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Profit margin is calculated by dividing

A) sales by cost of goods sold.
B) gross profit by net sales.
C) net income by stockholders' equity.
D) net income by net sales.

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

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Question 83

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The following information pertains to Rural Company.Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. $\begin{array}{lr}\text { Income Statement }\\\text { Sales } & \$ 90,000 \\\text { Cost of goods sold } & 44,000 \\\text { Gross profit } & 46,000 \\\text { Operating expenses } & 30,000\\\text { Net income }&\$16,000\\\text { Number of shares of common stock } & 5,000 \\\text { Market price of common stock } & \$ 22 \\\text { Dividends per share } & 1.00\end{array}$ What is the return on common stockholders' equity for Rural?

In vertical analysis, the base amount in an income statement is usually net sales.

Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year.The average inventory for the year amounted to $2,500,000.Inventory turnover for the year is

The following information pertains to Ortiz Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. $\begin{array}{lr}\text { Assets }\\\text { Cash and short-term investments } & \$ 45,000 \\\text { Accounts receivable (net) } & 30,000 \\\text { Inventory } & 20,000 \\\text { Property, plant and equipment } & 210,000\\\text { Total Assets }&\$305,000\\\\\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 50,000 \\\text { Long-term liabilities } & 95,000 \\\text { Stockholders' equity-common } & 160,000\\\text { Total Liabilities and Stockholders' Equity }&\$305,000\\\\\end{array}$ $\begin{array}{lr}\text { Income Statement }\\\text { Sales } & \$ 120,000 \\\text { Cost of goods sold } & 66,000\\\text { Gross profit } & 54,000 \\\text { Operating expenses } & 30,000\\\text { Net income }&\$14,000\\\\\text { Number of shares of common stock }&6,000 \\\text { Market price of common stock } &\$20\\\text { Dividends per share }&.50\end{array}$ What is the accounts receivable turnover for Ortiz?

Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.

Trading on the equity (leverage) refers to the

In common size analysis,

The days in inventory is computed by multiplying inventory turnover by 365.

Profitability ratios measure the ability of the enterprise to survive over a long period of time.

A measure of the percentage of each dollar of sales that results in net income is

The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.

Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis.

A company has an average inventory on hand of $60,000 and the days in inventory is 73 days.What is the cost of goods sold?

In reporting discontinued operations, the income statement should show in a special section 1. gains on the disposal of a discontinued component. 2. losses on the disposal of a discontinued component

The acid-test ratio is also known as the

The formula for horizontal analysis of changes since the base period is the current year amount

The following information pertains to Ortiz Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. $\begin{array}{lr}\text { Assets }\\\text { Cash and short-term investments } & \$ 45,000 \\\text { Accounts receivable (net) } & 25,000 \\\text { Inventory } & 20,000 \\\text { Property, plant and equipment } & 310,000 \\\text { Total Assets }&\$400,000\\\\\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 50,000 \\\text { Long-term liabilities } & 90,000 \\\text { Stockholders' equity-common } & 260,000\\\text { Total Liabilities and Stockholders' Equity }&\$400,000\\\\\text { Income Statement }\\\text { Sales } & \$ 300,000 \\\text { Cost of goods sold } & 66,000\\\text { Gross profit }&\$234,000\\\text { Operating expenses }&27,000\\\text { Net income }&\$207,000\\\\\text { Number of shares of common stock } & 6,000 \\\text { Market price of common stock } & \$ 20 \\\text { Dividends per share } & .50\end{array}$ What is the profit margin for Ortiz?