Multiple Choice Answers

Data from Davoren Corporation’s most recent balance sheet and income statement
appear below:
This YearLast Year
Accounts receivable$121,000   $119,000
Inventory$167,000   $196,000
Sales on account$723,000
Cost of goods sold$571,725
The average sale period for this year is: (Assume 365 days a year. Do not round
intermediate calculations. Round your answer to 1 decimal place.)
115.9 days
61.4 days
52.7 days
106.0 days
2.
The following account balances have been provided for the end of the most recent
year:
Total assets$260,000
Total stockholders’ equity$230,000
Total common stock (5,000 shares)$80,000
Total preferred stock (1,000 shares)$10,000
The book value per share of common stock is:
$230
$16
$46
$44
3. The gross margin percentage is most likely to be used to assess:
how quickly accounts receivables can be collected.
how quickly inventories are sold.
the overall profitability of the company’s products.
the efficiency of administrative departments.
4.
Basta Corporation’s net income last year was $1,396,000. The dividend on common
stock was $1.00 per share and the dividend on preferred stock was $2.90 per share.
The market price of common stock at the end of the year was $64.40 per share.
Throughout the year, 300,000 shares of common stock and 200,000 shares of
preferred stock were outstanding.
Required:
Compute the price-earnings ratio. (Round your answer to 2 decimal places.)

5.
Last year Jason Company had a net income of $190,000, income tax expense of
$72,000, and interest expense of $35,000. The company’s times interest earned was:
(Round your answer to 2 decimal places.)
2.37
8.49
5.43
6.43
6. Financial leverage is negative when:
total liabilities are less than stockholders’ equity.
the return on total assets is less than the rate of return on common stockholders’
equity.
total liabilities are less than total assets.
the return on total assets is less than the rate of return demanded by creditors.
7.
The following data have been taken from your company’s financial records for the
current year:
Earnings per share$10
Market price per share$76
Dividend per share$  8
Book value per share$91
The price-earnings ratio is: (Round your answer to 1 decimal place.)
10.0
12.0
7.6
9.1
8.
Drama Company’s working capital is $48,000 and its current liabilities are $105,000.
The company’s current ratio is: (Round your answer to 2 decimal places.)
0.54
0.31
0.46
1.46
9.
Data from Paynter Corporation’s most recent balance sheet appear below:
Preferred stock$500,000
Common stock 600,000
Additional paid-in capital–common stock 200,000
Retained earnings 420,000

Total stockholders’ equity$1,720,000
A total of 500,000 shares of common stock and 30,000 shares of preferred stock were outstanding at the end of the year.
Required:
Compute the book value per share. (Round your answer to 2 decimal places. Omit
the “$” sign in your response.)

10.
Last year, Shadow Corporation’s dividend on common stock was $14.90 per share
and the dividend on preferred stock was $2.00 per share. The market price of common
stock at the end of the year was $67.90 per share. The dividend yield ratio is: (Round
your answer to 2 decimal places.)
0.22
0.03
1.41
0.25