Management Accounting
Final Examination
Name: ______________________________
THEORIES: Encircle the best answer.
1. Which of the following is not a current asset?
Inventory Prepaid Insurance Fixtures
2. Current asset MINUS current liabilities is the
Current Ratio Net Worth Working Capital
3. Current assets DIVIDED BY current liabilities is the
Current Ratio Net Worth Ratio Working Capital
4. The quick ratio EXCLUDES which of the following?
Inventory Accounts Receivable Cash
Use the following information to answer items 5 - 7:
At December 31 a company's records show the following information:
5. The company's working capital is
$60,000 $66,000 $196,000
6. The company's current ratio is
1.0 : 1 2.0 : 1 2.1 : 1
7. The company's quick ratio is
0.7 : 1 1.0 : 1 2.0: 1
Use the following information to answer items 8 - 11:
For its most recent year a company had Sales (all on credit) of $830,000 and Cost of
Goods Sold of $525,000. At the beginning of the year its Accounts Receivable were
$80,000 and its Inventory was $100,000. At the end of the year its Accounts Receivable
were $86,000 and its Inventory was $110,000.
8. The inventory turnover ratio for the year was
4.8 5.0 7.9
9. The accounts receivable turnover ratio for the year was
6.3 7.5 10.0
10. On average how many days of sales were in Accounts Receivable during the year?
27 37 49
11. On average how many days of sales were in Inventory during the year?
14 46 73
Use the following information for items 12 and 13:
A company's net income after tax was $400,000 for its most recent year. The company's
income statement included Income Tax Expense of $140,000 and Interest Expense of
$60,000. At the beginning of the year the company's stockholders' equity was $1,900,000
and at the end of the year it was $2,100,000.
12. What is the times interest earned for the company?
6.7 9.0 10.0
13. What is the after-tax return on stockholder's equity for the year?
20% 25% 30%
14. The debt to equity ratio is computed as: (Total Liabilities ÷ Total __________) : 1
15. Which of the following are likely to have the reported amounts on the balance sheet
being close to their current value?
Current Assets
Long-term Assets
Stockholders' Equity
Problems
Year 1 Year 2
Net sales 2,500,000 3,000,000
Less: Cost of goods 400,000 500,000
sold
Gross income 2,100,000 2,500,000
Operating expenses:
Selling expense 240,000 -300,000
General expense -300,000 -360,000
Operating income 2,040,000 1,840,000
Add: Rent income 80,000 100,000
Net income before tax 1,960,000 1,740,000
Income tax (35% x net 686,000 609,000
income before tax)
Net income after tax 1,274,000 1,131,000
Assets Year 1 Year 2
Cash 90,000.00 100,000.00
Marketable Securities 100,000.00 120,000.00
Accounts Receivable 150,000.00 170,000.00
Merchandise inventory 120,000.00 110,000.00
Total current Assets 460,000.00 500,000.00
Land 900,000.00 900,000.00
Building 800,000.00 720,000.00
Machinery 100,000.00 420,000.00
Total non-current
assets 1,800,000.00 2,040,000.00
Total assets 2,260,000.00 2,540,000.00
Liabilities
Accounts Payable 100,000.00 70,000.00
Notes Payable 70,000.00 60,000.00
Accrued payable 40,000.00 30,000.00
Total current liabilities 210,000.00 160,000.00
Long term debt 300,000.00 150,000.00
Total liabilities 510,000.00 310,000.00
Stockholders' Equity
Common Stock (P100
par) 1,000,000.00 1,200,000.00
Additional paid in
capital 220,000.00 320,000.00
Retained Earnings 530,000.00 710,000.00
Total equity 1,750,000.00 2,230,000.00
Total liabilities and stockholders' equity 2,260,000.00 2,540,000.00
Compute the following for Year 1 and Year 2
1 Current ratio:
2 Quick Ratio
3 Cash Position Ratio
4 Inventory turnover =
5 Rate of turnover on sales
7 Average collection period [120,000/(1,750,000 * 80%)/365]
8 Number of days sales in inventory
9 Profit on sales ratio =
10 Profit on net worth
11 Profit on Total Assets
12 Debt to Total assets ratio
13 Stockholders' equity to total assets ratio
14 Stockholders' equity to total liabilities ratio
15 Book value per share
