Multiple Choice
Identify the letter of the choice that best
completes the statement or answers the question.
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1.
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Moose Mountain Hardware’s sales last year were $852,150. Cash
payments accounted for 45% of total sales and the balance was paid through invoices. The
company’s accounts receivable balance at year-end was $52, 647. Calculate the average collection
period. a. | 50 days | b. | 41
days | c. | 7.3 times per year | d. | 8.9 times per
year | | |
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2.
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Canada Steel Inc. shares currently trade on the TSX for $22.50 per
share. The company just announced fiscal earnings of $1.63 per share. Canada Steel’s
book value continues to increase reaching $16.30. Calculate the price-to-earnings
ratio: a. | 10 times | b. | 1.38
times | c. | 13.8 times | d. | none of the
above | | |
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3.
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Which of the following is NOT true: a. | Dividend policy
ratios provide an indication of a company’s dividend practices | b. | In a company
requiring higher inventory levels, the quick ratio is lower than the current
ratio | c. | A company that has consistently had earnings greater than their cost of capital will
see a decline in MVA | d. | On a cash flow
statement, a firm’s cash activities are broken down by operating, investing and
financing | | |
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4.
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NorthWest Mercantile’s cost of sales in the past fiscal year was
$652,220. The firm’s average inventory during the year was $312,860. For the three
years prior to this past fiscal year, NorthWest’s inventory turns have been 2.85x, 3.06x, and
2.81x. What is one of the most-likely reasons for this past year’s change in the inventory
turn ratio: a. | Both the cost of sales and inventory decreased by the same
percentage | b. | NorthWest reduced it’s inventory level | c. | Cost of sales
increased dramatically while inventory was maintained at historical levels | d. | Inventory
increased dramatically outpacing any changes in cost of sales | | |
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5.
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A manager for Moose Mountain Hardware is confused why his cash balance
continues to decrease each year despite the company increasing earnings each year. Which
financial statement would provide him with the best information on what is happening to his bank
account balance? a. | Income Statement | b. | Cash Flow
Statement | c. | Balance Sheet | d. | Common-Size Cash
Flow Statement | | |
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