31. Sales (in millions) for a three year period are: Year 1 $6, Year 2 $6.9, and

Question

31.   Sales (in millions) for a three year period are: Year 1 $6, Year 2 $6.9, and Year 3 $7.5. Using Year 1 as the base year the percentage increase in sales in Years 2 and 3 are _______ and _________, respectively.

a.   115% and 125%.

b.   115% and 109%.
c.   115% and 130%.

d.   87% and 80%.

32.   An incorrect formula is

a.   current ratio = current assets ÷ current liabilities.

b.   receivables turnover = net credit sales ÷ average net receivables.

c.   asset turnover = net income ÷ average assets.

d.   payout ratio = cash dividends ÷ net income.

33.   The acid-test ratio

a.   is a solvency ratio.
b.   measures immediate short-term liquidity.

c.   includes inventory in the numerator of the formula.

d.   includes total liabilities in the denominator of the formula.

34.   The ratio that measures the overall profitability of assets is

a.   profit margin.
b.   asset turnover.

c.   return on common stockholders’ equity.

d.   return on assets.

Explanation / Answer

31.   Sales (in millions) for a three year period are: Year 1 $6, Year 2 $6.9, and Year 3 $7.5. Using Year 1 as the base year the percentage increase in sales in Years 2 and 3 are __115%__ and ___125%__, respectively.

Increase in sales in Years 2 = 6.9/6 = 115%

Increase in sales in Years 3 = 7.5/6 = 125%

32.   An incorrect formula is

c.   asset turnover = net income ÷ average assets.

Note :

Asset turnover = Sale ÷ average assets

33.   The acid-test ratio

b.   measures immediate short-term liquidity.

34.   The ratio that measures the overall profitability of assets is

d.   return on assets.

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