Finance Questions
Please give explanation to your answers.
1. Britney and Christina Incorporated has a debt ratio of 0.42, noncurrent liabilities of $20,000 and total assets of $70,000. What is Britney and Christina's level of current liabilities?
A $8,400
B $9,400
C $12,348
D $10,600
2. In 2002 Clanton, Inc. had a gross profit of $27,000 on sales of $110,000. Clanton's operating expenses for 2002 were $13,000, and its net profit margin was .0585. Clanton had no interest expense in 2002. What was Clanton's gross profit margin for 2002?
A 0.127
B 0.325
C 0.245
D 0.364
3. In making financial decisions, the relevant tax rate is the:
A marginal tax rate
B average (effective) tax rate
C previous year's tax rate
D maximum allowable tax rate
4. Which of the following best reflects the mix of corporate securities issued in the U.S.?
A 74% debt, 26% equity
B 55% debt, 45% equity
C 45% debt, 55% equity
D 26% debt, 74% equity
5. Why is the quick ratio a more refined liquidity measure than the current ratio?
A It measures how "quickly" cash and other liquid assets flow through the company.
B Inventories are generally the least liquid of the firm's current assets.
C Inventories are generally among the most liquid of the firm's current assets.
D Cash is the most liquid current asset.
6. PDQ Corp. has sales of $3,000,000; the firm's cost of goods sold is $1,425,000; and its total operating expenses are $700,000. The firm's interest expense is $230,000, and the corporate tax rate is 40%. What is PDQ's tax liability?
A $258,000
B $350,000
C $387,000
D $645,000
7. The quick ratio of a firm would be unaffected by which of the following?
A land held for investment is sold for cash
B equipment is purchased, financed by a long-term debt issue
C inventories are sold for cash
D inventories are sold on a short-term credit basis
8 Which of the following ratios would be the best way to determine how customers are paying for their purchases?
A Inventory turnover.
B Total asset turnover.
C Current ratio.
D Average collection period.
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1. Britney and Christina Incorporated has a debt ratio of 0.42, noncurrent liabilities of $20,000 and total
assets of $70,000. What is Britney and Christina's level of current liabilities?
A $8,400
B $9,400
C $12,348
D $10,600
2. In 2002 Clanton, Inc. had a gross profit of $27,000 on sales of $110,000. Clanton's operating
expenses for 2002 were $13,000, and its net profit margin was .0585. Clanton had no interest expense in
2002. What was Clanton's gross profit margin for 2002?
A 0.127
B 0.325
C 0.245
D 0.364
3. In making financial decisions, the relevant tax rate is the:
A marginal tax rate
B average (effective) tax rate
C previous year’s tax rate
D maximum allowable tax rate
4. Which of the following best reflects the mix of corporate securities issued in the U.S.?
A 74% debt, 26% equity
B 55% debt, 45% equity
C 45% debt, 55% equity
D 26% debt, 74% equity
5. W hy is the quick ratio a more refined liquidity measure than the current ratio?
It measures how "quickly" cash and other liquid assets flow through the company.
A
Inventories are generally the least liquid of the firm's current assets.
B
Inventories are generally among the most liquid of the firm's current assets.
C
Cash is the most liquid current asset.
D
6. PDQ Corp. has sales of $3,000,000; the firm's cost of goods sold is $1,425,000; and its total operating
expenses are $700,000. The firm's interest expense is $230,000, and the corporate tax rate is 40%. What
is PDQ's tax liability?
A $258,000
B $350,000
C $387,000
D $645,000
7. The quick ratio of a firm would be unaffected by which of the following?
A land held for investment is sold for cash
B equipment is purchased, financed by a long-term debt issue
C inventories are sold for cash
D inventories are sold on a short-term credit basis
8 W hich of the following ratios would be the best way to determine how customers are paying
for their purchases?
A Inventory turnover.
B Total asset turnover.
C Current ratio.
D Average collection period.
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