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Finance Proficiency Quiz 1

Finance Proficiency Quiz 1

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Question 1

10 Points

Net sales are $10,000,000, beginning total assets are $2,000,000, and the asset turnover is 4.0 times. What is the ending total asset balance?

$2,000,000

$2,500,000

$3,000,000

$4,000,000

Question 2

10 Points

Which one of the following is a component of Liquidity analysis?

Asset Turnover

Current Ratio

Return on Assets

Debt to Total Assets

Question 3

10 Points

Darius, Inc. has the following income statement :

DARIUS, INC.
Income Statement ($000)
For the Year Ended December 31, 2019

Net Sales ....................................$ 1,000
Cost of Goods Sold .........................400
Gross Profit    ...................................600
Operating Expenses .......................500
Net Income ..................................$ 100

Using vertical analysis, what percentage is assigned to Cost of Goods Sold?

10%

60%

40%

None of the above

Question 4

10 Points

The total assets of ABC Company are $400,000 at the end of FY 2017 and $450,000 at the end of FY 2018. The net income for 2018 is $30,000. The Return on Assets for 2018 is.

5.0%.

6.7%.

7.1%

7.5%.

Question 5

10 Points

Use the following items taken from the financial statements of the Postal Service for the year ending December 31, 2019 to answer questions 5:

Accounts payable ........................................................$10,000
Accounts receivable ......................................................11,000
Accumulated depreciation – equipment ....................28,000
Advertising expense ......................................................21,000
Cash ................................................................................14,000
Owner’s capital (12/31/19) .........................................105,000
Owner’s drawings .........................................................14,000
Depreciation expense ..................................................12,000
Insurance expense ..........................................................3,000
Note payable, due 6/30/20 .............................................5,000
Prepaid insurance (6 - month policy).............................6,000
Rent expense .................................................................17,000
Salaries and wages expense ........................................32,000
Service revenue ...........................................................125,000
Supplies (Inventory).........................................................4,000
Supplies expense ............................................................6,000
Equipment (Long-term)  ............................................ 210,000

What is the Working Capital of the Postal Service at December 31, 2019?

Answer 1

Ques.1

Asset turnover=Sales/Average Assets

Average Assets=(Beginning Assets+Ending Assets)/2

so, 4=10000000/((2000000+End. Assets bal.)/2)

Solving the above,

Ending total asset balance= $ 3000000

Answer--- c---$ 3000000

Ques.2

A component of Liquidity analysis is

Current ratio (ANSWER)

ie. Current assets/Current liabilities

measures the capacity of the company to meet its short-term obligations with short-term/current assets.

Ideal ratio is 2, ie. To have current assets to the tune of   2 times the current liabilities--but the no. differs from industry to industry.

Ques. 3

COGS= 400/1000=

40.00%

Answer--c--- 40%

Ques.4

Return on assets(ROA)= Net income/Average total assets

Average total Assets=(Beginning total Assets+Ending total Assets)/2

so, ROA= 30000/((400000+450000)/2)=

7.06%

ie. 7.1%

Answer-----c-- 7.1%

Ques.5
Working capital=Current assets-Current Liabilities
Current assets
Accounts receivable	11000
Prepaid insurance (6 - month policy)	6000
Supplies (Inventory)	4000
Total Current assets	21000
Current Liabilities
Accounts payable	10000
Note payable, due 6/30/20	5000
Total Current Liabilities	15000
Working capital=
21000-15000=	6000