Question

 In its 2010 annual report, Caterpillar Inc. reported the following (in millions):

 

	2010	2009
Sales	$39,867	$29,540
Cost of goods sold	30,367	23,886

 

As a percentage of Sales, did Caterpillar’s Gross profit increase or decrease during 2011?

A) Gross profit increased from 19% to 24%

B) Gross profit decreased from 24% to 19%

C) Gross profit increased from 76% to 81%

D) Gross profit decreased from 81% to 76%

E) There is not enough information to answer the question.

The Goodyear Tire & Rubber Company’s December 31, 2011, financial statements reported the following (in millions).

 

Cash December 31, 2011	$ 2,772
Cash from operating activities	773
Cash from investing activities	(902)
Cash from financing activities	896

 

What did Goodyear report for Cash on its December 31, 2010 balance sheet?

A) $2,772 million

B) $3,539 million

C) $767 million

D) $2,005 million

E) None of the above

Answer 1

 

Answer: A

 

Rationale: Sales – Cost of goods sold = Gross profit. In 2009, gross profit to sales was 19%. This ratio increased to 24% in 2010.

Answer: D

Rationale: Cash, beginning of year + Cash from operating activities + Cash from investing activities + Cash from financing activities = Cash at end of year

Cash, beginning of year + $773 – $902 + $896 = $2,772. Cash, beginning of year = $2,005

 

$2,005