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Question(s) / Instruction(s):

ABC Co. has an average collection period of 90 days. Total credit sales for the year were $6,000,000. What is the balance in accounts receivable at year-end?

A. $150,000

B. $2,250,000

C. $1,500,000

D. $40,000

 

12. Asset utilization ratios

A. relate balance sheet assets to income statement sales.

B. measure how much cash is available for reinvestment into current assets.

C. are most important to stockholders.

D. measures the firm's ability to generate a profit on sales.

 

13. XYZ's receivables turnover is 4x. The accounts receivable at year-end are $600,000. The average collection period is 90 days. What was the sales figure for the year assuming all sales are on credit?

A. $60,000

B. $6,000,000

C. $2,400,000

D. None of these

 

 14. A decreasing average collection period could be associated with (select the one best answer)

A. increasing sales.

B. decreasing sales.

C. decreasing account receivable.

D. a and c.

 

15. If accounts receivable stays the same, and credit sales go up

A. the average collection period will go up.

B. the average collection period will go down.

C. accounts receivable turnover will decrease.

D. B and C.

 

 

16. Total asset turnover indicates the firm's

A. liquidity.

B. debt position.

C. ability to use its assets to generate sales.

D. profitability.

 

 

17. A firm has current assets of $100,000 and total assets of $300,000. The firm's sales are $900,000. The firm's fixed asset turnover is

A. 4.5x

B. 12.0x

C. 2.4x

D. 5.0x

 

18. A quick ratio that is much smaller than the current ratio reflects

A. a small portion of current assets is in inventory.

B. a large portion of current assets is in inventory.

C. that the firm will have a high inventory turnover.

D. that the firm will have a high return on assets.

 

 

 

19. A firm's long term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000.

A. current ratio = 0.5; quick ratio = 1.25

B. current ratio = 1.0; quick ratio = 2.0

C. current ratio = 1.5; quick ratio = 1.25

D. current ratio = 2.5; quick ratio = 2.0

 

20. Investors and financial analysts wanting to evaluate the operating efficiency of a firm's managers would probably look primarily at the firm's

A. debt utilization ratios.

B. liquidity ratios.

C. asset utilization ratios.

D. profitability ratios.

 

 

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