C. noncurrent assets from the balance sheet

d. current assets from the balance sheet.

8. The Wilson Inn sold 10,000 shares of $5 par value common stock for $30 per share. How much would be reported as sale of common stock on the statement of cash flows?

a. $15,000

b. $50,000

c. $25,000

d. $300,000

9. The River Hotel’s Dividends Payable account at the beginning and end of 20X3 totaled $40,000 and $35,000, respectively. Assume that dividends declared during 20X3 totaled $65,000. The dividends paid by the River Hotel during 20X3 totaled:

a. $70,000.

b. $65,000.

c. $45,000.

d. $15,000.

10. The Norumbega Villa Resort sold investments that originally cost it $300,000 for $200,000. How would this transaction affect the Investing Activities section of its statement of cash flows?

a. as a $200,000 cash inflow

b. as a $200,000 cash outflow

c. as a $200,000 noncash transaction

Chapter 18 Analysis and Interpretation of Financial Statements

A. vertical analysis

b. horizontal analysis

c. diagonal analysis

d. the acid test

2. At the beginning of the year, Cash amounted to $100,000 for the Adams Company. At the end of the year, the total was $120,000. The relative change in cash from the beginning to the end of the year for this firm is:

a. $20,000.

B. 20 percent.

c. 16.67 percent.

d. 15 percent.

3. Abu has selected five consecutive financial periods to use in calculating trend percentages. He should assign 100 percent to each amount of which of the periods?

a. the most recent period

b. the period with the highest net income

C. the earliest period

d. the period that falls in the middle in terms of age

4. Which of the following classes of ratios focuses on managers’ use of assets?

a. solvency ratios

B. activity ratios

c. liquidity ratios

d. operating ratios

5. Which of the following ratios is often expressed as the number of times current assets could cover current debt?

a. acid-test ratio

b. debt-equity ratio

C. current ratio

d. asset turnover ratio

6. Which of the following ratios compares a business’s liabilities with its net worth?

a. fixed charge coverage ratio

B. debt-equity ratio

c. long-term debt to total capitalization ratio

d. acid-test ratio

7. Freddy’s Place had a monthly beverage turnover of 1.25 times. This means that beverages were restored on an average of approximately _________ throughout the year.

a. 20 days

B. 24 days

c. 25 days

d. a number of days that cannot be determined

8. Asset turnover is determined by dividing _________ by ____________.

a. Total Revenue; total assets at the end of the year

b. Net Income; total assets at the end of the year

c. Net Income; Average Total Assets

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