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- 1. Multiple ChoiceJones Petro Company had the following financial statics for 2016:
RM
Long-term debt 400,000
(average rate of interest is 8%)
Interest expense 35,000
Net Income 48,000
Income tax 46,000
Operating income 107,000
What is the times interest earned for 2016?3.7 times11.4 times3.3 times3.1 times - 2. Multiple ChoiceA times interest earned ratio of 0.90 to 1 means?that the firm will default on its interest paymentthat net income is less than the interest expensethat the cash flow exceeds the net incomethat the cash flow is less than the net income
- 3. Multiple ChoiceThe ratio fixed charge coverageIs a cash flow indication of debt paying abilityIs an income statement indication of debt paying abilityIs a balance sheet indication of debt paying abilityWill usually be higher than the times interest earned ratio
- 4. Multiple ChoiceJordan Manufacturing reports the following capital structure:
RM
Current liabilities 100,000
Long-term debt 400,000
Deferred income taxes 10,000
Preferred stock 80,000
Common stock 100,000
Premium on common stock 180,000
Retained earnings 170,000
What is the debt ratio?0.480.490.930.96 - 5. Multiple ChoiceJoseph and John, Inc., had the following balance sheet results for 2008:
RM (in millions)
Current liabilities 12.6
Bonds payable 18.6
Lease obligations 2.7
Minority interest 1.4
Common stock 8.6
Retained earnings 22.9
Compute the debt-equity ratio.112.1%67.6%87.6%46.7% - 6. Multiple ChoiceThe following financial statement data are taken from Xeron Company's 2008 annual report:
RM (in millions)
Current assets 12.6
Investments 9.4
Intangibles 6.8
Tangible assets (net) 58.1
Current liabilities 6.4
Long-term debt 39.7
Stockholders' equity 40.8
Compute the debt to tangible net worth ratio.146.8%135.6%53.0%45.7% - 7. Multiple ChoiceIncluded in the Employee Retirement Income Security Act are the following:provisions requiring minimum funding of pension plansminimum rights to employees upon termination of their employmentprovisions requiring minimum funding of pension plans and minimum rights to employees upon termination of their employmentprovisions requiring minimum funding of pension plans, minimum rights to employees upon termination of their employment, and creation of the Pension Benefit Guaranty Corporation
- 8. Multiple ChoiceIf a firm has substantial capital or financing leases disclosed in the notes but not capitalized in the financial statements, then:the times interest earned ratio will be overstated, based upon the financial statementsthe fixed charge ratio will be overstated, based upon the financial statementsthe debt ratio will be understatedthe working capital will be understated
- 9. Multiple ChoiceWhich of the following statements is not true relating to a defined contribution pension plan?A defined contribution plan defines the contributions of the company to the pension plan.Once the defined contribution is paid, the company has no further obligation to the pension plan.There is no problem estimating the company's pension expense.This type of plan presents substantial problems in estimating the pension liability.
- 10. Multiple ChoiceIn computing debt to tangible net worth, which of the following is not subtracted in the denominator?copyrightsgoodwillpatentsinvestments
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