MGT 8803 Exam 1 UPDATED ACTUAL Questions and
CORRECT Answers
Terms in this set (68)
Current Ratio current assets/current liabilities
Quick Ratio (Acid Test) (Current Assets - Inventory) / Current Liabilities or (Cash +
Marketable Securities + Receivables)/Current Liabilities
Debt Ratio total liabilities/total assets
Interest Coverage Ratio EBIT/ interest expense
, Inventory Turnover Ratio cost of goods sold/average inventory
Asset Turnover Ratio net sales/average total assets
Profit Margin Ratio net income/net sales
Return on Assets Ratio net income/average total assets
Return on Equity Ratio Net Income / Average Stockholders' Equity
Gross Margin Ratio (Net Sales - Cost of Goods Sold) / Net Sales
Debt to Equity Ratio total liabilities/stockholders equity
Financial Leverage Ratio Average Total Assets / Average Shareholders' Equity
Ending Stockholder's Equity beginning stockholder's equity + revenues - expenses -
dividends
Percentage of Credit Sales Method Bases bad debt expenses on the historical percentage of
credit sales that result in bad debts. Ex. 2% of $500,000 =
$10,000
Percentage-of-receivables method Method of estimating uncollectible accounts based on the
percentage of accounts receivable expected not to be
collected. New allowance for bad debt - previous allowance
for bad debt.
allowance of bad debts A contra asset account, related to accounts receivable, that
holds the estimated amount of uncollectible accounts.
Annual Depreciation (cost - salvage value) / useful life
Goodwill the value of all favorable attributes that relate to a company
that are not attributable to any other specific asset. Price paid
for business - fair market value
contra asset account offsets an asset account on the balance sheet (ex.
accumulated depreciation)
discount bond A savings bond that is purchased for less than its maturity
value - discount. Less contract rate than the market rate.
premium bond a bond that is selling above its par value - premium. Higher
contract rate than the market rate.
Notes Receivable A written promise that a customer will pay a fixed amount of
principal plus interest by a certain date in the future.
CORRECT Answers
Terms in this set (68)
Current Ratio current assets/current liabilities
Quick Ratio (Acid Test) (Current Assets - Inventory) / Current Liabilities or (Cash +
Marketable Securities + Receivables)/Current Liabilities
Debt Ratio total liabilities/total assets
Interest Coverage Ratio EBIT/ interest expense
, Inventory Turnover Ratio cost of goods sold/average inventory
Asset Turnover Ratio net sales/average total assets
Profit Margin Ratio net income/net sales
Return on Assets Ratio net income/average total assets
Return on Equity Ratio Net Income / Average Stockholders' Equity
Gross Margin Ratio (Net Sales - Cost of Goods Sold) / Net Sales
Debt to Equity Ratio total liabilities/stockholders equity
Financial Leverage Ratio Average Total Assets / Average Shareholders' Equity
Ending Stockholder's Equity beginning stockholder's equity + revenues - expenses -
dividends
Percentage of Credit Sales Method Bases bad debt expenses on the historical percentage of
credit sales that result in bad debts. Ex. 2% of $500,000 =
$10,000
Percentage-of-receivables method Method of estimating uncollectible accounts based on the
percentage of accounts receivable expected not to be
collected. New allowance for bad debt - previous allowance
for bad debt.
allowance of bad debts A contra asset account, related to accounts receivable, that
holds the estimated amount of uncollectible accounts.
Annual Depreciation (cost - salvage value) / useful life
Goodwill the value of all favorable attributes that relate to a company
that are not attributable to any other specific asset. Price paid
for business - fair market value
contra asset account offsets an asset account on the balance sheet (ex.
accumulated depreciation)
discount bond A savings bond that is purchased for less than its maturity
value - discount. Less contract rate than the market rate.
premium bond a bond that is selling above its par value - premium. Higher
contract rate than the market rate.
Notes Receivable A written promise that a customer will pay a fixed amount of
principal plus interest by a certain date in the future.
