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