BUS 252Accounting Test Bank 29 Questions and Answers(2022/2023)

99. Karma Corporation has total assets of $190,000 and total liabilities of $90,000. The corporation's debt-to-equity ratio is closest to: A. 0.4 7 B. 0.9 0 C. 0.5 3 D. 0.3 2 Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity = $90,000 ÷ $100,000* = 0.90 *Stockholders' equity = Total assets - Total liabilities = $190,000 - $90,000 = $100,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 1 Easy Learning Objective: 15-04 Compute and interpret financial ratios that managers use for debt management purposes. 100. Rough Corporation's total assets at the end of Year 2 were $1,247,000 and at the end of Year 1 were $1,270,000. The company's total liabilities at the end of Year 2 were $512,000 and at the end of Year 1 were $550,000. The company's total stockholders' equity at the end of Year 2 was $735,000 and at the end of Year 1 was $720,000. The company's equity multiplier is closest to: A. 1.7 3 B. 1.4 4 C. 0.6 9 D. 0.5 8 Equity multiplier = Average total assets* ÷ Average stockholders' equity* = $1,258,500 ÷ $727,500 = 1.73 (rounded) *Average total assets = ($1,247,000 + $1,270,000) ÷ 2 = $1,258,500 **Average stockholders' equity = ($735,000 + $720,000) ÷ 2 = $727,500 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 15-04 Compute and interpret financial ratios that managers use for debt management purposes. 101. Younis Corporation's income statement appears below: The company's net profit margin percentage is closest to: A. 37.1 % B. 3.5 % C. 2.4 % D. 1.7 % Net profit margin percentage = Net income ÷ Sales = $20,600 ÷ $1,240,000 = 1.7% (rounded)