Quantitative Tools in Accounting - Module 6 of 6


Question 1

Acme Corporation shows $1,200,000 in current assets and $400,000 in current liabilities. Its sales amount is $200,000. Which of the following is true?

Question 2

Acme Corporation’s cost of goods sold (COGS) was $600,000. The company started the year with $20,000 in inventory and ended the year with $40,000 in inventory. The average turnover of Acme’s inventory was therefore

Question 3

Acme Corporation owes $4,000,000 to creditors and has $2,000,000 in outstanding stock. Acme’s debt to equity ratio is therefore

Question 4

Acme Corporation has $100,000 in earnings before interest and taxes (EBIT) and $400,000 in net sales. Acme also had interest expense of $10,000. The company therefore earned

Question 5

Acme Corporation has earnings of $320,000 and pays a preferred dividend of $120,000. Acme has 100,000 shares of common stock currently owned by shareholders. Its common stock sells for $20 per share. What is Acme’s price to earnings (PE) ratio?

Question 6

Acme Corporation invests $50,000 in surplus funds in an interest-bearing account that pays 4% in interest compounded annually. After 10 years, what is the total amount in the account?

Question 7

Acme Corporation is planning to buy bonds that will generate level, annual cash flows. The company is looking at two alternatives: one involves the purchase of a corporate bond and another involves the purchase of a state bond. The company wants to compare returns on the two bonds to maximize its investment for its shareholders. With respect to the profitability of the two different bonds, what will the company do?

Question 8

Acme Corporation’s balance sheet shows assets of $4,000,000 and liabilities of $2,500,000. The market value of its assets and liabilities are $7,000,000 and $4,000,000, respectively. Under the liquidation valuation approach, if Acme sold all of its assets it would get about $5,500,000 and if it then paid its liabilities it would cost Acme $3,500,000. Value Acme Corporation using book value, market value, and liquidation. Which valuation method produces the highest result?

Question 9

Acme Corporation earns $4.00 per share and its cap rate is estimated at 7%. Therefore, one share of Acme’s stock is worth

Question 10

Acme Corporation stock sells for $40 per share and earnings per share is $2.00. What is Acme’s implied cap rate?