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(solution) Question 1 1. According to the Grafton Furniture Profit video,


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Question 1

 

1. According to the Grafton Furniture Profit video, what large, national retailer does Marcus

 

pitch to carry the new line of chairs?

 

Ashley Furniture Camping World DirectBuy WalMart

 

2 points Question 2

 

1. According to the Grafton Furniture Profit video, Marcus states that "Efficiency is

 

labor, labor is money, money is ________." The correct word to fill-in the blank is:

 

profit net income margin awesome

 

2 points Question 3 1. According to the Grafton Furniture Profit video, what is the name of the new Quick-ship

 

line of 4 chairs that Marcus pitches to the largest retail buying consumer group in the

 

country?

 

Ready-to-buy American Dream Californian Cuban

 

2 points Question 4

 

1. According to the Grafton Furniture Profit video, how much revenue did Grafton furniture do

 

last year?

 

$1 million $2,448,000 $1.5 million $500,000

 

2 points Question 5

 

1. According to the Grafton Furniture Profit video, which is not one of the 4 types of accent

 

chairs Marcus asks Stephan to design? California Florida Midwest Southwest East Coast

 

2 points Question 6

 

1. According to the Grafton Furniture Profit video, when initially surveying the business

 

processes, Marcus discusses the Work-in-Process (WIP) Master List with the employees

 

and determines that:

 

All the WIPs on the Master list are at zero. The company keeps adequate WIP records. The company does not have a master list. The company initially sets all projects at 50% complete.

 

2 points Question 7

 

1. According to the Grafton Furniture Profit video, how much additional gross profit does

 

Marcus expect to earn from all 4 accent chairs combined that offered in the Quick-ship

 

line in 1 year? $500,000 $250,000 $1,000,000 $750,000

 

2 points Question 8

 

1. According to the Grafton Furniture Profit video, how much does Marcus offer in

 

exchange for 45% ownership in the business?

 

$1 million $2,448,000 $1.5 million $500,000

 

2 points Question 9

 

1. The information gained from an analysis of financial statements has its greatest value in

 

assisting the user in making predictions.

 

True False 2 points Question 10

 

1. You are given the following information:

 

Income before interest expense and taxes

 

Less: Interest expense

 

Income before federal income taxes

 

Less: Taxes (at 40% rate)

 

Net income

 

Less: Preferred dividends

 

Earnings available for common stockholders $500,000

 

40,000

 

$460,000

 

184,000

 

$276,000

 

30,000

 

$246,000 2.

 

The number of times the interest is earned is:

 

A. 25.5

 

B. 4.6

 

C. 12.5

 

D. 11.5

 

2 points Question 11

 

1. The two elements used in determining the rate of return on operating assets are:

 

A. net operating income and turnover of operating assets.

 

B. net income and operating assets.

 

C. net operating income and operating assets.

 

D. net income and turnover of operating assets.

 

2 points Question 12 1. The gross margin amounts for Blue Co. were $40,000, $44,000, and $50,000,

 

respectively, for the years 2010 through 2012. If 2010 is the base year for a trend

 

analysis, the appropriate percentages for 2011 and 2012 are:

 

A. 110% and 125%.

 

B. 22% and 25%.

 

C. 220% and 250%.

 

D. 10% and 25%.

 

2 points Question 13

 

1. Trend percentages are basically a type of:

 

A. horizontal analysis.

 

B. vertical analysis.

 

C. ratio analysis.

 

D. All of the above answers are incorrect.

 

2 points Question 14

 

1. You are given the following information:

 

Income before interest and taxes

 

Less: Interest expense

 

Balance

 

Less: Taxes (at 40% rate)

 

Income after taxes

 

Less: Preferred dividends

 

Income available to common stockholders

 

2.

 

The number of times interest was earned is:

 

A. 7.00 times

 

B. 3.60 times

 

C. 2.70 times $1,400,000

 

(200,000)

 

$1,200,000

 

(480,000)

 

$ 720,000

 

(180,000)

 

$ 540,000 D. 6.00 times

 

2 points Question 15

 

1. A company that has favorable financial leverage is using debt or preferred stock to

 

magnify the earnings per share on common stock.

 

True False 2 points Question 16

 

1. The stockholders' equity to debt ratio is a measure of the corporation's:

 

A. ability to generate profit.

 

B. ability to do all of the other answers.

 

C. ability to stimulate the growth of business debt.

 

D. long-term solvency.

 

2 points Question 17

 

1. Ratios are simply a way of expressing data as logical relationships within or between

 

financial statements.

 

True False 2 points Question 18

 

1. The current ratio is computed as total assets divided by total liabilities.

 

True False 2 points Question 19

 

1. The following selected data are taken from the Blake Company's accounts:

 

Sales in 2012

 

Cost of goods sold in 2012

 

Accounts receivable, 12/31/12

 

Accounts receivable, 1/1/12

 

Inventory, 1/1/12

 

Inventory, 12/31/12 $714,000

 

432,000

 

484,000

 

440,000

 

260,000

 

140,000 2.

 

The inventory turnover rate is:

 

A. 1.66

 

B. 1.35

 

C. 3.57

 

D. 2.16

 

2 points Question 20

 

1. Trend percentages are useful in budgeting for future periods. True False 2 points Question 21

 

1. In conducting vertical analysis of an income statement, what element is expressed as

 

100% so that all others are relative to it?

 

A. Cost of goods sold

 

B. Net sales

 

C. Net income

 

D. Gross margin

 

2 points Question 22

 

1. Earnings per share of common stock is a measure of the per share:

 

A. earnings available to common stockholders.

 

B. profit after taxes.

 

C. dividend distribution.

 

D. profit before interest and taxes.

 

2 points Question 23

 

1. Outside parties use financial statement analysis for:

 

A. assessing the results of past management performance.

 

B. assisting in decisions on investing.

 

C. assisting in decisions on extending credit.

 

D. All of the above answers are correct. 2 points Question 24

 

1. The stockholders' equity to debt ratio is a measure of the corporation's profitability.

 

True False 2 points Question 25

 

1. Whether a given common stock is said to be relatively high priced or low priced depends

 

at least partially on its earnings per share.

 

True False 2 points Question 26

 

1. Expressing the change in net sales from one period to the next in both absolute and

 

percentage terms is an example of horizontal analysis.

 

True False 2 points Question 27

 

1. Assuming relatively stable business conditions, a decline in the average number of day's

 

sales in accounts receivable outstanding from one year to the next might indicate:

 

A. that the second year's sales were made at lower prices than the first year's sales.

 

B. a stiffening of the company's credit policies.

 

C. a significant decrease in sales in the second year.

 

D. a longer discount period and a more distant due date were extended to customers

 

in the second year.

 

2 points Question 28

 

1. You are given the following information:

 

Income before interest and taxes

 

Less: Interest expense

 

Balance

 

Less: Taxes (at 40% rate)

 

Income after taxes

 

Less: Preferred dividends

 

Income available to common stockholders $600,000

 

(45,000)

 

$555,000

 

(222,000)

 

$333,000

 

(15,000)

 

$318,000 The number of times interest was earned is:

 

A. 7.40

 

B. 33.33

 

C. 13.33

 

D. 12.33

 

2 points Question 29

 

1. In evaluating a company, the financial analyst must be alert to the economic climate in

 

which that company operates, the general economic conditions in the country, regional

 

conditions, and conditions in the industry and related industries. True False 2 points Question 30

 

1. Percentages in financial analysis are useful for comparison purposes, but actual dollar

 

amounts are often necessary to make financial judgments.

 

True False

 


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