Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
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Chapter 5, Problem 2MCQ
To determine
Identify the component that would boost the company’s ROA in profit driver analysis, if a company plans to differentiate its products by offering low prices and discounts for items packaged in bulk (like a discount retailer that requires memberships for its customers).
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MULTIPLE CHOICE. Answer the following:
1.It show how efficient the business is as to its purchase or use of inventory for the whole operation.
a. Operating Income
b. Inventory Liquidation Ratio
c. Inventory Turnover
d. Operating Efficiency
2. This shows that the original investment made by the owner will be recovered.
a. Payback Period
b. Return on Investment
c. Asset Test Ratio
d. Capital Turnover Ratio
3. If the company wants to see the ratio of income generation of the business, what formula will they use for its computation?
a. Total Projected Cost / Average Annual Cash Inflow
b. (Net Income/Cost of Investment) x 100
c. (Net Profit/Net Sales) X 100
d. Cost of Goods Sold/ Average Inventory
4. If the cost of goods sold year 2023 is P60,000, net sales is P60,000 and average inventory is 20,000, what is the inventory turn-over?
a. 6 times
b. 3 times
c.2 times
d. 2.5 times
For CVP analysis calculations, which of the following statements is correct?
A. In target profit calculations, sales revenue is less than total costs.
B. CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit.
OC. A company's sales mix is ultimately determined by the management of a company.
D. The Break-even point is the point at which operating income is greater than $0.
O E.
If sales volume is expected to be higher than the indifference point, management should choose the cost structure with the
higher fixed costs.
Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales. Group of answer choices.
True False
Chapter 5 Solutions
Financial Accounting, 8th Edition
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Explain what a material amount is.Ch. 5 - What basis of accounting (cash or accrual) does...Ch. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - For property, plant, and equipment, as reported on...
Ch. 5 - Briefly explain the major classifications of...Ch. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - If average total assets increase, but net income,...Ch. 5 - Prob. 2MCQCh. 5 - Prob. 3MCQCh. 5 - Prob. 4MCQCh. 5 - Prob. 5MCQCh. 5 - Prob. 6MCQCh. 5 - Prob. 7MCQCh. 5 - Prob. 8MCQCh. 5 - Prob. 9MCQCh. 5 - Prob. 10MCQCh. 5 - Prob. 1MECh. 5 - Prob. 2MECh. 5 - Prob. 3MECh. 5 - Prob. 4MECh. 5 - Determining Financial Statement Effects of Sales...Ch. 5 - Prob. 6MECh. 5 - Prob. 7MECh. 5 - Matching Players in the Accounting Communication...Ch. 5 - Prob. 2ECh. 5 - Finding Financial Information: Matching...Ch. 5 - Prob. 4ECh. 5 - Preparing a Classified Balance Sheet Campbell Soup...Ch. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Stock Issuances and the Statement of Stockholders...Ch. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 19ECh. 5 - Prob. 1PCh. 5 - Matching Definitions with Balance Sheet-Related...Ch. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Preparing a Classified (Multiple-Step) Income...Ch. 5 - Prob. 6PCh. 5 - Determining and Interpreting the Effects of...Ch. 5 - Determining the Effects of Transactions on Ratios...Ch. 5 - Prob. 9PCh. 5 - Prob. 1APCh. 5 - Prob. 2APCh. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 1CPCh. 5 - Prob. 2CPCh. 5 - Prob. 3CPCh. 5 - Prob. 4CPCh. 5 - Prob. 5CPCh. 5 - Prob. 6CPCh. 5 - Prob. 7CPCh. 5 - Evaluating the Impact of Transactions on Statement...Ch. 5 - Prob. 2CC
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- Which of the following is the indicator of the rate at which company is earning profit? Select one: a. Margin of safety b. All options are correct c. Contribution margin d. Profit volume ratioarrow_forwardExplain why rewarding sales personnel on the basis of total sales might not be in the best interests of a business whose goal is to maximize profits.arrow_forwardWhich of the following is not included in the Dupont framework? a. a measure of profitability c. a measure of leverage b. a measure of efficiency d. a measure of market sharearrow_forward
- The margin of safety can be defined as the amount by which sales can decrease beforelosses are incurred by the company.TRUEFALSEarrow_forwardHow does the goal of the firm influence the sales maximization and profit maximization decision.arrow_forwardWhich of the following change in regulations is most likely to improve internal market efficiency and thereby overall market efficiency? Reducing margin requirements on short selling. Raising margin requirements on short selling. Raising margin requirements on margin purchases. Reducing trading hours. Increasing margin interest rates.arrow_forward
- The business risk of a company is most accurately measured by the company's: a. Debt-to-equity ratio b. Efficiency in using assets to generate sales c. Operating leverage and level of uncertainly about demand output prices and competitionarrow_forwardThe company manager (retail industry) stated that the company could lower its operating leverage by renting its stores rather than buying. Would you recommend this? Explain.arrow_forward1. The required sales in units to achive a target net income is? 2. What is the key factor in determining sales mix if a company has limited resources?arrow_forward
- Explain any FOUR (4) methods in analyzing the mixed cost. There are few ways to determine or evaluate the performance of company by using the financial statement. Please explain on how to evaluate the following: a) Ability to enhance market value b) Efficiency of the company c) Ability to generate profit d) Ability to pay debt e) Short term liquidityarrow_forwardContribution analysis and break-even analysis are popular and often used marketing metrics. These analyses are essential to determine if a firm's marketing opportunity will mean a finan- cial loss or profit. As explained in the chapter, contribution is the difference between the selling price per unit and the vari- able cost per unit. Break-even analysis that includes contribu- tion tells marketers how much must be sold to break even or to earn a desired amount of profit. Touch of Beirut Brands is a Los Angeles-based specialty manufacturer of Lebanese specialty foods and ingredients. In the past, the firm has marketed primarily through restaurantarrow_forwardWhich of the following statements is true with regard to the gross profit ratio? An increase in cost of goods sold would increase the gross profit ratio (assuming sales remain constant). An increase in the gross profit ratio may indicate that a company is efficiently managing its inventory. An increase in selling expenses would lower the gross profit ratio. a.1 b.2 c.1 and 2 d.2 and 3arrow_forward
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