1.

An acceleration in the collection of receivables will tend to cause the accounts receivable
turnover to:
A. decrease C. either increase or decrease
B. remain the same D. increase

2. Kline Corporation had net income of P2 million in 2006. Using the 2006 financial elements as the
base data, net income decreased by 70 percent in 2007 and increased by 175 percent in 2008. The
respective net income reported by Kline Corporation for 2007 and 2008 are:
A. P 600,000 and P5,500,000 C. P1,400,000 and P3,500,000
B. P5,500,000 and P 600,000 D. P1,400,000 and P5,500,000

3. The following financial data have been taken from the records of Ratio Company:
Accounts receivable P200,000
Accounts payable 80,000
Bonds payable, due in 10 years 500,000
Cash 100,000
Interest payable, due in three months 25,000
Inventory 440,000
Land 800,000
Notes payable, due in six months 250,000
What will happen to the ratios below if Ratio Company uses cash to pay 50 percent of its accounts
payable?
A. B. C. D.
Current Increase Decrease Increase Decrease
ratio Acid-
test Increase Decrease Decrease Increase
ratio

4. Pine Hardware Store had net credit sales of P6,500,000 and cost of goods sold of P5,000,000 for the
year. The Accounts Receivable balances at the beginning and end of the year were P600,000 and
P700,000, respectively. The receivables turnover was
A. 7.7 times. C. 9.3 times.
B. 10.8 times. D. 10.0 times.

5. Batik Clothing Store had a balance in the Accounts Receivable account of P390,000 at the beginning
of the year and a balance of P410,000 at the end of the year. The net credit sales during the year
amounted to P4,000,000. Using 360-day year, what is the average collection period of the receivables?
A. 30 days C. 73 days
B. 65 days D. 36 days

6. Deity Company had sales of P30,000, increase in accounts payable of P5,000, decrease in
accounts receivable of P1,000, increase in inventories of P4,000, and depreciation expense of
P4,000. What was the cash collected from customers?
A. P31,000 C. P34,000
B. P35,000 D. P25,000

7. Based on the following data for the current year, what is the inventory turnover? Net sales on
account during year P 500,000
Cost of merchandise sold during year 330,000
Accounts receivable, beginning of year 45,000
Accounts receivable, end of year 35,000 Inventory,
beginning of year 90,000
Inventory, end of year 110,000
A. 3.3 C. 3.7
B. 8.3 D. 3.0

8. Jordan Manufacturing reports the following capital structure:

Current liabilities P100,000

Long-term debt 400,000
Deferred income taxes 10,000
 Preferred stock 80,000
Common stock 100,000
Premium on common stock 180,000
Retained earnings 170,000
What is the debt ratio?
A. 0.48 C. 0.93
B. 0.49 D. 0.96

9. House of Fashion Company had the following financial statistics for 2006: Long-term

debt (average rate of interest is 8%) P400,000

Interest expense 35,000
Net income 48,000
Income tax 46,000
Operating income 107,000
What is the times interest earned for 2006?
A. 11.4 times C. 3.1 times
B. 3.3 times D. 3.7 times

Question Nos. 4 through 6 are based on the data taken from the balance sheet of Nomad Company at the
end of the current year:

Accounts payable P145,000

Accounts receivable 110,000

Accrued liabilities 4,000

Cash 80,000

Income tax payable 10,000

Inventory 140,000

Marketable securities 250,000

Notes payable, short-term 85,000

Prepaid expenses 15,000

10. The amount of working capital for the company is:

A. P351,000 C. P211,000
B. P361,000 D. P336,000

The company’s current ratio as of the balance sheet date is:

A. 2.67:1 C. 2.02:1
B. 2.44:1 D. 1.95:1

11. Selected information from the accounting records of the Blackwood Co. is as follows: Net A/R at
December 31, 2006 P 900,000
Net A/R at December 31, 2007 P1,000,000
Accounts receivable turnover 5 to 1
Inventories at December 31, 2006 P1,100,000
Inventories at December 31, 2007 P1,200,000
Inventory turnover 4 to 1

What was the gross margin for 2007?

A. P150,000 C. P300,000
B. P200,000 D. P400,000
 12. Orchard Company’s capital stock at December 31 consisted of the following:

• Common stock, P2 par value; 100,000 shares authorized, issued, and outstanding.
• 10% noncumulative, nonconvertible preferred stock, P100 par value; 1,000 shares
authorized, issued, and outstanding.
Orchard’s common stock, which is listed on a major stock exchange, was quoted at P4 per share on
December 31 Orchard’s net income for the year ended December 31 was P50,000. The yearly
preferred dividend was declared. No capital stock transactions occurred. What was the price
earnings ratio on Orchard’s common stock at December 31?

A. 6 to 1 C. 10 to 1
B. 8 to 1 D. 16 to 1

13. The balance sheet and income statement data for Candle Factory indicate the following:
Bonds payable, 10% (issued 1998 due 2022) P1,000,000
Preferred 5% stock, P100 par (no change during year) 300,000
Common stock, P50 par (no change during year) 2,000,000
Income before income tax for year 350,000
Income tax for year 80,000
Common dividends paid 50,000
Preferred dividends paid 15,000
Based on the data presented above, what is the number of times bond interest charges were earned
(round to one decimal point)?
A. 3.7 C. 4.5
B. 4.4 D. 3.5

14. M Corporation’s stockholders’ equity at December 31, 2007 consists of the following: 6% cumulative
preferred stock, P100 par, liquidating value
was P110 per share; issued and outstanding 50,000 sharesP5,000,000 Common stock, par, P5
per share; issued and
outstanding, 400,000 shares 2,000,000
Retained earnings 1,000,000

Total P8,000,000

Dividends on preferred stock have been paid through 2006.

At December 31, 2007, M Corporation’s book value per share was

A. P5.50 C. P6.75
B. P6.25 D. P7.50

15. The current assets of Mayon Enterprise consists of cash, accounts receivable, and
inventory. The following information is available:

Credit sales 75% of total sales

Inventory turnover 5 times

Working capital P1,120,000

Current ratio 2.00 to 1

Quick ratio 1.25 to 1

Average Collection period 42 days

Working days 360

The estimated inventory amount is:

A. 840,000 C. 720,000
B. 600,000 D. 550,000
 16. Recto Co. has a price earnings ratio of 10, earnings per share of P2.20, and a pay out ratio of 75%. The
dividend yield is
A. 25.0% C. 7.5%
B. 22.0% D. 10.0%

The balance sheets of Magdangal Company at the end of each of the first two years of operations indicate
the following:

2007 2006

Total current assets P600,00 0 P560,00

0
Total investments 60,000 40,000
Total property, plant, and equipment 900,000 700,000

Net income is P115,000 and interest expense is P30,000 for 2007.

17. What is the rate earned on total assets for 2007 (round percent to one decimal point)?
A. 9.3 percent C. 8.9 percent
B. 10.1 percent D. 7.4 percent

18. What is the rate earned on stockholders' equity for 2007 (round percent to one decimal point)?
A. 10.6 percent C. 12.4 percent
B. 11.2 percent D. 15.6 percent

19. What is the earnings per share on common stock for 2007, (round to two decimal places)?

A. P1.92 C. P1.77
B. P1.89 D. P1.42

.19. If the market price is P30, what is the price-earnings ratio on common stock for 2007 (round to one
decimal point)?
A. 17.0 C. 12.4
B. 12.1 D. 15.9
20 Assume that Axle Inc. reported a net loss of P50,000 in 2006 and net income of P250,000 in 2007. The
increase in net income of P300,000:
A. can be stated as 0% C. cannot be stated as a percentage
B. can be stated as 100% increase D. can be stated as 200% increase

21. During 2007, Tarlac Company purchased P960,000 of inventory. The cost of goods sold for 2007 was
P900,000, and the ending inventory at December 31, 2007 was P180,000. What was the inventory
turnover for 2007?
a. 6.4 C. 5.3
b. 6.0 D. 5.0
REQUIRED: (round-off answers to two decimal places)
1. Current ratio 11. EPS
2. Acid-test ratio 12. P/E ratio
3. Accounts receivable turnover 13. Dividend yield
4. Inventory turnover 14. Payout ratio
5. Gross profit margin 15. Debt ratio
6. Operating profit margin 16. Debt-equity ratio
7. Return on sales (RoS) 17. Times interest earned
8. RoA – operational performance 18. Cash flow to total debt
9. RoA – total management effort 19. Cash flow margin
10. Return on equity (RoE) 20. Cash ratio