8. Solvency ratio data are primarily concerned with the ability of a company to:

Question

8. Solvency ratio data are primarily concerned with the ability of a company to:

A. produce profits.

B. provide income for stockholders.

C. maintain long-term survival and repay its debt.

D. manage its cash flow.

9. A company issues 1 million shares of common stock with a par value of $0.05 for $15.30 a share. The entry to record this transaction includes a debit to Cash for:

A. $15,300,000, a credit to Common Stock for $50,000, and a credit to Additional Paid-in Capital for $15,250,000.

B. $50,000, a debit to Capital Receivable for $15,250,000, a credit to Common Stock for $50,000, and a credit to Additional Paid-in Capital for $15,250,000.

C. $15,300,000 and a credit to Common Stock for $15,300,000.

D. $50,000 and a credit to Common Stock for $50,000.

10. A company has net income of $31.10 million. Stockholders' equity at the beginning of the year is $75.05 million and, at the end of the year, it is $123.15 million. The only change to stockholders' equity came from net income. The return on equity ratio is approximately:

A. 0.41

B. 0.31

C. 3.96

D. 0.25

11. Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?

A. When the indirect method is used, changes in long-term assets are added to convert net income to net cash flow provided by operating activities.

B. When the indirect method is used, changes in long-term liabilities are subtracted to convert net income to net cash flow provided by operating activities.

C. When the indirect method is used, changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities.

D. When the indirect method is used, depreciation expense is added to net income as a step in the process of calculating net cash flow provided by operating activities.

9. A company issues 1 million shares of common stock with a par value of $0.05 for $15.30 a share. The entry to record this transaction includes a debit to Cash for:

Explanation / Answer

Answer:

Q8 Answer: Solvency ratio data are primarily concerned with the ability of the comapany to :

C: to maintain long term survival and repay its debt, as this ratio is computed in order to check

that the does not default in its debt obligation as had it uncehcked the company may not survive in long run. It can be computed by dividing (Net income + Depreciation) by Short term and log term liabilities.

Q9 Answer:  A company issues 1 million shares of common stock with a par value of $0.05 for $15.3 a share. The entry to record this transaction includes debit to Cash for :

A. $15,300,000, a credit to Common Stock for $50,000, and a credit to Additional Paid-in Capital for $15,250,000.

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