A common-size balance sheet consists of which of the following?
Answer(s): C
Expressing all items on the balance sheet as a percentage of total assets allows the analyst to review several years of balance sheets at a glance and to determine the relative changes that have taken place within balance sheet accounts.
Which of the following is not a current liability?
Allowance for Uncollectible Accounts is a contra account to Accounts Receivable, both of which are reported in the current asset section of the balance sheet.
Stock dividends have the greatest impact on which section of the balance sheet?
Answer(s): A
The effect of stock dividends is recorded by transferring part of the retained earnings to the contributed capital accounts. Because of the increase in contributed, it is often described as capitalizing retained earnings.
Morgan Inc. was organized on January 2, 1997 with the following capital structure: 10% cumulative preferred stock, par value $100 and liquidation value $105; authorized, issued and outstanding 1,000shares, $100,000 Common stock, par value $25; authorized 100,000 shares; Issued and outstanding 10,000 shares, $250,000 Morgan had net income of $450,000 for its first year, but no dividends were declared. How much was Morgan's book value per preferred share at December 31, 1997?
Answer(s): D
The book value per share of cumulative preferred stock is its liquidation value plus any dividends in arrears.Thus, the book value per preferred share is the $105 liquidation value plus $10 ($100 X 10%) of dividends in arrears, or $115.
Which of the following types of receivables is generally the most liquid?
Trade receivables are generally the most liquid type of receivable because they are generated from the sale of the firm's goods or services. Other forms of receivables are less liquid because the terms of repayment may vary such as the case with those due from corporate officers and/or affiliated companies. Of particular interest is notes receivable. The analyst should take care to understand the terms of these arrangements.
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