QUESTION: 2065

Profit margin is a ratio that:

shows the return on net sales
is calculated as net sales divided by operating expenses
yields the company's financial position at a point in time
compares total assets to net sales

Answer(s): A

Explanation:

Profit margin, also called return on net sales, is calculated by dividing net income by net sales. This ratio measures the average portion of each dollar of revenue that ends up as profit.

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Tracy company reports the following in its statement of cash flows:

Net Income $1,000
Depreciation and Amortization 350
Decrease (Increase) in Accounts receivable (10)
Decrease (increase) in inventory 200
Decrease (increase) in prepaid expenses 80
Increase (decrease) in trade payables (300)
Increase (decrease) in taxes payable 75
Cash Flow from operations 1,395

If Tracy shows depreciation expense of $275 in its income statement, cash paid for amortization is ________.

$75
$525
not determinable
$0

Answer(s): D

Explanation:

No cash outflow.

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QUESTION: 2067

The following information should be used according to the provisions of SFAS 95 (Statement of Cash flows) and using the following data.

Net Income $50,000
Provision for bad debts $2,000
Increase in Inventory $1,000
Increase in accounts payable $2,000
Purchase of new equipment $15,000
Sale of equipment for $10,000 gain $20,000
Depreciation expense $5,000
Repurchase of common stock $10,000
Payment of dividend $4,000
Interest payment $3,000

What is change in cash?

$39,000
$45,000
$46,000
$49,000

Answer(s): A

Explanation:

$50,000 + (-$1,000 + $2,000 - $15,000 + $20,000 - $10,000 - $4,000 - $3,000)

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QUESTION: 2068

Excerpts from the balance sheet of Milton Corporation as of April 30, 1997 are presented as follows:

Cash $725,000
Accounts receivable (net) $1,640,000
Inventories $2,945,000
Total current assets $5,310,000
Accounts payable $1,236,000
Accrued liabilities $831,000
Total current liabilities $2,067,000

The board of directors of Milton met on May 5, 1997 and declared a quarterly cash dividend in the amount of $200,000 ($0.50 per share). The dividend was paid on May 28, 1997 to shareholders of record as of May 15, 1997.

Assume that the only transactions that affected Milton during May 1997 were the dividend transactions. If the dividend declared by Milton had been a 10% stock dividend instead of a cash dividend, Milton's total shareholders' equity would have been

unchanged by either the dividend declaration or the dividend distribution.
increased by the dividend declaration and unchanged by the dividend distribution.
decreased by the dividend declaration and increased by the dividend distribution.
unchanged by the dividend declaration and decreased by the dividend distribution.
increased by the dividend declaration and decreased by the dividend distribution.

Answer(s): A

Explanation:

The declaration and distribution of a stock dividend involves transferring an amount from retained earnings to common stock. However, the total shareholders' equity remains the same.

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Free CFA-Level-I Exam Braindumps (page: 517)

QUESTION: 2065

Explanation:

QUESTION: 2066

Explanation:

QUESTION: 2067

Explanation:

QUESTION: 2068

Explanation: