Accounting-The 2008 balance sheet of The Washington Post Company

The 2008 balance sheet
of The Washington Post Company shows average shareholders’ equity of $3,171,176
thousand, net operating profit after tax of $79,895 thousand, net income of
$65,722 thousand, and average net operating assets of $3,279,742 thousand. The
company’s return on net operating assets (RNOA) for the year is:

Answer

	A.	2.5%
	B.	2.4%
	C.	2.1%
	D.	2.0%
	E.	There is not enough information to calculate the ratio

When considering the
results of an Altman Z-Score analysis a score of 4.20 would suggest?

Answer

	A.	The company is healthy and there is a low bankruptcy potential in the short-term
	B.	The company is healthy and there is a low bankruptcy potential in both the short and long-term
	C.	The company is exposed to some risk of bankruptcy
	D.	The company is in financial distress and there is a high probability of bankruptcy in the short term future

Generally Accepted
Accounting Principles (GAAP) are created by: (select all that apply)

Answer

The
Securities and Exchange Commission

The
Generally Accepted Accounting Principles Task Force

The
Sarbanes Oxley Act

The
Financial Accounting Standards Board

The
Emerging Issues Task Force

During
the month of March 2010, Weaver World, a tax-preparation service, had the
following transactions.

• Billed $74,000 in revenues on credit
• Received $41,000 from customers’ accounts receivable
• Incurred expenses of $33,500 but only paid $19,425 cash for
these expenses
• Prepaid $5,555 for computer services to be used next month

What was the company’s net cash flow from operations for the month?

Answer

	A.	$16,020
	B.	$10,465
	C.	$74,000
	D.	None of the above

Selected balance sheet income statement data
follow for Harley Davidson, Inc for the year ended December 31, 2008 (in
thousands).
What is the company’s times interest earned ratio?

Income before provision for income
taxes

Interest

expense

Statutory

tax rate

Provision for income taxes

Net income

$1,033,977

$4,542

36.6%

$379,259

$654,718

Answer

	A.	1.004
	B.	144.1
	C.	228.6
	D.	360.0
	E.	None of the above

Covenants represent:

Answer

	A.	The maximum that a creditor will allow a customer to owe at any point in time
	B.	Promises the company makes to the creditor
	C.	Terms and conditions set forth in a lending agreement to reduce the probability of nonpayment
	D.	The property that a company pledges to guarantee repayment

A letter of credit:

Answer

	A.	Provides a guarantee of payment from the buyer, reducing the credit risk to the seller
	B.	Ensures a company that funds will be available when needed
	C.	Is analogous to a credit card that companies can draw on as needed
	D.	Is a representation that a company has a high credit rating

Which of the following
items would not be found on a balance sheet? (Select all that apply)

Answer

	A.	Nonowner financing
	B.	Sales
	C.	Stockholders’ Equity
	D.	Property, plant and equipment
	E.	Cost of Goods Sold

The current ratio is a
measure of:

Answer

	A.	Solvency
	B.	Leverage
	C.	Short-term debt paying ability
	D.	Bankruptcy position

An accrual of wages
expense would have what effect on the balance sheet?

Answer

	A.	Decrease liabilities and increase equity
	B.	Increase assets and increase liabilities
	C.	Increase liabilities and decrease equity
	D.	Decrease assets and decrease liabilities
	E.	None of the above

RainStorm Industries manufactures weather equipment. Selected financial data
for RainStorm is presented below; use the information to answer the question
that follows:

Current Assets	As of Dec. 31, 2008	Dec. 31, 2007
Cash and cash equivalents	$276,843	$255,088
Marketable Securities	$166,106	$187,064
Accounts Receivable (net)	258,387	289,100
Inventories	424,493	391,135
Prepaid Expenses	55,369	25,509
Other current assets	83,053	85,029
Total Current Assets	$1,264,252	$1,232,925

Plant Property and Equipment	1,384,217	625,421
Long-Term Investment	568,000	425,000
Total Assets	3,216,469	2,283,346

Current Liabilities
Short-term borrowings	$156,376	$95,419
Current portion of long-term debt	155,000	168,000
Accounts payable	254,111	286,257
Accrued liabilities	273,658	166,983
Income taxes payable	97,735	178,911
Total Current Liabilities	$936,879	$895,571

Long-Term Debt	450,000	325,000
Deferred Income Taxes	215,017	262,403
Total Liabilities	$1,601,896	$1,482,973

Common Stock	$425,250	$125,000
Additional Paid-in Capital	356,450	279,951
Retained Earnings	832,874	395421
Total Stockholders’ Equity	1,614,573	800,372
Total Liabilities and Stockholders’ Equity	$3,216,469	$2,283,346

Selected Income Statement Data – for the year ending December 31,
2008:

Net
Sales

$4,585,340

Cost of Goods Sold	(2,942,353)
Selling Expenses	(884,685)

Operating
Income

758,302

Interest
Expense

(35,240)

Earnings
before Income Taxes

723,062

Income
Tax Expense

(285,609)

Net Income	437,453

Selected Statement of Cash Flow Data – for the year ending
December 31, 2008:

Cash Flows from Operations	$1,156,084
Capital Expenditures	$845,862

RainStorm’s liabilities to equity ratio in 2007 was:

Answer

	A.	1.12
	B.	1.05
	C.	1.68
	D.	1.85

The ratio of net income
to equity is also known as:

Answer

	A.	Total net equity ratio
	B.	Profit margin
	C.	Return on equity
	D.	Net income ratio
	E.	None of the above

RainStorm Industries manufactures weather equipment. Selected
financial data for RainStorm is presented below; use the information to answer
the question that follows:

Current Assets	As of Dec. 31, 2008	Dec. 31, 2007
Cash and cash equivalents	$276,843	$255,088
Marketable Securities	$166,106	$187,064
Accounts Receivable (net)	258,387	289,100
Inventories	424,493	391,135
Prepaid Expenses	55,369	25,509
Other current assets	83,053	85,029
Total Current Assets	$1,264,252	$1,232,925

Plant Property and Equipment	1,384,217	625,421
Long-Term Investment	568,000	425,000
Total Assets	3,216,469	2,283,346

Current Liabilities
Short-term borrowings	$156,376	$95,419
Current portion of long-term debt	155,000	168,000
Accounts payable	254,111	286,257
Accrued liabilities	273,658	166,983
Income taxes payable	97,735	178,911
Total Current Liabilities	$936,879	$895,571

Long-Term Debt	450,000	325,000
Deferred Income Taxes	215,017	262,403
Total Liabilities	$1,601,896	$1,482,973

Common Stock	$425,250	$125,000
Additional Paid-in Capital	356,450	279,951
Retained Earnings	832,874	395421
Total Stockholders’ Equity	1,614,573	800,372
Total Liabilities and Stockholders’ Equity	$3,216,469	$2,283,346

Selected Income Statement Data – for the year ending December
31, 2008:

Net
Sales

$4,585,340

Cost of Goods Sold	(2,942,353)
Selling Expenses	(884,685)

Operating
Income

758,302

Interest
Expense

(35,240)

Earnings
before Income Taxes

723,062

Income
Tax Expense

(285,609)

Net Income	437,453

Selected Statement of Cash Flow Data – for the year ending
December 31, 2008:

Cash Flows from Operations	$1,156,084
Capital Expenditures	$845,862

RainStorm’s quick ratio in 2008 was:

Answer

	A.	1.35
	B.	1.00
	C.	0.89
	D.	0.75

The overarching purpose
of credit risk analysis is to:

Answer

	A.	Quantify potential credit losses
	B.	Determine a company’s optimal capital structure
	C.	Identify credit opportunities
	D.	Provide information to banks about credit losses

The audit report is
addressed to:

Answer

	A.	The board of directors and the shareholders
	B.	The shareholders
	C.	The audit committee
	D.	The Securities and Exchange Commission (SEC)
	E.	The board of director

A company’s net cash
flow will equal its net income …

Answer

	A.	Only when the company has no investing cash flow for the period
	B.	Occasionally
	C.	Only when the company has no investing or financing cash flow for the period
	D.	Rarely
	E.	Almost always

During fiscal 2008,
Black & Decker Corporation reported Net income of $293.6 million and paid
dividends of $101.8 million. Which of the following describes how these
transactions would affect Black and Decker’s equity accounts? (in millions)

Answer

	A.	Increase contributed capital by $293.6 and decrease earned capital by $101.8
	B.	Decrease contributed capital by $101.8 and increase earned capital by $293.6
	C.	Increase contributed capital by $191.8
	D.	Increase earned capital by $191.8
	E.	None of the above

RainStorm Industries manufactures weather equipment. Selected
financial data for RainStorm is presented below; use the information to answer
the question that follows:

Current Assets	As of Dec. 31, 2008	Dec. 31, 2007
Cash and cash equivalents	$276,843	$255,088
Marketable Securities	$166,106	$187,064
Accounts Receivable (net)	258,387	289,100
Inventories	424,493	391,135
Prepaid Expenses	55,369	25,509
Other current assets	83,053	85,029
Total Current Assets	$1,264,252	$1,232,925

Plant Property and Equipment	1,384,217	625,421
Long-Term Investment	568,000	425,000
Total Assets	3,216,469	2,283,346

Current Liabilities
Short-term borrowings	$156,376	$95,419
Current portion of long-term debt	155,000	168,000
Accounts payable	254,111	286,257
Accrued liabilities	273,658	166,983
Income taxes payable	97,735	178,911
Total Current Liabilities	$936,879	$895,571

Long-Term Debt	450,000	325,000
Deferred Income Taxes	215,017	262,403
Total Liabilities	$1,601,896	$1,482,973

Common Stock	$425,250	$125,000
Additional Paid-in Capital	356,450	279,951
Retained Earnings	832,874	395421
Total Stockholders’ Equity	1,614,573	800,372
Total Liabilities and Stockholders’ Equity	$3,216,469	$2,283,346

Selected Income Statement Data – for the year ending December
31, 2008:

Net
Sales

$4,585,340

Cost of Goods Sold	(2,942,353)
Selling Expenses	(884,685)

Operating
Income

758,302

Interest
Expense

(35,240)

Earnings
before Income Taxes

723,062

Income
Tax Expense

(285,609)

Net Income	437,453

Selected Statement of Cash Flow Data – for the year ending
December 31, 2008:

Cash Flows from Operations	$1,156,084
Capital Expenditures	$845,862

RainStorm’s current ratio in 2008 was:

Answer

	A.	1.35
	B.	1.00
	C.	2.02
	D.	1.50

A list of assets, liabilities and equity can be found on which of the
following?

Answer

	A.	Statement of Assets and Liabilities
	B.	Income Statement
	C.	Balance Sheet
	D.	Statement of Cash Flows
	E.	Statement of Stockholders’ Equity

Which of the following
statements are correct (select all that apply):

Answer

	A.	A balance sheet reports on investing and financing activities.
	B.	An income statement reports on financing activities.
	C.	The statement of equity reports on changes in the accounts that make up equity.
	D.	The statement of cash flows reports on cash flows from operating, investing, and financing activities over a period of time.
	E.	A balance sheet reports on a company’s assets and liabilities over a period of time.

Selected ratios follow for BJ Services for the year ended
September 31, 2008 (in millions). What is the company’s return on equity (ROE)
for the year?

Return on net operating assets (RNOA)

Profit margin (PM)

Net operating profit margin (NOPM)

Asset turnover (AT)

Financial leverage

(FL)

17.10%

11.23%

11.69%

1.081

1.595

Answer

	A.	12.64%
	B.	19.36%
	C.	20.16%
	D.	27.27%
	E.	None of the above

Procter & Gamble’s June 30, 2008 financial statements reported
the following (in millions):

Cash, beginning of year	$ 5,354
Cash, end of year	3,313
Cash from operating activities	15,814
Cash from investing activities	$(2,549)

What did Procter & Gamble report for Cash from financing activities for the
year ended June 30, 2008?

Answer

	A.	$(13,265) million
	B.	$(21,932) million
	C.	$(15,306) million
	D.	$15,306 million
	E.	$13,265 million

Commercial paper is
issued with maturities of less than 270 days because:

Answer

	A.	Usually the collateral consists of short-term assets
	B.	It exempts the borrowing from SEC regulation
	C.	Companies use it to fund working capital needs
	D.	Companies do not want to pay high interest rates

Arizona Company
currently has a current ratio of 0.9. The company decides to borrow $1,000,000
from First Granite Bank for a period of nine months. After the borrowing
Arizona’s current ratio will be:

Answer

“Arrrgh!” exclaimed James L. Heskett, President of Innovative Distribution Company (IDC)

Accounting-The 2008 balance sheet of The Washington Post Company

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