1. _____. The balance sheets at the end of each of the first two years of operations indicate the following:

2009 2008

Total current assets $500,000 $450,000

Total investments 100,000 50,000

Total plant assets 900,000 600,000

Total current liabilities 200,000 75,000

Total long-term liabilities 400,000 225,000

Preferred 9% stock, $100 par

100,000 100,000

Common stock, $10 par. 500,000 500,000

Paid-in capital in excess of par -common stock. 50,000 50,000

Retained earnings 250,000 150,000

If net income is $120,000 and interest expense is $42,500 for 2009, what is the rate earned on common stockholders equity for 2009 (round percent to one decimal point)?

A. 13.9%

B. 14.8%

C. 15.9%

D. 12.3%

E. None of the above

2. _____. The balance sheets at the end of each of the first two years of operations indicate the following:

2009 2008

Total current assets $500,000 $450,000

Total investments. 100,000 50,000

Total plant assets. 900,000 600,000

Total current liabilities. 200,000 75,000

Total long-term liabilities. 400,000 225,000

Preferred 9% stock, $110 par 100,000 100,000

Common stock, $10 par 500,000 500,000

Paid-in capital in excess of par -common stock 50,000 50,000

Retained earnings 250,000 150,000

If net income is $120,000 and interest expense is $42,500 for 2009, what are the earnings per share on common stock for 2009 (round to two decimal places)?

A. $2.22

B. $2.40

C. $3.25

D. $1.55

E. None of the above

3. _____. An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to:

A. increase

B. decrease

C. remain the same

D. either increase or decrease

E. None of the above

4. _____. The ability of a business to pay its debts as they come due is referred to as the factor of:

A. leverage

B. profitability

C. wealth

D. solvency

E. None of the above