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1. Presented below are select financial data from Major Drugs annual report:
| Amounts in millions | Year 1 | Year 2 |
| Balance sheet | | |
| Accounts receivable (net) | $9,367 | $13,765 |
| Inventory | 6,860 | 6,239 |
| Income statement | | |
| Net sales | $52,716 | $61,498 |
| Cost of goods sold | 7,541 | 8,525 |
What can be said about Major Drugs accounts receivable turnover for Year 2?
A. It improved from Year 1 to Year 2
B. Major Drug collected receivables less effectively in Year 2 as compared to Year 1
C. Fewer customers purchased items on account during Year 2 as compared to Year 1
D. Customers paid their account balances more quickly during Year 2 as compared to Year 1
2. What advantage exists in analyzing common-size statements rather than statements prepared using actual dollar amounts?
A. Firms of different size can be readily compared.
B. Pro forma amounts are reported.
C. Opportunity costs are minimized.
D. Measurement concerns are eliminated.
3. Presented below are the consolidated balance sheets for B&B Company, Inc. at December 31:
| Amounts in thousands | |
| Current assets | |
| Cash | $ 24,600 |
| Accounts receivable | 29,500 |
| Inventory | 33,400 |
| Marketable securities | 25,900 |
| Total current assets | 113,400 |
| Equipment, net | 145,000 |
| Total assets | $258,400 |
| Current liabilities | |
| Accounts payable | $ 21,000 |
| Income taxes payable | 10,000 |
| Current portion of long-term debt | 13,000 |
| Total current liabilities | 44,000 |
| Long-term obligations | 75,400 |
| Common stock | 55,000 |
| Retained earnings | 84,000 |
| Total liabilities & shareholders' equity | $258,400 |
How does B&B current ratio compare to the industry average of 1.8?
A. B&B will likely have a more difficult time servicing it current liabilities as compared to its competition.
B. B&B is significantly more liquid than other companies in the same industry.
C. B&B current ratio is significantly lower than the benchmark.
D. B&B current ratio implies it is more risky than other companies in the same industry.
B&B of California provided the following information concerning its accounting records:
| Collection revenue (all on account) | $925,000 |
| Accounts receivable, January 1 | 250,000 |
| Allowance for uncollectible accounts, January 1 | 2,700 |
| Collections from customers during the year | 810,000 |
| Accounts written off as uncollectible during the year | 25,000 |
4. How much is the balance of the Accounts Receivable account at December 31?
A. $455,000
B. $340,000
C. $357,300
D. $250,700
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