Freiman Corporation's Most Recent Balance Sheet and Income Statement Appear

question 146

Multiple Choice

Freiman Corporation's most recent balance sheet and income statement appear below:
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
$\begin{array}{lr}\text { Sales (all on account) }&\$ 1,310 \\\text {Cost of goods sold. }&780 \\\text {Gross margin. }&530 \\\text {Selling and administrative expense }&359 \\\text {Net operating income }&171 \\\text {Interest expense }& 35 \\\text {Net income before taxes }&136 \\\text { income taxes (30\%) }& 41 \\\text {Net income }& 95\end{array}$
-The accounts receivable turnover for Year 2 is closest to:

• A) 5.95
• B) 5.70
• C) 1.09
• D) 0.92

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Definitions:

Net Income

This is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in determining product cost, excluding fixed costs.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. It indicates the efficiency with which a company uses its materials and labor to produce and sell products profitably.