Use This Balance Sheet and Income Statement for the First

question 1

Multiple Choice

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. The return on equity for Layton Novelties is

• A) 48 percent.
• B) 21.6 percent.
• C) 42 percent.
• D) 30 percent.

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Definitions:

Accounts Receivable Turnover

A financial metric used to assess how efficiently a company collects payments from its customers over a given period.

Converted to Cash

The process of liquidating assets or investments into cash or cash equivalents.

Order of Liquidity

The sequence in which assets are expected to be converted into cash, with the most liquid assets listed first.

Notes Receivable

A type of asset on the balance sheet representing a written promise to receive a certain amount of cash from another party on or before a specified date.