Overton Company Had the Following Transactions in 2012, Its First

question 69

Multiple Choice

Overton Company had the following transactions in 2012, its first year of operations.
• Issued 5,000 shares of common stock. Stock has par value of $0.01 per share and was issued at $30.00
Per share.
• Earned net income of $200,000.
• Paid dividends of $5.00 per share.
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At the end of 2012, how much is the total Stockholders' equity?

• A) $150,000
• B) $325,000
• C) $175,000
• D) $200,000

Understand the significance of changes in accounts receivable turnover over different periods.

Understand the calculation and implication of the gross profit rate in covering expenses.

Calculate and interpret the times interest earned ratio to evaluate a company's ability to meet interest obligations.

Analyze the impact of inventory management on business operations through inventory turnover ratios.

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Definitions:

Times-Interest-Earned Ratio

A fiscal indicator that evaluates a firm's capacity to satisfy its debt commitments utilizing its present income.

Operating Costs

Expenditures that are necessary for the day-to-day operations of a business, including costs related to manufacturing, sales, and administration.

Interest Charges

Interest charges are the costs incurred by an entity for borrowing money, quantified as a percentage of the principal loan amount.

Assets

Economic resources or owned items of value that an individual, corporation, or country possesses, expected to provide future benefits.