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Financial Statements for Orange Company Appear Below Total Dividends During Year 2 Were

question 83

Multiple Choice

Financial statements for Orange Company appear below:
$Financial statements for Orange Company appear below: \begin{array}{|l|r|} \hline&\text { Orange Company } \\ &\text { Income Statement } \\ &\text { For the Year Ended December 31, Year } \\ &2\\ &\text { (dollars in thousands) }\\ \hline \text { Sales (All on Account) } & \$ 2830 \\ \hline \text { Costs of Goods Sold } & \$ 1980 \\ \hline \text { Gross Margin } & \$ 850 \\ \hline \text { Operating Expenses } & \$ 340 \\ \hline \text { Net Operating Income } & \$ 510 \\ \hline \text { Interest Expense } & \$ 30 \\ \hline \text { Net Income before Taxes } & \$ 480 \\ \hline \text { Income Taxes (30\%) } & \$ 144 \\ \hline \text { Net Income } & \$ 336\\ \hline \end{array} Total dividends during Year 2 were \$ 156,000 , of which \$ 18,000 were preferred dividends. The market price of a share of common stock on December 31, Year 2 was \$ 100 . -Orange Company's times interest earned for Year 2 was closest to which of the following? A) 11.2 times. B) 16.0 times. C) 17.0 times. D) 28.3 times.$
$\begin{array}{|l|r|}\hline&\text { Orange Company } \\&\text { Income Statement } \\&\text { For the Year Ended December 31, Year } \\&2\\&\text { (dollars in thousands) }\\\hline \text { Sales (All on Account) } & \$ 2830 \\\hline \text { Costs of Goods Sold } & \$ 1980 \\\hline \text { Gross Margin } & \$ 850 \\\hline \text { Operating Expenses } & \$ 340 \\\hline \text { Net Operating Income } & \$ 510 \\\hline \text { Interest Expense } & \$ 30 \\\hline \text { Net Income before Taxes } & \$ 480 \\\hline \text { Income Taxes (30\%) } & \$ 144 \\\hline \text { Net Income } & \$ 336\\\hline\end{array}$

Total dividends during Year 2 were $\$ 156,000$ , of which $\$ 18,000$ were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $\$ 100$ .
-Orange Company's times interest earned for Year 2 was closest to which of the following?

Understand the impact of activity variances on net operating income.

Learn how different types of businesses measure activity (e.g., by wells serviced, client-visits, units produced, tenant-days).

Understand the concept of planning budgets and their adjustments based on actual activity levels.

Learn about the financial management practices in service companies versus manufacturing companies.

Definitions:

Acceptance

The act of agreeing to a proposal or offer, thereby creating a binding contract upon meeting the terms of the offer.

Seller's Offer

A proposal by a seller to sell goods or services under specified terms and conditions to a buyer.

Void Contract

A legal agreement that is invalid from the outset and has no legal effect due to circumstances of its formation.

Voidable Contract

A contract that may be annulled or considered void at the option of one of the parties due to certain defects or circumstances affecting the contract's validity.