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

question 191

Multiple Choice

Financial statements for Oratz Company appear below:

$\begin{array}{|l|r|}\hline&\text { Oratz Company } \\&\text { Income Statement } \\&\text { For the Year Ended December 31, Year } \\&2\\&\text { (dollars in thousands) }\\\hline \text { Sales (All on Account) } & \$ 1630 \\\hline \text { Costs of Goods Sold } & \$ 1140 \\\hline \text { Gross Margin } & \$ 490 \\\hline \text { Operating Expenses } & \$ 190 \\\hline \text { Net Operating Income } & \$ 300 \\\hline \text { Interest Expense } & \$ 30 \\\hline \text { Net Income before Taxes } & \$ 270 \\\hline \text { Income Taxes (30\%) } & \$ 81 \\\hline \text { Net Income } & \$ 189\\\hline\end{array}$

Total dividends during Year 2 were $\$ 139,000$ , of which $\$ 6,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 260$ .


-Oratz Company's current ratio at the end of Year 2 was closest to which of the following?

• A) 0.51 to 1.
• B) 0.57 to 1.
• C) 1.23 to 1.
• D) 1.26 to 1.

---

Definitions:

Absolute Purchasing Power Parity

A theory that suggests that in the absence of trade barriers and transportation costs, identical goods will have the same price in different countries when prices are expressed in a common currency.

Covered Interest Arbitrage

A financial strategy to profit from the difference in interest rates between two countries while hedging against exchange rate risks.

Spot Rate

The current market price at which a particular asset, such as a currency, commodity, or security, can be bought or sold for immediate delivery.

Relative Purchasing Power Parity

Relative Purchasing Power Parity (RPPP) is an economic theory which postulates that the rate at which the exchange rate between two currencies will change over time is equivalent to the rate at which their purchasing power converges, essentially due to inflation rates differences.