Question 1

Peterboro Supply has a current accounts receivable balance of $391,648.Credit sales for the year just ended were $5,338,411.How long did it take on average for credit customers to pay off their accounts during the past year?

Accepted Answer

A)  24.78 days
B)  26.78 days
C)  29.09 days
D)  31.15 days
E)  33.33 daysF) B) and C)
G) A) and E)

Question 2

Fresh Foods has sales of $213,600,total assets of $198,700,a debt-equity ratio of 1.7,and a profit margin of 2.4 percent.What is the equity multiplier?

Accepted Answer

A)  0.70
B)  0.73
C)  1.93
D)  2.70
E)  2.84F) B) and E)
G) C) and D)

Question 3

Tom's Hardware has inventory of $318,000,equity of $421,800,total assets of $647,700,and sales of $687,400.What is the common-size percentage for the inventory account?

Accepted Answer

A)  26.81 percent
B)  33.66 percent
C)  46.26 percent
D)  49.10 percent
E)  51.68 percentF) A) and D)
G) B) and C)

Question 4

The ratios that are based on financial statement values and used for comparison purposes are called:

Accepted Answer

A)  financial ratios.
B)  industrial statistics.
C)  equity standards.
D)  accounting returns.
E)  analytical standards.F) A) and B)
G) C) and E)

Question 5

The Saw Mill has a return on assets of 6.1 percent,a total asset turnover rate of 1.8,and a debt-equity ratio of 1.6.What is the return on equity?

Accepted Answer

A)  4.26 percent
B)  9.76 percent
C)  12.28 percent
D)  15.86 percent
E)  19.03 percentF) B) and D)
G) All of the above

Question 6

Aardvaark & Co.has sales of $291,200,cost of goods sold of $163,300,net profit of $11,360,net fixed assets of $154,500,and current assets of $89,500.What is the total asset turnover rate?

Accepted Answer

A)  1.08
B)  1.11
C)  1.19
D)  1.24
E)  1.28F) D) and E)
G) A) and B)

Question 7

Western Hardwood Sales has total equity of $79,000,a profit margin of 4.8 percent,an equity multiplier of 1.5,and a total asset turnover of 1.3.What is the amount of the firm's sales?

Accepted Answer

A)  $154,050
B)  $173,550
C)  $181,430
D)  $185,620
E)  $739,440F) A) and C)
G) None of the above

Question 8

Sunshine Rentals has a debt-equity ratio of 0.84.Return on assets is 7.9 percent,and total equity is $438,000.What is the net income?

Accepted Answer

A)  $41,147.09
B)  $54,311.29
C)  $63,667.68
D)  $48,887.02
E)  $50,458.95F) All of the above
G) A) and D)

Question 9

Joshua's Antiques has a total asset turnover rate of 1.2,an equity multiplier of 1.4,a profit margin of 5 percent,a retention ratio of 0.8,and total assets of $120,000.What is the sustainable growth rate?

Accepted Answer

A)  6.98 percent
B)  7.20 percent
C)  7.33 percent
D)  7.54 percent
E)  7.91 percentF) A) and C)
G) A) and B)

Question 10

Which one of the following actions will increase the current ratio,all else constant? Assume the current ratio is greater than 1.0.

Accepted Answer

A)  Cash purchase of inventory
B)  Cash payment of an account receivable
C)  Cash payment of an account payable
D)  Credit sale of inventory at cost
E)  Cash sale of inventory at a lossF) All of the above
G) A) and D)

Question 11

The Blue Lagoon has a return on equity of 18.9 percent,an equity multiplier of 1.9,and a total asset turnover of 1.45.What is the profit margin?

Accepted Answer

A)  2.76 percent
B)  3.57 percent
C)  4.90 percent
D)  6.85 percent
E)  14.60 percentF) B) and D)
G) B) and E)

Question 12

A firm has a current ratio of 1.4 and a quick ratio of 0.9.Given this,you know for certain that the firm:

Accepted Answer

A)  pays cash for its inventory.
B)  has more than half its current assets invested in inventory.
C)  has more cash than inventory.
D)  has more current liabilities than it does current assets.
E)  has positive net working capital.F) B) and C)
G) A) and E)

Question 13

The Green House has a profit margin of 5.6 percent on sales of $311,200.The firm currently has 15,000 shares of stock outstanding at a market price of $11.60 per share.What is the price-earnings ratio?

Accepted Answer

A)  9.98
B)  10.02
C)  11.50
D)  11.93
E)  12.84F) B) and D)
G) B) and C)

Question 14

Explain why the DuPont identity is so useful to a financial manager.

Accepted Answer

Student answers will vary but a good ans...

Question 15

If a firm has a 100 percent dividend payout ratio,then the internal growth rate of the firm is:

Accepted Answer

A)  zero percent.
B)  100 percent.
C)  equal to the ROA.
D)  negative.
E)  infinite.F) C) and D)
G) B) and E)

Question 16

Baugh & Essary has net income of $149,200,sales of $936,800,a capital intensity ratio of 0.74,and an equity multiplier of 1.5.What is the return on equity?

Accepted Answer

A)  6.67 percent
B)  15.93 percent
C)  32.25 percent
D)  42.21 percent
E)  44.09 percentF) B) and C)
G) C) and D)

Question 17

Martha's Fabric House has sales of $137,200,total equity of $74,400,and a debt-equity ratio of 0.45.What is the capital intensity ratio?

Accepted Answer

A)  0.79
B)  0.83
C)  1.06
D)  1.20
E)  1.27F) A) and C)
G) C) and E)

Question 18

Fried Foods has sales of $238,900,total assets of $217,000,total equity of $121,300,net income of $18,700,and dividends paid of $7,000.What is the internal growth rate?

Accepted Answer

A)  5.48 percent
B)  5.70 percent
C)  5.98 percent
D)  7.34 percent
E)  7.92 percentF) A) and C)
G) B) and C)

Question 19

Assume this is your first day on the job as the new chief financial officer of a midsize company.Identify the three key ratios that you would compute first as you begin to try to understand the financial status of the firm.Explain why you selected the three ratios that you did.

Accepted Answer

Student answers will vary but should inc...

Question 20

A firm has net income of $114,000,a return on assets of 12.6 percent,and a debt-equity ratio of 0.60.What is the return on equity?

Accepted Answer

A)  17.11 percent
B)  18.98 percent
C)  20.16 percent
D)  22.20 percent
E)  24.60 percentF) A) and C)
G) A) and E)

Exam 3: Working With Financial Statements

The Saw Mill has a return on assets of 6.1 percent,a total asset turnover rate of 1.8,and a debt-equity ratio of 1.6.What is the return on equity?

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Martha's Fabric House has sales of $137,200,total equity of $74,400,and a debt-equity ratio of 0.45.What is the capital intensity ratio?

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Baugh & Essary has net income of $149,200,sales of $936,800,a capital intensity ratio of 0.74,and an equity multiplier of 1.5.What is the return on equity?

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Peterboro Supply has a current accounts receivable balance of $391,648.Credit sales for the year just ended were $5,338,411.How long did it take on average for credit customers to pay off their accounts during the past year?

Correct AnswerverifiedShow Answer

Tom's Hardware has inventory of $318,000,equity of $421,800,total assets of $647,700,and sales of $687,400.What is the common-size percentage for the inventory account?

Correct AnswerverifiedShow Answer

Sunshine Rentals has a debt-equity ratio of 0.84.Return on assets is 7.9 percent,and total equity is $438,000.What is the net income?

Correct AnswerverifiedShow Answer

Assume this is your first day on the job as the new chief financial officer of a midsize company.Identify the three key ratios that you would compute first as you begin to try to understand the financial status of the firm.Explain why you selected the three ratios that you did.

Correct AnswerverifiedStudent answers will vary but should inc...View AnswerShow Answer

The ratios that are based on financial statement values and used for comparison purposes are called:

Correct AnswerverifiedShow Answer

Explain why the DuPont identity is so useful to a financial manager.

Correct AnswerverifiedStudent answers will vary but a good ans...View AnswerShow Answer

The Blue Lagoon has a return on equity of 18.9 percent,an equity multiplier of 1.9,and a total asset turnover of 1.45.What is the profit margin?

Correct AnswerverifiedShow Answer

If a firm has a 100 percent dividend payout ratio,then the internal growth rate of the firm is:

Correct AnswerverifiedShow Answer

Western Hardwood Sales has total equity of $79,000,a profit margin of 4.8 percent,an equity multiplier of 1.5,and a total asset turnover of 1.3.What is the amount of the firm's sales?

Correct AnswerverifiedShow Answer

A firm has a current ratio of 1.4 and a quick ratio of 0.9.Given this,you know for certain that the firm:

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Fried Foods has sales of $238,900,total assets of $217,000,total equity of $121,300,net income of $18,700,and dividends paid of $7,000.What is the internal growth rate?

Correct AnswerverifiedShow Answer

Which one of the following actions will increase the current ratio,all else constant? Assume the current ratio is greater than 1.0.

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A firm has net income of $114,000,a return on assets of 12.6 percent,and a debt-equity ratio of 0.60.What is the return on equity?

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Joshua's Antiques has a total asset turnover rate of 1.2,an equity multiplier of 1.4,a profit margin of 5 percent,a retention ratio of 0.8,and total assets of $120,000.What is the sustainable growth rate?

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Fresh Foods has sales of $213,600,total assets of $198,700,a debt-equity ratio of 1.7,and a profit margin of 2.4 percent.What is the equity multiplier?

Correct AnswerverifiedShow Answer

The Green House has a profit margin of 5.6 percent on sales of $311,200.The firm currently has 15,000 shares of stock outstanding at a market price of $11.60 per share.What is the price-earnings ratio?

Correct AnswerverifiedShow Answer

Aardvaark & Co.has sales of $291,200,cost of goods sold of $163,300,net profit of $11,360,net fixed assets of $154,500,and current assets of $89,500.What is the total asset turnover rate?

Correct AnswerverifiedShow Answer

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