Question 1

Blooming Gardens has an inventory turnover of 16. This means the firm:

Accepted Answer

A)   sells its entire inventory every 16 days.
B)   only stocks its inventory every 16 days.
C)   buys 16 days of inventory with each order.
D)   sells its inventory by granting customers 16 days credit.
E)   sells its inventory an average of 16 times each year.F) None of the above
G) A) and B)

Question 2

Textile Mills has sales of $923,000, cost of goods sold of $748,000, and accounts receivable of $106,700. How long on average does it take the firm's customers to pay for their purchases?

Accepted Answer

A)   8.65 days
B)   11.28 days
C)   25.01 days
D)   42.19 days
E)   45.33 daysF) B) and D)
G) B) and C)

Question 3

Martha's Sweet Shop reduced its fixed assets this year without affecting the shop's operations, sales, or equity. This reduction will increase which of the following ratios? I. Capital intensity ratio
II)  Return on assets
III)  Total asset turnover
IV)  Return on equity

Accepted Answer

A)   I and II only
B)   II and III only
C)   II, III, and IV only
D)   I, II, and IV only
E)   I, II, III, and IVF) A) and C)
G) A) and B)

Question 4

Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?

Accepted Answer

A)   Decrease in the total asset turnover
B)   Decrease in the capital intensity ratio
C)   Increase in days' sales in receivables
D)   Decrease in the profit margin
E)   Decrease in the inventory turnover rateF) C) and D)
G) A) and E)

Question 5

Donovan Brothers, Inc. would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal?

Accepted Answer

A)   Return on assets
B)   Net income
C)   Retention ratio
D)   Dividend payout ratio
E)   Return on equityF) D) and E)
G) C) and D)

Question 6

It takes The Corner Store an average of 51 days to sell its inventory and 32 days to collect its accounts receivable. The firm has sales of $568,700 and costs of goods sold of $398,800. What is the accounts receivable turnover rate?

Accepted Answer

A)   11.23
B)   11.41
C)   11.78
D)   12.23
E)   12.55F) A) and D)
G) A) and C)

Question 7

Cross Hairs Gun Shop has sales of $189,000, a profit margin of 4.8 percent, and a capital intensity ratio of 0.79. What is the return on assets?

Accepted Answer

A)   5.67 percent
B)   6.08 percent
C)   6.39 percent
D)   6.42 percent
E)   6.67 percentF) B) and D)
G) D) and E)

Question 8

Eastern Hardwood Sales has total equity of $89,000, 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)   $168,200
B)   $173,550
C)   $181,430
D)   $185,620
E)   $187,500F) D) and E)
G) All of the above

Question 9

A firm has net working capital of $3,800 and current assets of $11,700. What is the current ratio?

Accepted Answer

A)   0.34
B)   0.60
C)   1.48
D)   1.65
E)   2.92F) B) and C)
G) D) and E)

Question 10

Tessler Farms has a return on equity of 12.71 percent, a debt-equity ratio of 0.75, and a total asset turnover of 0.9. What is the return on assets?

Accepted Answer

A)   7.26 percent
B)   8.06 percent
C)   13.67 percent
D)   15.24 percent
E)   17.41 percentF) A) and B)
G) A) and D)

Question 11

Ratzell's Place has a market-to-book ratio of 2.7, net income of $68,400, a book value per share of $37, and 45,000 shares of stock outstanding. What is the price-earnings ratio?

Accepted Answer

A)   24.34
B)   28.16
C)   55.10
D)   59.09
E)   65.72F) A) and B)
G) C) and D)

Question 12

Wilson's Realty has total assets of $46,800, net fixed assets of $37,400, current liabilities of $6,100, and long-term liabilities of $24,600. What is the total debt ratio?

Accepted Answer

A)   0.41
B)   0.60
C)   0.66
D)   0.78
E)   0.86F) D) and E)
G) A) and B)

Question 13

The equity multiplier is equal to:

Accepted Answer

A)   one plus the debt-equity ratio.
B)   one plus the total asset turnover.
C)   total debt divided by total equity.
D)   total equity divided by total assets.
E)   one divided by the total asset turnover.F) A) and B)
G) A) and C)

Question 14

Quick 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 $6,000. What is the internal growth rate?

Accepted Answer

A)   5.48 percent
B)   6.22 percent
C)   6.67 percent
D)   7.34 percent
E)   7.92 percentF) A) and B)
G) A) and C)

Question 15

Tasty Dee-Lite has current liabilities of $6,630, net working capital of $2,180, inventory of $2,750, and sales of $36,800. What is the quick ratio?

Accepted Answer

A)   0.76
B)   0.84
C)   0.91
D)   1.09
E)   1.19F) B) and E)
G) D) and E)

Question 16

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 E)
G) A) and B)

Question 17

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) A) and B)
G) B) and D)

Question 18

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) A) and E)
G) A) and D)

Question 19

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) C) and D)
G) A) and E)

Question 20

A firm has inventory of $11,400, accounts payable of $9,800, cash of $850, net fixed assets of $12,150, long-term debt of $9,500, accounts receivable of $6,600, and total equity of $11,700. What is the common-size percentage for the net fixed assets?

Accepted Answer

A)   19.60 percent
B)   26.67 percent
C)   39.19 percent
D)   42.08 percent
E)   48.75 percentF) C) and D)
G) A) and B)

Exam 3: Working With Financial Statements

The equity multiplier is equal to:

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A firm has inventory of $11,400, accounts payable of $9,800, cash of $850, net fixed assets of $12,150, long-term debt of $9,500, accounts receivable of $6,600, and total equity of $11,700. What is the common-size percentage for the net fixed assets?

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Donovan Brothers, Inc. would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal?

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It takes The Corner Store an average of 51 days to sell its inventory and 32 days to collect its accounts receivable. The firm has sales of $568,700 and costs of goods sold of $398,800. What is the accounts receivable turnover rate?

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Blooming Gardens has an inventory turnover of 16. This means the firm:

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Textile Mills has sales of $923,000, cost of goods sold of $748,000, and accounts receivable of $106,700. How long on average does it take the firm's customers to pay for their purchases?

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Martha's Sweet Shop reduced its fixed assets this year without affecting the shop's operations, sales, or equity. This reduction will increase which of the following ratios? I. Capital intensity ratio II) Return on assets III) Total asset turnover IV) Return on equity

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Eastern Hardwood Sales has total equity of $89,000, 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?

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Quick 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 $6,000. What is the internal growth rate?

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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?

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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 working capital of $3,800 and current assets of $11,700. What is the current ratio?

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Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?

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Cross Hairs Gun Shop has sales of $189,000, a profit margin of 4.8 percent, and a capital intensity ratio of 0.79. What is the return on assets?

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Wilson's Realty has total assets of $46,800, net fixed assets of $37,400, current liabilities of $6,100, and long-term liabilities of $24,600. What is the total debt ratio?

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Tasty Dee-Lite has current liabilities of $6,630, net working capital of $2,180, inventory of $2,750, and sales of $36,800. What is the quick ratio?

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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?

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Tessler Farms has a return on equity of 12.71 percent, a debt-equity ratio of 0.75, and a total asset turnover of 0.9. What is the return on assets?

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Ratzell's Place has a market-to-book ratio of 2.7, net income of $68,400, a book value per share of $37, and 45,000 shares of stock outstanding. What is the price-earnings ratio?

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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?

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