CH 3 Quiz

Bed Bug Inn has annual sales of $137,000. Earnings before interest and taxes is equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent?

1.56 percent Profit margin = {[(.058 × $137,000) - $4,700] × (1 - .34)} / $137,000 = .0156, or 1.56 percent

A firm has net working capital of $6,800 and current assets of $21,800. What is the current ratio?

1.45 Current ratio = $21,800 / ($21,800 - 6,800) = 1.45

High Road Transport has a current stock price of $5.60. For the past year, the company had net income of $287,400, total equity of $992,300, sales of $1,511,000, and 750,000 shares outstanding. What is the market-to-book ratio?

4.23 Market-to-book = $5.60 /($992,300 / 750,000) = 4.23

Leisure Products has sales of $738,800, cost of goods sold of $598,200, and accounts receivable of $86,700. How long on average does it take the firm's customers to pay for their purchases? Assume a 365-day year.

42.83 days Days' sales in receivables = 365 / ($738,800 / $86,700) = 42.83 days

World Exports has total assets of $938,280, a total asset turnover rate of 1.18, a debt-equity ratio of .47, and a return on equity of 18.7 percent. What is the firm's net income?

$119,359.43 Return on equity = .187 = (Net income/$938,280) ×(1 + .47) Net income = $119,359.43

The Gift Shoppe has total assets of $487,920 and an equity multiplier of 1.47. What is the debt-equity ratio?

.47 Debt-equity ratio = 1.47 - 1 = .47

A firm has net income of $197,400, a return on assets of 8.4 percent, and a debt-equity ratio of .72. What is the return on equity?

14.45 percent Return on equity = .084 ×(1 + .72) = .1445, or 14.45 percent

Tessler Farms has a return on equity of 11.28 percent, a debt-equity ratio of 1.03, and a total asset turnover of .87. What is the return on assets?

5.56 percent Return on assets = .1128 /(1 + 1.03) = .0556, or 5.56 percent

UXZ has sales of $683,200, cost of goods sold of $512,900, and inventory of $74,315. What is the inventory turnover rate?

6.90 times Inventory turnover = $512,900 / $74,315 = 6.90 times

Common-size financial statements present all balance sheet account values as a percentage of:

total assets.