Chapter 3 Test Bank Questions BA 323 EXAM 1

Earth Fare Foods has total assets of $229,800, net fixed assets of $71,500, long-term debt of $52,000, and total debt of $78,700. If inventory is $45,000, what is the current ratio?

(229,800 - 71,500) / (78,700 - 52,000) = 5.93

Your firm has cash of $3,800, accounts receivable of $8,600, inventory of $33,100, and net working capital of $1,100. What is the cash ratio

(3,800)/(3,800+33,100+1,100) = .09

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

(318,000)/(647,700)= 49.10

Delmont Movers has a profit margin of 6.2 % and net income of $48,900. What is the common sized % for the cost of goods and sold if that expenses amounted to $379,000 for the year

(379,000)/(48,900/.062)= 48.05

International Travel Services has net income of $48,400, total assets of $219,000, total equity of $154,800, and total sales of $411,700. What is the common size % for the net income

(48,400)/(411,700)= 11.76 %

Underwood Home Sales has total assets of $589,900 and total debt of $318,000. What is the equity multiplier

(589,900)/(589,900-318,000) = 2.17

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?

(6100+24,600) / (46,800) = .66

Denbo's, Inc. has total equity of $389,600, long-term debt of $116,400, net working capital of $1,600, and total assets of $627,600. What is the total debt ratio?

(627,600 - 389,600) / (627,600) = .38

Peter's Motor Works has total assets of $689,400, long-term debt of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio?

(689,400 - 497,000) / (689,400 - 299,500 - 275,000) = 1.67 `

Eric & Jared's Department Store has current liabilities of $7,630, net working capital of $2,180, inventory of $2,750, and sales of $51,800. What is the quick ratio?

(7,630 + 2,180 - 2,750) / (7,630) = .93

The DuPont identity can be used to help a financial manager determine 1) degree of financial leverage used by a firm 2) operating efficiency of a firm 3) utilization rate of a firms assets 4) rate of return on a firm's assets

1, 2, 3, 4

The T-shirt successfully managed to reduce its general and administrative costs this year. This cost improvement will increase which of the following ratios 1) profit margin 2) return on assets 3) total asset turnover 4) return on equity

1, 2, 4

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Market-to-book ratio = $16.25/$9.28 = 1.75

Whole Foods has a book value per share of $13.50, earnings per share of $1.21, and a price- earnings ratio of 17.6. What is the market-to-book ratio?

Market-to-book ratio = ($1.21 × 17.6)/$13.50 = 1.58

For the most recent year, Wilson Enterprises had sales of $689,000, cost of goods sold of $470,300, depreciation expense of $61,200, and additions to retained earnings of $48,560. The firm currently has 12,000 shares of common stock outstanding, and the previous year's dividends per share were $1.18. Assuming a 35 percent tax rate, what was the times interest earned ratio?

Net income = $48,560 + ($1.18 × 12,000) = $62,720; Earnings before taxes = [$62,720/(1 - 0.35)] = $96,492.31; Earnings before interest and taxes = $689,000 - $470,300 - $61,200 = $157,500; Interest = $157,500 - $96,492.31 = $61,007.69; Times interest earned = $157,500/$61,007.69 = 2.58

The Medicine Shoppe has a return on equity of 19.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income?

Net income = 0.192 × $738,000 = $141,696

Adell Furniture has a profit margin of 8.2 percent and a dividend payout ratio of 40 percent. What is the plowback ratio?

Plowback ratio = 1 - 0.40 = 0.60

Lawler's BBQ has sales of $311,800, a profit margin of 3.9 percent, and dividends of $4,500. What is the plowback ratio?

Plowback ratio = 1 - [$4,500/(0.039 × $311,800)] = 62.99 percent

A firm has net income of $6,850 and interest expense of $2,130. The tax rate is 34 percent. What is the firms times interest earned ratio?

Times interest earned ratio = {[$6,850/(1 - 0.34)] + $2,130}/$2,130 = 5.87

Which one of the following statement is correct

adjustment have to be made when comparing the income statements of firms that use different methods of accounting for inventory

A firm has a current ratio of 1.4 and a quick ratio of .9. Given this you know for certain that the firm

has positive net working capital

A common size balance sheet helps financial managers determine

if changes are occurring in a firm;s mix of assets

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions

no new equity and a constant debt equity ratio

The equity multiplier is equal to

one plus the debt equity ratio

All else constant, which one of the following will decrease if a firm increases its net income

price earning ratio

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

total asset turnover

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

total assets

A firm has an equity multiplier of 1.5. This means that the firm has a:

total debt ratio of .33

High Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends. Given this, the percentage shown on a common-size income statement for the dividend account will:

vary in direct relation to the net profit %

A firm has total assets of $523,100, current assets of $186,500, current liabilities of $141,000, and total debt of $215,000. What is the debt-equity ratio?

(215,000)/ (523,100 - 215,000) = .70

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?

($149,200/$936,800) × (1/0.74) × 1.5 = 32.25 percent

Tressier Dry Cleaners has inventory of $1,700, accounts payable of $4,200, cash of $1,950, and accounts receivables of $3,680. What is the cash ratio

(1,950)/(4,200) = .46

You are analyzing a company that has cash of $11,200, accounts receivable of $27,800, fixed assets of $124,600, accounts payable of $31,300 and inventory of $56,900. What is the quick ratio

(11,200 + 27,800)/ (31,300) = 1.25

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

(11,700)/ (11,700 - 3,800) = 1.48

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

(12,150)/(850+6,600+11,400+ 12,150)= 39.19 %

Gently Used Goods has cash of $2,950, inventory of $28,470, fixed assets of $9,860, accounts payable of $11,900, and accounts receivable of $4,660. What is the cash ratio?

(2,900)/ (11,900) = .25

Which of the following are determinants of a firm's sustainable rate of growth 1) amount of sales generated form each dollar invested in assets 2) amount of debt per dollar of equity 3) amount of current assets per dollar of current liabilities 4) percentage of net income distributed as dividends

1,2,4

The Underground Coffee Shop has total assets of 85,300 and an equity multiplier of 1.53. What is the debt equity ratio

1.53 - 1 = .53

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

2, 3

Which of the following will increase the sustainable growth for a firm 1) decreasing the profit margin 2) increasing the dividend payout ratio 3) decreasing the capital intensity ratio 4) increasing the target debt equity ratio

3, 4

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?

Accounts receivable turnover = $5,338,411/$391,648 = 13.63064; Days' sales in receivables = 365/13.63064 = 26.78 days

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 firms customers to pay for their purchases?

Accounts receivable turnover = $923,000/$106,700 = 8.65042; Days' sales in receivables = 365/8.65042 = 42.19 days

A firm has $42,900 in receivables and $211,800 in total assets. The total asset turnover rate is 1.40 and the profit margin is 5.2 percent. How long on average does it take the firm to collect its receivables?

Accounts receivable turnover = ($211,800 × 1.40)/$42,900 = 6.9119; Days' sales in receivables = 365/6.9119 = 52.81 days

Kessler, Inc. has accounts receivable of $31,600, total assets of $311,500, cost of goods sold of $208,400, and a capital intensity ratio of 1.08. What is the accounts receivable turnover rate?

Accounts receivable turnover = ($311,500/1.08)/$31,600 = 9.13

It takes The Crossroads Boutique an average of 61 days to sell its inventory and 30 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?

Accounts receivable turnover = 365/30 = 12.17

True Blue Transport has a current stock price of $27. For the past year, the company had net income of $2,187,400, total equity of $13,892,300, sales of $26,511,000, and 2.5 million shares outstanding. What is the market-to-book ratio?

Book value per share = $13,892,300/2,500,000 = $5.55692; Market-to-book = $27/$5.55692 = 4.86

Circle K Stores has net income of $41,000, a profit margin of 3.7 percent, and a return on assets of 9 percent. What is the capital intensity ratio?

Capital intensity ratio = ($41,000/0.09)/($41,000/0.037) = 0.41

A firm has net income of $31,300, depreciation of $5,100, taxes of $14,600, and interest paid of $3,100. What is the cash coverage ratio?

Cash coverage ratio = ($31,300 + $14,600 + $3,100 + $5,100)/$3,100 = 17.45

Blue Water Cafe has $28,700 in total assets, depreciation of $3,100, and interest of $1,400. The total asset turnover rate is 1.2. Earnings before interest and taxes are equal to 28 percent of sales. What is the cash coverage ratio?

Cash coverage ratio = {[0.28 × (1.2 × $28,700)] + $3,100}/$1,400 = 9.10

You would like to borrow money 3 years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future

Cash coverage ratio= 2.6; debt equity ratio= .3

A fire has destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 13.8 percent. Sales were $979,000, the total debt ratio was 0.42, and total debt was $548,000. What is the return on assets?

Debt-equity ratio = 0.42/(1 - 0.42) = 0.72414; Return on assets = 0.138/(1 + 0.72414) = 8.00 percent

Last year, Teresa's Fashions earned net income of $68,400 and had 12,000 shares of stock outstanding. The dividends per share were $1.20. What is the dividend payout ratio?

Dividend payout ratio = $1.20/($68,400/12,000) = 21.05 percent

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $8,500 in dividends. What is the dividend payout ratio?

Dividend payout ratio = $8,500/$31,200 = 27.24 percent

The Rainbow Company has total sales of $713,200 and a profit margin of 8.5 percent.

Earnings per share = (0.085 × $713,200)/12,500 = $4.85

Suppose Gallinger Corp. has the following characteristics: Shares outstanding: 1,000,000 Current share price: $10 Total debt: $1,000,000 Total cash: $500,000 Based on the formula above, what is the enterprise value of Gallinger Corp.?

Enterprise value = ($1,000,000 × $10) + $1,000,000 - $500,000 = $10,500,000

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?

Equity multiplier = 1 + 1.7 = 2.70

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing

Internal growth rate

A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent. The current profit margin is 7.5 percent and the firm uses no external financing sources. What must the total asset turnover be?

Internal growth rate = 0.045 = [0.075 × TAT × (1 - 0.60)]/{1 - [0.075 × TAT × (1 - 0.60)]}; TAT = 1.44

Undertaker Enterprises earns $0.17 in profit on every $1 of sales and has $0.67 in assets for every $1 of sales. The firm pays out 20 percent of its profits to its shareholders. What is the internal growth rate?

Internal growth rate = [($0.17/$0.67) × (1 - 0.20)]/{1 - [($0.17/$0.67) × (1 - 0.20)]} = 25.47 percent

A firm has adopted a policy whereby it will not seek any additional external financing. Given this, what is the maximum growth rate for the firm if it has net income of $12,100, total equity of $94,000, total assets of $156,000, and a 40 percent dividend payout ratio?

Internal growth rate = [($12,100/$156,000) × (1 - 0.40)]/{1 - [($12,100/$156,000) × (1 - 0.40)]} = 4.88 percent

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

Internal growth rate = [($26,400/$189,500) × (1 - 0.30)]/{1 - [($26,400/$189,500) × (1 - 0.30)]} = 10.81 percent

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?

Internal growth rate = {($18,700/$217,000) × [($18,700 - $7,000)/$18,700]}/{1 - {($18,700/$217,000) × [($18,700 - $7,000)/$18,700]}}/ = 5.70 percent

The Universal Network has sales of $496,500, cost of goods sold of $264,900, and inventory of $87,100. What is the inventory turnover rate?

Inventory turnover = $264,900/$87,100 = 3.04

Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of $94,300. How long on average does it take the firm to sell its inventory?

Inventory turnover = $603,200/$94,300 = 6.39661; Days' sales in inventory = 365/6.39661 = 57.06 days

The Space and Rocket Center takes an average of 55 days to sell its inventory and an average of 2.5 days to collect payment on its sales. What is the inventory turnover rate?

Inventory turnover = 365/55 = 6.64

Phils Hardware sells its inventory in 75 days, on average. Costs of goods sold for the year are $631,800. What is the average value of the firms inventory?

Inventory turnover = 365/75 = 4.8667; Inventory = $631,800/4.8667 = $129,821

The cash coverage ratio is used to evaluate the:

ability of a firm to pay the interest on its debt.

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?

Price-earnings ratio = $11.60/[(0.056 × $311,200)/15,000] = 9.98

Baxter & Baxter has total assets of $710,000. There are 45,000 shares of stock outstanding with a market value of $28 a share. The firm has a profit margin of 7.1 percent and a total asset turnover of 1.29. What is the price-earnings ratio?

Price-earnings ratio = $28/{[0.071 × ($710,000 × 1.29)]/45,000} = 19.38

Childrens Place has a market-to-book ratio of 2.9, 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?

Price-earnings ratio = (2.9 × $37)/($68,400/45,000) = 70.59

A firm has sales of $311,000 and net income of $31,600. Currently, there are 28,000 shares outstanding at a market price of $36 per share. What is the price-sales ratio?

Price-sales ratio = $36/($311,000/28,000) = 3.24

Waldale Pools has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.55 and the total asset turnover is 1.6. What is the profit margin?

Profit margin = ($64,500/$289,100)/[(1 + 0.55) × 1.6] = 9.00 percent

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?

Profit margin = 0.189/(1.45 × 1.9) = 6.85 percent

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

Profit margin = {[(0.21 × $737,000) - $7,900] × (1 - 0.35)}/$737,000 = 12.95 percent

A firm earns $0.18 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Return on assets = ($0.18/$1)/($1.60/$1) = 11.25 percent

Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent, and a debt-equity ratio of 0.55. What is the return on assets?

Return on assets = (0.046 × $828,900)/[(1 + 0.55) × $539,200)] = 4.56 percent

Larrys Gun Shop has sales of $189,000, a profit margin of 5.6 percent, and a capital intensity ratio of 0.79. What is the return on assets?

Return on assets = (0.056 × $189,000)/(0.79 × $189,000) = 7.09 percent

The After Life has sales of $428,300, total assets of $389,100, and a profit margin of 7.2 percent. What is the return on assets?

Return on assets = (0.072 × $428,300)/$389,100 = 7.93 percent

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?

Return on assets = 0.1271/(1 + 0.75) = 7.26 percent

The Inside Door has total debt of $78,600, total equity of $214,000, and a return on equity of 14.5 percent. What is the return on assets?

Return on assets = 0.145/[($78,600 + $214,000)/$214,000] = 10.61 percent

Mercier United has net income of $128,470. There are currently 32.67 days' sales in receivables. Total assets are $1,419,415, total receivables are $122,306, and the debt-equity ratio is 0.40. What is the return on equity?

Return on equity = ($128,470/$1,419,415) × (1 + 0.40)] = 12.67 percent

Mikes Place has total assets of $123,800, a debt-equity ratio of 0.75, and net income of $7,100. What is the return on equity?

Return on equity = ($7,100/$123,800) × (1 + 0.75) = 10.04 percent

Freedom Health Centers has total equity of $861,300, sales of $1.48 million, and a profit margin of 5.2 percent. What is the return on equity?

Return on equity = (0.052 × $1,480,000)/$861,300 = 8.94 percent

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?

Return on equity = 0.061 × (1 + 1.6) = 15.86 percent

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?

Return on equity = 0.079 × (1 + 0.84) = 0.14536; Net income = 0.14536 × $438,000 = $63,667.68

New Steel Products has total assets of $991,000, a total asset turnover rate of 1.1, a debt-equity ratio of 0.6, and a return on equity of 8.7 percent. What is the firm's net income?

Return on equity = 0.087 = [Net income/($991,000 × 1.1)] × 1.1 × (1 + 0.6); Net income = $53,885.63

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?

Return on equity = 0.126 × (1 + 0.60) = 20.16 percent

Taylor, Inc. has sales of $11,898, total assets of $9,315, and a debt-equity ratio of 0.55. If its return on equity is 14 percent, what is its net income?

Return on equity = 0.14 = (Net income/$9,315) × (1 + 0.55); Net income = $841.35

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

Return on equity = 0.148 × 2.16 × 1.30 = 41.56 percent

Which one of the following is the abbreviation for the US government coding system that classifies a firm by its specific type of business operation

SIC

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?

Sales = $79,000 × 1.5 × 1.3 = $154,050

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve?

Sustainable growth = 0.06 = {[PM × (1/1.25) × (1 + 0.45)] × (1 - 0.30)}/1 - {[PM × (1/1.25) × (1 + 0.45)] × (1 - 0.30)} = 6.97 percent

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?

Sustainable growth rate = [(0.05 × 1.2 × 1.4) × 0.8]/{1 - [(0.05 × 1.2 × 1.4) × 0.8]} = 7.20 percent

A firm has a return on equity of 16 percent, a return on assets of 11 percent, and a 30 percent dividend payout ratio. What is the sustainable growth rate?

Sustainable growth rate = [0.16 × (1 - 0.30)]/{1 - [0.16 × (1 - 0.30)]} = 12.61 percent

Valentino's maintains a constant debt-equity ratio of 0.45. The firm had net income of $11,800 for the year and paid $6,500 in dividends. The firm has total assets of $92,000. What is the sustainable growth rate?

Sustainable growth rate = {$11,800/[$92,000/(1 + 0.45)]} × [($11,800 - $6,500)/$11,800]/{1 - {$11,800/[$92,000/(1 + 0.45)]} × [($11,800 - $6,500)/$11,800]} = 9.11 percent

The Donut Hut has sales of $68,000, current assets of $11,300, net income of $5,100, net fixed assets of $54,900, total debt of $23,800, and dividends of $800. What is the sustainable growth rate?

Sustainable growth rate = {[$5,100/($11,300 + $54,900 - $23,800)] × [($5,100 - $800)/$5,100]}/{1 - {[$5,100/($11,300 + $54,900 - $23,800)] × [($5,100 - $800)/$5,100]}} = 11.29 percent

Friendly Skies Airline has earnings before interest and taxes of $21,680 and net income of $12,542. The tax rate is 35 percent. What is the times interest earned ratio?

Times interest earned ratio = $21,680/{$21,680 - [$12,542/(1 - 0.35)]} = 9.09

The Berry Patch has sales of $438,000, cost of goods sold of $369,000, depreciation of $37,400, and interest expense of $13,800. The tax rate is 35 percent. What is the times interest earned ratio?

Times interest earned ratio = ($438,000 - $369,000 - $37,400)/$13,800 = 2.29

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

financial ratios

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?

Total asset turnover = $291,200/($154,500 + $89,500) = 1.19

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Total asset turnover = 1.40 × $798,000 = $1,117,200

Whitts BBQ has sales of $348,000, a profit margin of 8.1 percent, and a capital intensity ratio of 0.70. What is the total asset turnover rate?

Total asset turnover = 1/0.70 = 1.43

Marthas 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?

Total assets = (0.45 × $74,400) + $74,400 = $107,880; Capital intensity ratio = $107,880/$137,200 = 0.79

A firm has sales of $529,000 for the year. The profit margin is 3.4 percent and the retention ratio is 60 percent. What is the common-size percentage for the dividends paid?

[529,000 x .034 x (1-.6)] / (529,000)= 1.36 %

Which one of the following statements is true concerning the price earning (PE) ratio

a high PE ratio may indicate that a firm is expected to grow significantly

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1

cash payments of an account payable

Fred is the owner of a local feed store. Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has?

cash ratio

Builder's Outlet just hired a new chief financial officer. To get a feel for the company, she wants to compare the firm's sales and costs over the past three years to determine if any trends are present and also determine where the firm might need to make changes. Which one of the following statements will best suit her purposes?

common size income statement

Which one of the following transactions will increase the liquidity of a firm

credit sale of inventory at cost

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

decrease in the capital intensity ratio

Which one of the following will increase the profit margin of a firm, all else constant

decrease in the tax rate

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?

dividend payout ratio

Which one of the following is a measure of long term solveny

equity multiplier

The Dupont identity can be totally defined by which one of the following

equity multiplier, return on assets

New Century Products is a company that was founded last year. While the outlook for the company is positive, it currently has negative earnings. If you wanted to measure the progress of this firm, which one of the following ratios would probably be best to monitor given the firm's current situation?

price sales ratio

Financial statements analysis

provides useful information that can serve as a basis for forecasting future performance

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

sells its inventory an average of 16 times each year

If a firm has a 100 % dividend payout ratio then the internal growth rate of the firm is

zero percent