FIN 300 Chapter 3

Allison's Trees has total assets of $846,200 and total debt of $367,500. What is the equity multiplier? .46 .57 2.17 1.85 1.77

1.77

Outdoor Gear reduced its general and administrative costs this year. This cost improvement will increase which of the following ratios? I. Profit margin II. Return on assets III. Total asset turnover IV. Return on equity I and II only I and III only II, III, and IV only I, II, and IV only I, II, III, and IV

I, II, and IV only

Fast Kars has a return on equity of 22.3 percent, a profit margin of 14.2 percent, and total equity of $467,000. What is the net income? $69,608 $113,875 $104,141 $66,314 $109,897

Net income = .223 × $467,000 = $104,141

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions? No new external financing of any kind No new debt but additional external equity equal to the increase in retained earnings New debt and external equity in equal proportions New debt and external equity, provided the debt-equity ratio remains constant No new external equity and a constant debt-equity ratio

No new external equity and a constant debt-equity ratio

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 8.06 percent 13.67 percent 15.24 percent 17.41 percent

Return on assets = .1128 /(1 + 1.03) = .0556, or 5.56 percent. Section: 3.3 The DuPont Identity

Health Centers, Inc., has total equity of $948,300, sales of $1.523 million, and a profit margin of 4.4 percent. What is the return on equity? 4.21 percent 6.49 percent 7.18 percent 8.68 percent 7.07 percent

Return on equity = (.044 ×$1,523,000)/$948,300 = .0707, or 7.07 percent (profit margin X total Sales)/ Total equity

A firm has total assets of $638,727, current assets of $203,015, current liabilities of $122,008, and total debt of $348,092. What is the debt-equity ratio? 1.03 1.20 1.31 1.43 .87

1.20 Total debt / (total assets - total debt) $348,092 / ($638,727 - $348,092)

AZ Sales has total revenue of $318,400, cost of goods sold equal to 72 percent of sales, and a profit margin of 8.1 percent. Net fixed assets are $154,500 and current assets are $89,500. What is the total asset turnover rate? 1.08 1.38 1.30 1.24 1.28

1.30 Total asset turnover = $318,400 / ($154,500 + $89,500)

Galaxy Sales has sales of $938,300, cost of goods sold of $764,500, and inventory of $123,600. How long on average does it take the firm to sell its inventory? 6.40 days 7.23 days 48.68 days 59.01 days 61.10 days

59.01 days Days' sales in inventory = 365 / ($764,500 / $123,600) = 59.01 days

Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500. The dividend payout ratio is .30. What is the internal growth rate? 2.32 percent 3.57 percent 5.60 percent 2.87 percent 4.94 percent

C. 5.60 percent Internal growth rate = [($82,490/$1,089,500) ×(1 -.30)]/{1 - [($82,490/$1,089,500) ×(1 -.30)]} = .0560, or 5.60 percent

Motor Works has total assets of $919,200, long-term debt of $264,500, total equity of $466,900, net fixed assets of $682,800, and sales of $1,021,500. The profit margin is 6.2 percent. What is the current ratio? .79 .84 1.01 1.26 1.19

Current ratio = ($919,200 - 682,800) / ($919,200 - 264,500 - 466,900) = 1.26

A firm has total assets of $638,727, current assets of $203,015, current liabilities of $122,008, and total debt of $348,092. What is the debt-equity ratio? 1.03 1.20 1.31 1.43 .87

Debt-equity ratio = $348,092 / ($638,727 - 348,092) = 1.20 Section: 3.2 Ratio Analysis

You are analyzing a company that has cash of $8,800, accounts receivable of $15,800, fixed assets of $87,600, accounts payable of $40,300, and inventory of $46,900. What is the quick ratio? 1.20 .67 .83 .61 1.64

Quick ratio = ($8,800 + 15,800) / $40,300 = .61

The Wood Shop generates $.97 in sales for every $1 invested in total assets. Which one of the following ratios would reflect this relationship? Receivables turnover Equity multiplier Profit margin Return on assets Total asset turnover

Total asset turnover

A firm has net working capital of $6,800 and current assets of $21,800. What is the current ratio? .69 .60 1.45 1.67 .92

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

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. 8.65 days 11.28 days 25.01 days 42.83 days 45.33 days

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

If a firm has an inventory turnover of 15, the firm: sells its entire inventory every 15 days. stocks its inventory only once every 15 days. delivers inventory to its customers every 15 days. sells its inventory by granting customers 15 days' of free credit. sells its entire inventory an average of 15 times each year.

sells its entire inventory an average of 15 times each year.

Common-size financial statements present all balance sheet account values as a percentage of: the forecasted budget. sales. total equity. total assets. last year's account value.

total assets.