FINA 3824 quiz 8

Uptown Men's Wear has accounts payable of $2,214, inventory of $7,950, cash of $1,263, fixed assets of $8,400, accounts receivable of $3,907, and long-term debt of $4,200. What is the value of the net working capital to total assets ratio?

0.51 Net working capital to total assets = ($1,263 + $3,907 + $7,950 - $2,214)/($1,263 + $3,907 + $7,950 + $8,400) = 0.51

The Dockside Inn has net income for the most recent year of $8,450. The tax rate was 35 percent. The firm paid $1,300 in total interest expense and deducted $1,900 in depreciation expense. What was the cash coverage ratio for the year?

12.46 Earnings before taxes = $8,450/(1 - .35) = $13,000.00 Earnings before interest, taxes, and depreciation = $13,000.00 + $1,300 + $1,900 = $16,200.00 Cash coverage ratio = $16,200.00/$1,300 = 12.46 times

The Flower Shoppe has accounts receivable of $3,506, inventory of $4,407, sales of $218,640, and cost of goods sold of $169,290. How many days does it take the firm to sell its inventory and collect the payment on the sale assuming that all sales are on credit?

15.35 days Days in inventory = 365/($169,290/$4,407) = 9.502 days Days' sales in receivables = 365/($218,640/$3,506) = 5.853 days Total days in inventory and receivables = 9.502 + 5.853 = 15.35 days

The Bike Shop paid $1,990 in interest and $1,850 in dividends last year. The times interest earned ratio is 2.2 and the depreciation expense is $520. What is the value of the cash coverage ratio?

2.46 EBIT = 2.2 × $1,990 = $4,378 Cash coverage ratio = ($4,378 + $520)/$1,990 = 2.46

Dandelion Fields has a Tobin's Q of .96. The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000. The firm has 20,000 shares of stock outstanding and a book value per share of $2.09. What is the market to book ratio?

2.75 times Market value of assets = .96 × $225,000 = $216,000 Market value of equity = $216,000 - $101,000 = $115,000 Market value per share $115,000/20,000 = $5.75 Market-to-book ratio = $5.75/$2.09 = 2.75 times

Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 3.2, and a current ratio of 2.9. What is the cost of goods sold?

$1,400,000 Current assets = 2.9 × $350,000 = $1,015,000 ($1,015,000 - Inventory)/$350,000 = 1.65; Inventory = $437,500 Costs of goods sold = 3.2 × $437,500 = $1,400,000

The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What is the amount of the cash flow to stockholders?

$20,680 Cash flow from assets = $48,450 - (-$1,330) − $24,000 = $25,780 Cash flow to creditors = $2,480 - (-$2,620) = $5,100 Cash flow to stockholders = $25,780 − $5,100 = $20,680

Crandall Oil has total sales of $1,349,800 and costs of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow?

$309,076 Earnings before interest and taxes = $1,349,800 − $903,500 − $42,700 = $403,600 Tax = $403,600 × .34 = $137,224 Operating cash flow = $403,600 + $42,700 − $137,224 = $309,076

A firm has a debt-equity ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total equity is $511,640. What is the amount of the net income?

$44,084 Return on equity = .049 × 1.12 × (1 + 0.57) = .0861616 Net income = $511,640 × .0861616 = $44,084

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent. What is the return on equity?

50% (Total assets - Total equity)/Total assets = .74; Total equity = .26 Total assets Net income = .13 Total assets Return on equity = .13 Total assets/.26 Total assets = 50 percent

Gladstone Pavers has a long-term debt ratio of 0.6 and a current ratio of 1.6. Current liabilities are $700, sales are $4,440, the profit margin is 9.5 percent, and the return on equity is 19.5 percent. How much does the firm have in net fixed assets?

$4,987.69 Current assets = 1.6 × $700 = $1,120 Net income = .095 × $4,440 = $421.80 Total equity = $421.80/.195 = $2,163.0769 0.6 = Long term debt/(Long-term debt + $2,163.0769); Long-term debt = $3,244.6153 Total debt = $700 + $3,244.6153 = $3,944.6153 Total assets = $3,944.6153 + $2,163.0769 = $6,107.6922 Net fixed assets = $6,107.6922 - $1,120 = $4,987.69

Webster World has sales of $12,900, costs of $5,800, depreciation expense of $1,100, and interest expense of $700. What is the operating cash flow if the tax rate is 32 percent?

$5,404 Earnings before interest and taxes = $12,900 - $5,800 - $1,100 = $6,000 Taxable income = $6,000 - $700 = $5,300 Tax = .32($5,300) = $1,696 Operating cash flow = $6,000 + $1,100 - $1,696 = $5,404

Lancaster Toys has a profit margin of 7.5 percent, a total asset turnover of 1.71, and a return on equity of 21.01 percent. What is the debt-equity ratio?

0.64 Equity multiplier = .2101/(.075 × 1.71) = 1.638 Debt-equity ratio = 1.638 - 1 = 0.638

Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding. The firm has a profit margin of 6 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?

20 Price per share = 1.20 × ($220,000/10,000) = $26.40 Earnings per share = ($220,000 × .06)/10,000 = $1.32 Price-earnings ratio = $26.40/$1.32 = 20