Finance Chapter 3 - Optional

A firm has sales of $68,400 , costs of $42,900 , interest paid of $2,100 , and depreciation of $6500. the tax rate is 34%. what is the value fo the cash coverage ratio?

12.14 Cash Coverage ratio = (Sales - costs) / interest paid

Al's Sport Store has sales of $897,400, costs of goods sold of $628,300, inventory of $208,400, and accounts receivable of $74,100. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

121.07 days Invt. Turnover = COGS/ inventory Days of Inventory = 365/ inventory turnover

It is easer to evaluate a firm using financial statements when the firm:

Uses the same accounting procedures as other firms in the industry.

During the year, kitchen Supply increased its accounts receivable by $130, decreased its inventory by $75, and decreased its accounts payable by $40. How did these three accounts affect the firm's cash flows for the year?

$95 use of cash

An increase in what will increase a firms quick ratio without affecting its cash ratio?

Accounts receivable

Uses of Cash

Activities of a firm which require the spending of cash

Which is a use of cash?

Decrease in common stock

Which is a source of cash?

Decrease in inventory

Which of the following ratios measure a firm's liquidity?

Interval measure, and Quick ratio

Ratios that measure a firm's financial leverage are known as:

Long-term solvency ratios

Big Guy Subs has net income of $150,980, a price-earnings ratio of 12.8, and earnings per share of $0.87. How many shares of stock are outstanding?

Number of shares = $150,980 / $0.87 = 173,540

A common-size income statement is an accounting statement that expresses all of a firm's expenses as percentage of:

Sales

The US Government coding system that classifies a firm by the nature of its business operations is known as the:

Standard Industrial Classification Code

Which of the following represents problems encountered when comparing the financial statements of two separate entities?

Either one or both of the firms may be conglomerates and thus have unrelated lines of business, The operations of the tow firms may vary geographically, The firms may use differing accounting methods, The tow firms may be seasonal in nature and have different fiscal year ends.

Jasper United had sales of $21,000 in 2011 and $24,000 in 2012. The firm's current accounts remained constant. Given this information, which one of the following statements must be true?

The net working capital turnover rate increased