Financial Management: Chapter 3 Homework

The Harrisburg Store has net working capital of $2,715, net fixed assets of $22,407, sales of $31,350, and current liabilities of $3,908. How many dollars' worth of sales are generated from every $1 in total assets?

$1.08

Green Yard Care has net income of $62,300, a tax rate of 21 percent, and a profit margin of 6.7 percent. Total assets are $1,100,500 and current assets are $328,200. How many dollars of sales are being generated from every dollar of net fixed assets?

$1.20

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?

.5

Western Gear has net income of $12,400, a tax rate of 21 percent, and interest expense of $1,600. What is the times interest earned ratio for the year?

10.81

Frank's Used Cars has sales of $807,200, total assets of $768,100, and a profit margin of 6.68 percent. The firm has a total debt ratio of 54 percent. What is the return on equity?

15.26

Flo's Flowers has accounts receivable of $4,511, inventory of $1,810, sales of $138,609, and cost of goods sold of $64,003. 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?

22.20

Corner Supply has a current accounts receivable balance of $246,000. Credit sales for the year just ended were $2,430,000. How many days on average did it take for credit customers to pay off their accounts during this past year?

36.95

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

Accounts Receivable

Which one of these identifies the relationship between the return on assets and the return on equity?

DuPont identity

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

profitability

On a common-size balance sheet all accounts for the current year are expressed as a percentage of:

Total Assests for the current year

An increase in which of the following must increase the return on equity, all else constant?

Total Asset turnover and debt-equity ratio

If a company produces a return on assets of 14 percent and also a return on equity of 14 percent, then the firm:

Has an equity multiplier 1.0

Mortgage lenders probably have the most interest in the ______ ratios.

Long-term debt times interest earned

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Price-earnings ratio

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

Quick Ratio

Which one of the following is a correct formula for computing the return on equity?

ROA * Equity Multiplier

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

Sales

DL Farms currently has $600 in debt for every $1,000 in equity. Assume the company uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

Equity Multiplier

The Corner Hardware has succeeded in increasing the amount of goods it sells while holding the amount of inventory on hand at a constant level. Assume that both the cost per unit and the selling price per unit also remained constant. This accomplishment will be reflected in the firm's financial ratios in which one of the following ways?

decrease in the day's sales in inventory

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

decrease in the quick ratio