Chapter 3

A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 21.3, and a book value per share of $7.92. What is the market-to-book ratio? A) 1.39 B) 2.12 C) 1.84 D) 2.45 E) 2.69

B

All-State Moving had sales of $899,000 in 2017 and $967,000 in 2018. The firm's current accounts remained constant. Given this information, which one of the following statements must be true? A) The fixed asset turnover decreased. B) The net working capital turnover rate increased. C) The receivables turnover rate decreased. D) The days' sales in receivables increased. E) The total asset turnover rate increased.

B

Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 4.7, and a current ratio of 2.9. What is the cost of goods sold? A) $2,056,250 Correct B) $1,560,000 C) $1,760,750 D) $1,980,500 E) $1,950,000

A

Drive-Up has sales of $31.4 million, total assets of $27.6 million, and total debt of $14.9 million. The profit margin is 3.7 percent. What is the return on equity? A) 9.15 percent B) 14.21 percent C) 6.85 percent D) 11.08 percent E) 13.31 percent

A

Nielsen's has inventory of $29,406, accounts receivable of $46,215, net working capital of $4,507, and accounts payable of $48,919. What is the quick ratio? A) .49 B) .92 C) 1.32 D) 1.55 E) .94

A

The cash coverage ratio directly measures the ability of a company to meet its obligation to pay: A) An invoice to a supplier. B) Principal to a lender. C) A dividend to a shareholder. D) Wages to an employee. E) Interest to a lender.

E

RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be doing which one of the following? A) Utilizing its total assets more efficiently than Sam's B) Generating $1.26 in net income for every $1 in net fixed assets C) Generating $1 in sales for every $1.26 in net fixed assets D) Maintaining the same level of current assets as Sam's E) Utilizing its fixed assets more efficiently than Sam's

A

On a common-size balance sheet all accounts for the current year are expressed as a percentage of: A) The base year sales. B) Total assets for the current year. C) Total equity for the base year. D) Total assets for the base year. E) Sales for the period.

B

Which one of the following is a source of cash? A) Repurchase of common stock B) Acquisition of debt C) Payment to a supplier D) Purchase of inventory E) Granting credit to a customer

B

Activities of a firm that require the spending of cash are known as: A) Cash on hand. B) Cash receipts. C) Uses of cash. D) Cash collections. E) sources of cash.

C

Corner Books has sales of $687,400, cost of goods sold of $454,200, and a profit margin of 5.5 percent. The balance sheet shows common stock of $324,000 with a par value of $5 a share, and retained earnings of $689,500. What is the price-sales ratio if the market price is $43.20 per share? A) 14.51 B) 12.74 C) 4.07 D) 6.12 E) 4.28

C

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? A) 14.50 days B) 18.67 days C) 22.20 days D) 11.88 days E) 16.23 days

C

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? A) 12.04 percent B) 8.56 percent C) 15.26 percent D) 13.09 percent E) 11.03 percent

C

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? A) $1.23 B) $2.83 C) $1.20 D) 1.37 E) $.84

C

The Docksider has net income for the most recent year of $24,650 and a combined tax rate of 24 percent. The firm paid $1,800 in total interest expense and deducted $2,900 in depreciation expense. What was the cash coverage ratio for the year? A) 13.69 times B) 11.48 times C) 20.63 times D) 20.48 times E) 19.39 times

C

Which one of the following statements is correct? A) Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5. B) If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0. C) An increase in the depreciation expense will not affect the cash coverage ratio. D) An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity. E) The debt-equity ratio can be computed as 1 plus the equity multiplier.

C

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? A) 3.18 times B) 4.01 times C) 4.20 times D) 2.75 times E) 3.54 times

D

Dixie Supply has total assets with a current book value of $368,900 and a current replacement cost of $486,200. The market value of these assets is $464,800. What is the value of Tobin's Q? A) 1.05 B) .79 C) .76 D) .96 E) 1.26

D

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios. A) short-term solvency B) turnover C) asset management D) profitability E) long-term solvency

D

Which one of the following is a source of cash? A) Decrease in common stock B) Increase in fixed assets C) Increase in accounts receivable D) Decrease in inventory E) Decrease in accounts payable

D

A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 21.3, and a book value per share of $7.92. What is the market-to-book ratio? A) 1.84 B) 1.39 C) 2.45 D) 2.69 E) 2.12

E

According to the statement of cash flows, an increase in inventory will _____ the cash flow from _____ activities. A) Increase; investment B) Decrease; financing C) Increase; operating D) Increase; financing E) Decrease; operating

E

Oil Creek Auto has sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. What is the common-size statement value of inventory? A) 13.36 percent B) 16.54 percent C) 44.16 percent D) 46.74 percent E) 12.22 percent

E

Ratios that measure a firm's liquidity are known as _____ ratios. A) long-term solvency B) asset management C) profitability D) book value E) short-term solvency

E