F
It takes K's Boutique an average of 53 days to sell its inventory and an average of 16.8 days to collect its accounts receivable. The firm has sales of $942,300 and costs of goods sold of $692,800. What is the accounts receivable turnover rate? Assume a 365-day year.
Accounts Receivable turnover = 365/16.8 = 21.73
Mahalo Tours currently has $10,500 in cash. The company owes $26,900 to suppliers for merchandise and $47,500 to the bank for a long-term loan. Customers owe the company $33,000 for their purchases. The inventory has a book value of $62,400 and an estimated market value of $65,600. If the store complied a balance sheet as of today, what would be the book value of the current assets?
CA =$10,500+33,000+62,400=$105,900
Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:
had to decrease
The market value:
of an asset tends to provide a better guide to the actual worth of that asset than does the book value
An income statement prepared according to GAAP:
records expenses based on the matching principle.
Which one of the following statements is correct?
NASDAQ has more listed stocks than does the NYSE
The Carpentry Shop has sales of $398,600, costs of $254,800, depreciation expense of $26,400, interest expense of $1,600, and a tax rate of 34 percent. What is the net income for this firm?
NI = ($398,600-254,800-26,400-1,600)(1-.34)=$76,428
Financial Ratios are traditionally grouped in all but which of the following categories?
Working Capital Management
What is the primary goal of financial management for a sole proprietorship?
Maximize the market value of the equity
Which one of the following is the abbreviation for the U.S. government coding system that classifies a firm by its specific type of business operations?
SIC
Donut Delite has total assets of $31,300, long-term debt of $8,600, net fixed assets of $19,300, and owners' equity of $21,100. What is the value of the net working capital?
$10,400 Net Working Capital = $21,000+8,600-19,300=$10,400
Andersen's Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 35 percent. The firm paid out $23,400 in dividends. What is the addition to retained earnings?
Addition to retained earnings = ((318,400-199,400-28,600-1,100)(1-.35))-23,400=$34,645
Which one of the following statements concerning the balance sheet is correct?
Assets are listed in descending order of liquidity
Lester's Fried Chick'n purchased its building 11 years ago at a cost of $189,000. The building is currently valued at $209,000. The firm has other fixed assets that cost $56,000 and are currently valued at $32,000. To date, the firm has recorded a total of $49,000 in depreciation on the various assets. The company has current liabilities of $36,600 and net working capital of $18,400. What is the total book value of the firm's assets?
Book Value = $189,000 + 56,000-49,000+18,4000+36,000=$251,000
Which one of the following is an intangible fixed asset?
Copyright
Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?
Corporation
The passage of the Tax Cuts and Jobs Act of 2017 created a revised progressive tax structure, which applies to all of the following except:
Corporations
Wes Motors has total assets of $98,300, net working capital of $11,300, owners' equity of $41,600, and long-term debt of $38,600. What is the value of the current assets?
Current Liabilities = $98,300-38,600-41,600=$18,100 Current Assets = $11,300+18,100=$29,400
Jaminda's Holistic Healing has sales of $980,000, cost of goods sold of $765,250, and account receivable of $88,640. How long on average does it take the firm's customers to pay for their purchases? Assume a 365 day year.
Days' sales in receivables = 365/($980,000/$88,640) = 33.01 days
Outdoor Sports paid $12,500 in dividends and $9,310 in interest over the past year. Sales totaled $361,820 with costs of $267,940. The depreciation expense was $16,500 and the tax rate was 35 percent. What was the amount of the operating cash flow?
EBIT = $361,820-267,940-16,500=$77,380 Tax=($77,380-9,310)x.35 =$23,824.50 OCF=$77,380+16,500-23,824.50=$70,056 $70,056
The ratios that are based on financial statement values and used for comparison purposes are called:
Financial Ratios
Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?
General Partnership
Which one of the following is a working capital decision?
How much cash should the firm keep in reserve?
Maria is the sole proprietor of an antique store that she has operated at the same location for the past 16 years. The store rents the space in which it is located but does own all of the inventory and fixtures. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific loan covenants or assets pledged as security for the loan. Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which of the following options does the bank have to collect the money it is owed? I. Sell the inventory and use the cash raised to apply to the debt II. Sell the store fixtures and use the cash raised to apply to the debt III. Take funds from Maria's personal account at the bank to pay the store's debt IV. Sell any assets Maria personally owns and apply the proceeds to the store's debt
I,III, and IV only
Jamie is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance?
International Finance
Phil's Carvings sells its inventory in 93 days, on average. Costs of goods sold for the year are $187,200. What is the average value of the firm's inventory? Assume a 365-day year.
Inventory = $187,200 x 93/365 = $47,698
SRC, Inc., sells its inventory in an average of 43 days and collects its receivables in 3.6 days, on average. What is the inventory turnover rate? Assume a 365-day year.
Inventory Turnover = 365/43 = 8.49 times
If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?
Investments
Saki Kale Farms has net income of $96,320, total assets of $975,200, total equity of $555,280, and total sales of $1,141, 275. What is the common-size percentage for the net income?
Net Income common size percentage = $96, 320/ $1,141,275 = .0844 or 8.44%
For the most recent year, Wilson Enterprises had sales of $689,000, cost of goods sold of $470,300, depreciation expense of $61,200, additions to retained earnings of $48,560, and dividends per share of $2.18. There are 12,000 shares of common stock outstanding and the tax rate is 35 percent. What is the times interest earned ratio?
Net income = $48,560 +($2.18 x 12,000) = $74,720 Earnings before taxes =($74,720/(1-.35)=$114,953.85 Earnings before interest and taxes = $689,000-492,300-61,200 = $135,500 Interest = $135,500-114,953.85 = $20,546.15 Times interest earned = $135,500/$20,546.15 = 6.59
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 equity and a constant debt-equity ratio
Daisy Co. has $267,000 in taxable income and Binget Co. has $1,600,000 in taxable income. Suppose both firms have identified a new project that will increase taxable income by $10,000. The additional project will increase Daisy Co. 's taxes by _______ and Binget Co's taxes by ______.
Taxable Income Tax Rate $0 - 9,525 10% 9,525 -38,700 12 38,700-82,500 22 82,500-157,500 24 157,500-200,000 32 200,000-500,000 35 500,000+ 37 Daisy Co. tax = $10,000 x 0.35= $3,500 Binget Co. tax =$10,000 x 0.37 = $3,700
Market Values
reflect expected selling prices given the current economic situation
The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:
An agency conflict
Uptown Market is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:
Capital Structure
Daniel's Market has sales of $43,800, costs of $40,400, depreciation expense of $2,500, and interest expense of $1,100. If the tax is 34 percent, what is the operating cash flow. OCF?Assume tax losses can be carried forwarded and utilized.
EBIT = $43,800 -40,400-2500=$900 Tax=(900-1,100)x.34=-$68 OCF=$900+2500-(-68)=$3,468
Fresh Foods has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.43 and a profit margin of 4.8 percent. What is the equity multiplier?
Equity multiplier = 1+1.43 =2.43
The balance sheet of a firm shows beginning net fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending?
Net Capital Spending = $371,920-348,200 + 46,080= $69,800
The balance sheet of a firm shows beginning net fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending?
Net Capital spending = $371,920-348,200+ 46,080 = $69,800
Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?
Positive cash flow to stockholders
KBJ has total assets of $613,000. There are 21,000 shares of stock outstanding with a market value of $13 a share. The firm has a profit margin of 6.2 percent and a total asset turnover of 1.08. What is the price earnings ratio?
Price earnings ratio = $13/ ((.062 x ($613,000 x 1.08))/21,000 = 6.65
Gaspares Agriculture Cooperative has current liabilities of $162,500, net working capital of $28,560, inventory of $175,800, and sales of $1,941,840. What is the quick ratio?
Quick Ratio = ($28,560 + 162,500 - 175,800)/162,500 = .09
Al's Markets earns $.12 in profit for every $1 of equity and borrows $.65 for every $1 of equity. What is the firm's return on assets?
ROE =($.12/$1) = ROA x (($1+.65)/$1) ROA = .0727 or 7.27 percent
Spring Falls Gifts has sales of $680,300, total assets of $589,100, and a profit margin of 4.3 percent. What is the return on assets?
Return on assets = (.043 x $680,300)/$589,100 =.0497 or 4.97 percent
Prime Electronic Sales has sales of $723,450, total equity of $490,000, a profit margin of 9.3 percent, and a debt equity ratio of .42. What is the return on assets>
Return on assets = (.093 x $723,450)/((1+.42)x$490,000)) = .0967 or 9.67 percent
Mercier United has net income of $128,470. There are currently 32.67 days' sales in receivables. Total assets are $1,419,415, total receivables are $122,306, and the debt-equity ratio is 0.40. What is the return on equity? A. 11.42 percent B. 12.67 percent C. 13.09 percent D. 13.48 percent E. 15.03 percent
Return on equity = ($128,470/$1,419,415) x (1+.40)) =.1267 or 12.67 percent
Rogers Radiators has net income of $48,200, sales of $947,100, a capital intensity ratio of .87, and an equity multiplier of 1.53. What is the return on equity?
Return on equity = ($48,200/$947,100) x(1/.87) x 1.53 = .0895 or 8.95 percent
Martin Tucker Enterprises., has total equity of $645,500, sales of $1.15 million, and a profit margin of 3.6 percent. What is the return on equity?
Return on equity = (.036 x $1,150,000)/$645,500 =.0641 or 6.41 percent
Generally Accepted Accounting Principles, as they relate to the income statement includes the recognition principle: to recognize revenue when the earnings process is virtually complete and the value of an exchange of goods or services is known or can be reliably determined. Which of the following statements is true with regard to this principle?
Revenue is recognized at the time of the sale. Cost associated with the sale of that product likewise would be recognized at the time.
Assume earnings before interest and taxes of $56,850 and net income of $23,954. The tax rate is 30 percent. What is the times interest earned ratio?
Times Interest Earned Ratio = $56,850/($56,850-($23,954/(1-.30)))= 2.51
The Wood Shop generates $.97 in sales for every $1 invested in total assets. Which one of the following ratios would reflect this relationship?
Total asset turnover
Gracie Human Resource Consulting has total revenue of $285,400, cost of goods sold equal to 68 percent of sales, and a profit margin of 9.2 percent. Net fixed assets are $126, 400 and current assets are $65,880. What is the total asset turnover rate?
Total asset turnover rate = $285,400/($126,400+65,880) =1.48
Southern Style Realty has total assets of $485,390, net fixed assets of $250,000, current liabilities of $23,456, and long term liabilities of $148,000. What is the total debt ratio?
Total debt ratio = ($23,456 +148,000)/$485,390 =.35
If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is:
Zero percent
It is important to review not just the current ratio, but also the quick ratio and cash ratio because:
a low current ratio may not necessarily indicate a problem with a company