FI 352 - Quiz 3

Which ratio was primarily designed to monitor firms with negative earnings? a. Price-sales ratio b. Market-to-book ratio c. Profit margin d. ROE e. ROA

a. Price-sales ratio

The ratios that are based on financial statement values and used for comparison purposes are called: a. financial ratios. b. industrial statistics. c. equity standards. d. accounting returns. e. analytical standards.

a. financial ratios.

Bed Bug Inn has annual sales of $137,000. Earnings before interest and taxes are equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent? a. −2.43 percent b. 1.56 percent c. 3.33 percent d. −5.29 percent e. −6.11 percent

b. 1.56 percent

The Inside Door has total debt of $208,600, total equity of $343,560, and a return on equity of 13.27 percent. What is the return on assets? a. 9.14 percent b. 8.26 percent c. 11.45 percent d. 9.61 percent e. 9.48 percent

b. 8.26 percent

Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past? a. A decrease in the total asset turnover b. A decrease in the capital intensity ratio c. An increase in days' sales in receivables d. A decrease in the profit margin e. A decrease in the inventory turnover rate

b. A decrease in the capital intensity ratio

Dellf's has a profit margin of 3.8 percent on sales of $287,200. The firm currently has 5,000 shares of stock outstanding at a market price of $7.11 per share. What is the price-earnings ratio? a. 3.26 b. 8.02 c. 11.50 d. 5.93 e. 12.84

a. 3.26

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. a. 8.49 b. 7.29 c. 8.68 d. 10.18 e. 7.13

a. 8.49

The DuPont identity can be accurately defined as: a. Return on equity × Total asset turnover × Equity multiplier. b. Equity multiplier × Return on assets. c. Profit margin × Return on equity. d. Total asset turnover × Profit margin × Debt-equity ratio. e. Equity multiplier × Return on assets × Profit margin.

b. Equity multiplier × Return on assets.

A firm has an equity multiplier of 1.5. This means that the firm has a: a. debt-equity ratio of .67. b. debt-equity ratio of .50. c. total debt ratio of .50. d. total debt ratio of .67. e. total debt ratio of .33.

b. debt-equity ratio of .50.

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? a. 6.38 b. 7.99 c. 6.65 d. 5.12 e. 7.41

c. 6.65

A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-term debt of $109,500, and accounts receivable of $16,600. What is the common-size percentage of the equity? a. 70.60 percent b. 70.12 percent c. 66.87 percent d. 42.08 percent e. 68.75 percent

c. 66.87 percent

Financial statement analysis: a. is primarily used to identify account values that meet the normal standards. b. is limited to internal use by a firm's managers. c. provides useful information that can serve as a basis for forecasting future performance. d. provides useful information to shareholders but not to debt holders. e. is enhanced by comparing results to those of a firm's peers but not by comparing results to prior periods.

c. provides useful information that can serve as a basis for forecasting future performance.

You are analyzing a company that has cash of $8,800, accounts receivable of $15,800, fixed assets of $87,600, accounts payable of $40,300, and inventory of $46,900. What is the quick ratio? a. 1.20 b. .67 c. .83 d. .61 e. 1.64

d. .61

Donovan's would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal? a. Return on assets b. Net income c. Retention ratio d. Dividend payout ratio e. Return on equity

d. Dividend payout ratio

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing? a. DuPont rate b. External growth rate c. Sustainable growth rate d. Internal growth rate e. Cash flow rate

d. Internal growth rate

A firm has a return on equity of 17.8 percent, a return on assets of 11.3 percent, and a 65 percent dividend payout ratio. What is the sustainable growth rate? a. 5.72 percent b. 6.84 percent c. 7.12 percent d. 11.38 percent e. 6.64 percent

e. 6.64 percent

A firm has net income of $4,238 and interest expense of $898. The tax rate is 35 percent. What is the firm's times interest earned ratio? a. 7.33 b. 7.26 c. 5.38 e. 8.26 d. 9.33

e. 8.26

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions? a. No new external financing of any kind b. No new debt but additional external equity equal to the increase in retained earnings c. New debt and external equity in equal proportions d. New debt and external equity, provided the debt-equity ratio remains constant e. No new external equity and a constant debt-equity ratio

e. No new external equity and a constant debt-equity ratio

A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm: a. pays cash for its inventory. b. has more than half its current assets invested in inventory. c. has more cash than inventory. d. has more current liabilities than it does current assets. e. has positive net working capital.

e. has positive net working capital.

If a firm has an inventory turnover of 15, the firm: a. sells its entire inventory every 15 days. b. stocks its inventory only once every 15 days. c. delivers inventory to its customers every 15 days. d. sells its inventory by granting customers 15 days' of free credit. e. sells its entire inventory an average of 15 times each year.

e. sells its entire inventory an average of 15 times each year.