Fin 200 Quiz 3

Western Hardwoods has total equity of $318,456, a profit margin of 3.79 percent, an equity multiplier of 1.68, and a total asset turnover of .97. What is the amount of the firm's sales?

$318,456 x 1.68 x .97 = $518,956

Delmont Movers has a profit margin of 7.1 percent and net income of $63,700. What is the common-size percentage for the cost of goods sold if that expense amounted to $522,600 for the year?

COGS common-size percentage = $522,600 / ($63,700 / .071) = .5825, or 58.25 percent

You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?

Cash coverage ratio = 2.6; debt-equity ratio = .3

Which one of these transactions will increase the liquidity of a firm?

Credit sale of inventory at cost

Galaxy Sales has sales of $938,300, cost of goods sold of $764,500, and inventory of $123,600. How long on average does it take the firm to sell its inventory?

Days' sales in inventory = 365 / ($764,500 / $123,600) = 59.01 days

A firm has total assets of $638,727, current assets of $203,015, current liabilities of $122,008, and total debt of $348,092. What is the debt-equity ratio?

Debt-equity ratio = $348,092 / ($638,727 - 348,092) = 1.20

The ratios that are based on financial statement values and used for comparison purposes are called:

Financial Ratios

Sweet Candies reduced its fixed assets this year without affecting the shop's operations, sales, or equity. This reduction will increase which of the following ratios? I. Capital intensity ratio II. Return on assets III. Total asset turnover IV. Return on equity

II and III only

A common-size balance sheet helps financial managers determine:

If changes are occurring in a firm's mix of assets.

City Plumbing has inventory of $287,800, equity of $538,800, total assets of $998,700, and sales of $1,027,400. What is the common-size percentage for the inventory account?

Inventory common-size percentage = $287,800/$998,700 = .2882, or 28.82 percent

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