Ch.3 HW
Allyba Dance Supply has total assets of $550,000 and total debt of $295,000. What is the equity multiplier?
2.16 Equity multiplier = $550,000 / ($550,000 - $295,000) = 2.16
Leon is the owner of a corner store. Which ratio should he compute if he wants to know how long the store can pay its bills given its current level of cash and accounts receivable? Assume all receivables are collectible when due.
quick ratio
Peterboro Supply has a current accounts receivable balance of $391,648. Credit sales for the year just ended were $5,338,411. How long did it take on average for credit customers to pay off their accounts during the past year? Assume a 365-day year.
26.78 days
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 $7.11 per share. What is the price-earnings ratio?
3.26 Market price per share / Earnings per share Earnings per share is computed as follows: = (Sales x profit margin) / Number of shares outstanding = ($ 287,200 x 3.8%) / 5,000 = $ 10,913.6 / 5,000 = $ 2.18272 So, the PE ratio will be computed as follows: = $ 7.11 / $ 2.18272 = 3.26
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?
8.44% Common Size percentage of Net Income = Net Income / Sales * 100 = 96320 / 1141275 * 100 = 8.44 percent
The DuPont identity can be used to help a financial manager determine the: I. degree of financial leverage used by a firm. II. operating efficiency of a firm. III. utilization rate of a firm's assets. IV. rate of return on a firm's assets.
I, II, III, and IV
Martn 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?
6.4
World Exports has total assets of $938,280, a total asset turnover rate of 1.18, a debt-equity ratio of .47, and a return on equity of 18.7 percent. What is the firm's net income?
$119,359.43
Sunshine Rentals has a debt-equity ratio of .67. The return on assets is 8.1 percent, and total equity is $595,000. What is the net income?
$80,485.65 Debt-equity ratio=Debt/Equity Total debt=(0.67*$595000)=$398650. total assets=(Debt+equity) =($398650.+$595000)=$993,650. ROA=Net income/Total assets. net income=($993,650*8.1%)=$80,485.65
Taylor, Inc. has sales of $11,898, total assets of $9,315, and a debt-equity ratio of .55. If its return on equity is 14 percent, what is its net income?
$841.35 Debt Equity ratio = Debt /equity Total assets = Debt + equity Return on equity = Net income / equity 0.14 = (Net income/$9,315) (1 + 0.55) Net income = $841.35
Maren's House of Pancakes has sales of $635,400, total equity of $268,000, and a debt-equity ratio of .6. What is the capital intensity ratio?
0.67 debt-equity ratio=debt/equity Hence debt=268,000*0.6=$160800 Total assets=debt+equity =$160800+268,000 =$428800 Capital intensity ratio=Total assets/Sales =$428800/635,400 =0.67
A firm has net working capital of $8,200 and current assets of $37,500. What is the current ratio?
1.28 Net Working Capital = Current Assets - Current Liabilities$8,200 = $37,500 - Current Liabilities Current Liabilities = $37,500 - $8,200 Current Liabilities = $29,300 Current Ratio = Current Assets / Current LiabilitiesCurrent Ratio = $37,500 / $29,300 Current Ratio = 1.28
Wilberton's has total assets of $537,800, net fixed assets of $412,400, long-term debt of $323,900, and total debt of $388,700. If inventory is $173,900, what is the current ratio?
1.94 Current Ratio is given by current ratio=current assets/current liabilities Current Assets = Total Assets - Net Fixed Assets = 537800 - 412400 = $125400 Current Liabilities = Total Debt - Long Term Debt = 388700-323900 = $64800 Current ratio = 125400/64800 Current Ratio = 1.935
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 .40. What is the return on equity?
12.67% Total Assets=1,419,415.00 Debt Equity Ratio = .40 Debt / Equity = .40 Debt = (.40)(Equity) Debt + Equity = Assets .40 Equity + Equity = 1419,415 Equity = 1419,415/1.4 =1,013,867.86 Return on Equity = 128,470/1,013,867.86 Net Income=128,470.00
Mike's Place has total assets of $152,080, a debt-equity ratio of .62, and net income of $14,342 What is the return on equity?
15.28% Total equity = 1/1.62 * 152,080 = 93,876.54 return on equity = net income/ equity return on equity = 14,343/93,876.54 = 15.28%
The Blue Lagoon has a return on equity of 23.62 percent, an equity multiplier of 1.48, and a capital intensity ratio of 1.06. What is the profit margin?
16.92% capital intensity ratio=total assets/sales =1.06 equity multiplier=total assets/equity =1.48 ROE= net income/equity =23.62% profit margin= net income/sales =16.92%
The Saw Mill has a return on assets of 7.92 percent, a total asset turnover rate of 1.18, and a debt-equity ratio of 1.46. What is the return on equity?
19.48 percent
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.
21.73 days average days of collection = 365/accounts receivable turnover rate 16.80 = 365/x x = 365/16.80 x=21.72619 or 21.73 days
Prisqua Rentals has inventory of $147,500, equity of $320,000, total assets of $658,800, and sales of $800,780. What is the common-size percentage for the inventory account?
22.39
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 = 0.3 Times interest earned = 1.7; debt-equity ratio = 1.6 Cash coverage ratio = .8; debt-equity ratio = .8 Cash coverage ratio = .5; total debt ratio = .2 Times interest earned = 1.5; debt-equity ratio = 1.2 Cash coverage ratio = 2.6; debt-equity ratio = .3
Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.
Cash payment of an account payable
Builder's Outlet just hired a new chief financial officer. To get a feel for the company, she wants to compare the firm's sales and costs over the past three years to determine if any trends are present and also determine where the firm might need to make changes. Which one of the following statements will best suit her purposes?
Common-size income statement
Which one of the following will increase the profit margin of a firm, all else held constant?
Decrease in the tax rate
Financial Ratios are traditionally grouped in all but which of the following categories?: Asset Management Short- and Long-Term Solvency Working Capital Management Market Value Ratios Profitability Ratios
Short- and Long-Term Solvency
Jessica's Sports Wear has $38,100 in receivables and $523,700 in total assets. The total asset turnover rate is 1.17 and the profit margin is 7.3 percent. How long on average does it take to collect the receivables? Assume a 365-day year.
22.70 days Total Asset turnover ratio=Sales /Total assets Hence sales=(523700*1.17)=$612729 Profit=(7.3%*612729)=$44729.217 hence accounts receivable turnover=Sales/Accounts receivable =(612729/38100)=16.08 Average collection period=365/16.08'
If sales are $211,000, the profit margin is 6.3 percent, and the capital intensity ratio is .94, what is the return on assets?
6.70 profit = 0.063*211,000 = 13,293 assets = 0.94*211,000 = 198,340 return on assets = 13,293/198,340 = 6.70% 6.70
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?
66.87 percent Equity=Assets-liabilities Equity=46500+1250+318650+16600-109500-17400 Equity=256100 Equity=256100/(46500+1250+318650+16600) Equity=66.87%
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?
7.27 ROA=net income/total assets 0.12/(1+0.65) =0.07272727 =7.27%
Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past? A decrease in the total asset turnover A decrease in the profit margin A decrease in the inventory turnover rate An increase in days' sales in receivables A decrease in the capital intensity ratio
A decrease in the capital intensity ratio