Ch3 Math

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent. What is the return on equity? A. 26 percent B. 50 percent C. 65 percent D. 84 percent E. 135 percent

B. 50 percent (Total assets - Total equity)/Total assets = .74; Total equity = .26 Total assets Net income = .13 Total assets Return on equity = .13 Total assets/.26 Total assets = 50 percent

Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income? A. $105,616 B. $148,309 C. $157,136 D. $161,008 E. $164,909

C. $157,136 Equity multiplier = 1 + 2.05 = 3.05 Return on equity = .092 × 3.05 = .2806 Net income = .2806 × $560,000 = $157,136

A firm has a debt-equity ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total equity is $511,640. What is the amount of the net income? A. $28,079 B. $35,143 C. $44,084 D. $47,601 E. $52,418

C. $44,084 Return on equity = .049 × 1.12 × (1 + 0.57) = .0861616 Net income = $511,640 × .0861616 = $44,084

A firm generated net income of $878. The depreciation expense was $47 and dividends were paid in the amount of $25. Accounts payables decreased by $13, accounts receivables increased by $22, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity? A. $876 B. $902 C. $904 D. $922 E. $930

C. $904 Net cash from operating activities = $878 + $47 - $13 - $22 + $14 = $904

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. .86 B. .92 C. .96 D. 1.01 E. 1.06

C. .96 Tobin's Q = $464,800/$486,200 = .96

Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 3.2, and a current ratio of 2.9. What is the cost of goods sold? A. $980,000 B. $1,060,000 C. $1,200,000 D. $1,400,000 E. $1,560,000

D. $1,400,000 Current assets = 2.9 × $350,000 = $1,015,000 ($1,015,000 - Inventory)/$350,000 = 1.65; Inventory = $437,500 Costs of goods sold = 3.2 × $437,500 = $1,400,000

Uptown Men's Wear has accounts payable of $2,214, inventory of $7,950, cash of $1,263, fixed assets of $8,400, accounts receivable of $3,907, and long-term debt of $4,200. What is the value of the net working capital to total assets ratio? A. 0.31 B. 0.42 C. 0.47 D. 0.51 E. 0.56

D. 0.51 Net working capital to total assets = ($1,263 + $3,907 + $7,950 - $2,214)/($1,263 + $3,907 + $7,950 + $8,400) = 0.51

Canine Supply has sales of $2,200, total assets of $1,400, and a debt-equity ratio of 0.3. Its return on equity is 15 percent. What is the net income? A. $138.16 B. $141.41 C. $152.09 D. $156.67 E. $161.54

E. $161.54 Return on equity = .15 = (Net income/$2,200) × ($2,200/$1,400) × (1 + 0.30) Net income = $161.54

A firm has total assets with a current book value of $68,700, a current market value of $74,300, and a current replacement cost of $75,600. What is the value of Tobin's Q? A. .85 B. .87 C. .92 D. .95 E. .98

E. .98 Tobin's Q = $74,300/$75,600 = .98

High Mountain Foods has an equity multiplier of 1.55, a total asset turnover of 1.3, and a profit margin of 7.5 percent. What is the return on equity? A. 8.94 percent B. 10.87 percent C. 12.69 percent D. 14.38 percent E. 15.11 percent

E. 15.11 percent Return on equity = .075 × 1.3 × 1.55 = 15.11 percent

Big Guy Subs has net income of $150,980, a price-earnings ratio of 12.8, and earnings per share of $0.87. How many shares of stock are outstanding? A. 13,558 B. 14,407 C. 165,523 D. 171,000 E. 173,540

E. 173,540 Number of shares = $150,980/$0.87 = 173,540

Reliable Cars has sales of $807,200, total assets of $1,105,100, and a profit margin of 9.68 percent. The firm has a total debt ratio of 78 percent. What is the return on equity? A. 13.09 percent B. 16.67 percent C. 17.68 percent D. 28.56 percent E. 32.14 percent

E. 32.14 percent Return on equity = (.0968 × $807,200)/[$1,105,100 × (1 - .78)] = 32.14 percent

BL Lumber has earnings per share of $1.21. The firm's earnings have been increasing at an average rate of 3.1 percent annually and are expected to continue doing so. The firm has 21,500 shares of stock outstanding at a price per share of $18.70. What is the firm's PEG ratio? A. 0.48 B. 1.24 C. 2.85 D. 3.97 E. 4.99

E. 4.99 PEG ratio = ($18.70/$1.21)/(.031 × 100) = 4.99

The Meat Market has $747,000 in sales. The profit margin is 4.1 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $27. What is the price-earnings ratio? A. 6.61 B. 8.98 C. 11.42 D. 13.15 E. 14.27

A. 6.61 Earnings per share = (.041 × $747,000)/7,500 = 4.0836 Price-earnings ratio = $27/4.0836 = 6.61

The Purple Martin has annual sales of $687,400, total debt of $210,000, total equity of $365,000, and a profit margin of 5.20 percent. What is the return on assets? A. 6.22 percent B. 6.48 percent C. 7.02 percent D. 7.78 percent E. 9.79 percent

A. 6.22 percent Return on assets = (.0520 × $687,400)/($210,000 + $365,000) = 6.22 percent

A firm has net working capital of $2,715, net fixed assets of $22,407, sales of $31,350, and current liabilities of $3,908. How many dollars worth of sales are generated from every $1 in total assets? A. $1.08 B. $1.14 C. $1.19 D. $1.26 E. $1.30

A. $1.08 Total asset turnover = $31,350/($2,715 + $22,407 + $3,908) = 1.08 Every $1 in total assets generates $1.08 in sales.

A firm has a debt-equity ratio of 0.42. What is the total debt ratio? A. 0.30 B. 0.36 C. 0.44 D. 1.58 E. 2.38

A. 0.30 The debt-equity ratio is 0.42. If total debt is $42 and total equity is $100, then total assets are $142. Total debt ratio = $42/$142 = 0.30.

A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 18.7, and a book value per share of $9.12. What is the market-to-book ratio? A. 1.62 B. 1.84 C. 2.23 D. 2.45 E. 2.57

A. 1.62 Earnings per share = $126,400/160,000 = $0.79 Price per share = $0.79 × 18.7 = $14.773 Market-to-book ratio = $14.773/$9.12 = 1.62

A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio? A. 12.14 B. 15.24 C. 17.27 D. 23.41 E. 24.56

A. 12.14 Cash coverage ratio = ($68,400 - $42,900)/$2,100 = 12.14

A firm has sales of $2,190, net income of $174, net fixed assets of $1,600, and current assets of $720. The firm has $310 in inventory. What is the common-size statement value of inventory? A. 13.36 percent B. 14.16 percent C. 19.38 percent D. 30.42 percent E. 43.06 percent

A. 13.36 percent Common-size inventory = $310/($1,600 + $720) = 13.36 percent

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 $109,000. 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. 2.56 times B. 3.18 times C. 3.54 times D. 4.01 times E. 4.20 times

A. 2.56 times Market value of assets = .96 × $225,000 = $216,000 Market value of equity = $216,000 - $109,000 = $107,000 Market value per share $107,000/20,000 = $5.35 Market-to-book ratio = $5.35/$2.09 = 2.56 times

Gladstone Pavers has a long-term debt ratio of 0.6 and a current ratio of 1.3. Current liabilities are $700, sales are $4,440, the profit margin is 9.5 percent, and the return on equity is 19.5 percent. How much does the firm have in net fixed assets? A. $4,880.18 B. $5,197.69 C. $5,666.67 D. $5,848.15 E. $6,107.70

B. $5,197.69 Current assets = 1.3 × $700 = $910 Net income = .095 × $4,440 = $421.80 Total equity = $421.80/.195 = $2,163.0769 0.6 = Long term debt/(Long-term debt + $2,163.0769); Long-term debt = $3,244.6153 Total debt = $700 + $3,244.6153 = $3,944.6153 Total assets = $3,944.6153 + $2,163.0769 = $6,107.6922 Net fixed assets = $6,107.6922 - $910 = $5,197.69

Lancaster Toys has a profit margin of 9.6 percent, a total asset turnover of 1.71, and a return on equity of 21.01 percent. What is the debt-equity ratio? A. 0.22 B. 0.28 C. 0.46 D. 0.72 E. 0.78

B. 0.28 Equity multiplier = .2101/(.096 × 1.71) = 1.28 Debt-equity ratio = 1.28 - 1 = 0.28

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio? A. 0.97 B. 1.01 C. 1.08 D. 1.15 E. 1.22

B. 1.01 Earnings per share = ($320,000 × .042)/14,000 = $0.96 Price-sales ratio = (24 × $0.96)/($320,000/14,000) = 1.01

A firm has sales of $3,400, net income of $390, total assets of $4,500, and total equity of $2,750. Interest expense is $40. What is the common-size statement value of the interest expense? A. 0.89 percent B. 1.18 percent C. 3.69 percent D. 10.26 percent E. 14.55 percent

B. 1.18 percent Common-size interest = $40/$3,400 = 1.18 percent

The Burger Hut has sales of $29 million, total assets of $43 million, and total debt of $13 million. The profit margin is 11 percent. What is the return on equity? A. 7.42 percent B. 10.63 percent C. 11.08 percent D. 13.31 percent E. 14.28 percent

B. 10.63 percent Return on equity = (.11 × $29m)/($43m - $13m) = 10.63 percent

The Flower Shoppe has accounts receivable of $3,709, inventory of $4,407, sales of $218,640, and cost of goods sold of $167,306. How many days does it take the firm to both sell its inventory and collect the payment on the sale assuming that all sales are on credit? A. 14.67 days B. 15.81 days C. 16.23 days D. 17.18 days E. 17.47 days

B. 15.81 days Days in inventory = 365/($167,306/$4,407) = 9.614 days Days' sales in receivables = 365/($218,640/$3,709) = 6.192 days Total days in inventory and receivables = 9.614 + 6.192 = 15.81 days

Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding. The firm has a profit margin of 7.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio? A. 14 B. 16 C. 18 D. 20 E. 22

B. 16 Price per share = 1.20 × ($220,000/10,000) = $26.40 Earnings per share = ($220,000 × .075)/10,000 = $1.65 Price-earnings ratio = $26.40/$1.65 = 16

Oscar's Dog House has a profit margin of 5.6 percent, a return on assets of 12.5 percent, and an equity multiplier of 1.49. What is the return on equity? A. 17.14 percent B. 18.63 percent C. 19.67 percent D. 21.69 percent E. 22.30 percent

B. 18.63 percent Return on equity = 12.5 percent × 1.49 = 18.63 percent, using the Du Pont Identity

A firm has total assets of $311,770 and net fixed assets of $167,532. The average daily operating costs are $2,980. What is the value of the interval measure? A. 31.47 days B. 48.40 days C. 56.22 days D. 68.05 days E. 104.62 days

B. 48.40 days Interval measure = ($311,770 - $167,532)/$2,980 = 48.40 days

Al's Sport Store has sales of $897,400, costs of goods sold of $628,300, inventory of $208,400, and accounts receivable of $74,100. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit? A. 74.19 days B. 84.76 days C. 121.07 days D. 138.46 days E. 151.21 days

C. 121.07 days Inventory turnover = $628,300/$208,400 = 3.014875 Days in inventory = 365/3.014875 = 121.07 days

Townsend Enterprises has a PEG ratio of 5.3, net income of $49,200, a price-earnings ratio of 17.6, and a profit margin of 7.1 percent. What is the earnings growth rate? A. 0.33 percent B. 1.06 percent C. 3.32 percent D. 5.30 percent E. 10.60 percent

C. 3.32 percent 5.3 = 17.6/(Earnings growth rate × 100); Earnings growth rate = 3.32 percent

Billings, Inc. has net income of $161,000, a profit margin of 7.6 percent, and an accounts receivable balance of $127,100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables? A. 21.90 days B. 27.56 days C. 33.18 days D. 35.04 days E. 36.19 days

C. 33.18 days Sales = $161,000/.076 = $2,118,421 Credit sales = $2,118,421 × .66 = $1,398,158 Accounts receivable turnover = $1,398,158/$127,100 = 11 times Days' sales in receivables = 365/11 = 33.18 days

BL Industries has ending inventory of $300,000, and cost of goods sold for the year just ended was $1,410,000. On average, how long does a unit of inventory sit on the shelf before it is sold? A. 17.16 days B. 21.43 days C. 77.66 days D. 78.29 days E. 83.13 days

C. 77.66 days Inventory turnover = $1,410,000/$300,000 = 4.7 times Day's sales in inventory = 365/4.7 = 77.66 days

Taylor's Men's Wear has a debt-equity ratio of 42 percent, sales of $749,000, net income of $41,300, and total debt of $198,400. What is the return on equity? A. 7.79 percent B. 8.41 percent C. 8.74 percent D. 9.09 percent E. 9.16 percent

C. 8.74 percent Return on equity = $41,300/($198,400/0.42) = 8.74 percent

Last year, which is used as the base year, a firm had cash of $52, accounts receivable of $218, inventory of $509, and net fixed assets of $1,107. This year, the firm has cash of $61, accounts receivable of $198, inventory of $527, and net fixed assets of $1,216. What is the common-base year value of accounts receivable? A. 0.08 B. 0.10 C. 0.88 D. 0.91 E. 1.18

D. 0.91 Common-base year accounts receivable = $198/$218 = 0.91

Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio? A. 0.31 B. 0.53 C. 0.71 D. 1.04 E. 1.07

D. 1.04 Quick ratio = ($136 + $87)/$215 = 1.04

Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier? A. 0.89 B. 1.13 C. 1.47 D. 1.89 E. 2.13

D. 1.89 Debt-equity ratio = .47/(1 - 0.47) = 0.89 Equity multiplier = 1 + 0.89 = 1.89

The Dockside Inn has net income for the most recent year of $8,450. The tax rate was 38 percent. The firm paid $1,300 in total interest expense and deducted $1,900 in depreciation expense. What was the cash coverage ratio for the year? A. 10.48 times B. 11.48 times C. 12.39 times D. 12.95 times E. 13.07 times

D. 12.95 times Earnings before taxes = $8,450/(1 - .38) = $13,629.03 Earnings before interest, taxes, and depreciation = $13,629.03 + $1,300 + $1,900 = $16,829.03 Cash coverage ratio = $16,829.03/$1,300 = 12.95 times

. The Bike Shop paid $2,310 in interest and $1,850 in dividends last year. The times interest earned ratio is 2.2 and the depreciation expense is $460. What is the value of the cash coverage ratio? A. 1.67 B. 1.80 C. 2.21 D. 2.40 E. 2.52

D. 2.40 EBIT = 2.2 × $2,310 = $5,082; Cash coverage ratio = ($5,082 + $460)/$2,310 = 2.40

The Home Supply Co. has a current accounts receivable balance of $300,000. Credit sales for the year just ended were $1,830,000. How many days on average did it take for credit customers to pay off their accounts during this past year? A. 54.29 days B. 56.01 days C. 57.50 days D. 59.84 days E. 61.00 days

D. 59.84 days Receivables turnover = $1,830,000/$300,000 = 6.1 times Days' sales in receivables = 365/6.1 = 59.84 days

A firm has total debt of $4,620 and a debt-equity ratio of 0.57. What is the value of the total assets? A. $6,128.05 B. $7,253.40 C. $9,571.95 D. $11,034.00 E. $12,725.26

E. $12,725.26 Total equity = $4,620/0.57 = $8,105.26 Total assets = $4,620 + $8,105.26 = $12,725.26