FIN 305 Exam 1

A firm has sales of $311,000 and net income of $31,600. The price-sales ratio is 3.24 and market price is $36 per share. How many shares are outstanding? 20,608 27,990 28,356 30,515 31,011

Price-sales ratio = 3.24 = $36 = ($311,000 ÷ Outstanding shares) Outstanding shares = 27,990

Goshen Pools has total equity of $358,200 and net income of $47,500. The debt-equity ratio is .68 and the total asset turnover is 1.2. What is the profit margin? 4.82% 5.23% 5.67% 6.58% 7.31%

Profit margin = ($47,500 ÷ $358,200) ÷ [1.2 × (1 + 68)] = 0658, or 6.58%

A firm has net income of $4,238 and interest expense of $898. The tax rate is 21 percent. What is the firm's times interest earned ratio? 7.33 7.26 6.97 8.26 9.33

Times interest earned ratio = [I$4,238 ÷ (1 - 21)] + $898} ÷ $898 = 6.97

Whitt's BBQ has sales of $1,318,000, a profit margin of 7.4 percent, and a capital intensity ratio of .78. What is the total asset turnover rate? 1.04 1.08 1.13 1.43 1.28

Total asset turnover = 1 ÷ 78 = 1.28

Which one of the following statements correctly applies to a sole proprietorship? The business entity has an unlimited life. The ownership can easily be transferred to another individual. The owner enjoys limited liability for the firm's debts. Debt financing is easy to arrange in the firm's name. Obtaining additional equity is dependent on the owner's personal finances.

Obtaining additional equity is dependent on the owner's personal finances.

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? -$22,360 -$4,780 $23,720 $58,340 $69,800

$69,800 Net capital spending = $371,920 - 348,200 + 46,080 = $69,800 Net capital spending = $371,920 - 348,200 + 46,080 = $69,800

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? Income statement Balance sheet Common-size income statement Common-size balance sheet Statement of cash flows

Common-size income statement

Which one of the following is an intangible fixed asset? Inventory Machinery Copyright Account receivable Building

Copyright

A firm has net working capital of $8,200 and current assets of $37,500. What is the current ratio? .69 .78 1.28 1.45 1.67

Current ratio = $37,500 ÷ ($37,500 - 8,200) = 1.28

McHenry Sales has sales of $938,300, cost of goods sold of $688,050, and inventory of $98,880. How long, on average, does it take the firm to sell its inventory? 6.40 days 52.45 days 48.68 days 59.01 days 61.10 days

Days' sales in inventory = 365 ÷ ($688,050 ÷ $98,880) = 52.45 days

Castaway Resort common stock is selling for $42.50 a share. The company has earnings per share of $.79 and a book value per share of $17.50. What is the market-to-book ratio? 2.43 7.69 2.96 3.97 5.92

Market-to-book ratio = $42.50 ÷ $17.50 = 2.43

Efran's Auto Repair has total equity of $815,280, long-term debt of $391,900, net working capital of $49,500, and total assets of $1,292,485. What is the total debt ratio? .50 .37 64 .46 .60

Total debt ratio = ($1,292,485 - 815,280) ÷ $1,292,485 = .37

The daily financial operations of a firm are primarily controlled by managing the: total debt level. working capital. capital structure. capital budget. long-term liabilities.

Working capital

The shareholders of Qiang'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: a corporate takeover. a capital structure issue. a working capital decision. an agency conflict. a compensation issue.

an agency conflict

Nishaa has been promoted and is now in charge of all external financing. In other words, she is in charge of: capital structure management. asset allocation. risk management. capital budgeting. working capital management.

capital structure management

Net working capital is defined as: available cash minus current liabilities. the depreciated book value of a firm's fixed assets. total assets minus total liabilities. the value of a firm's current assets. Correct. current assets minus current liabilities. available cash minus current liabilities. total assets minus total liabilities.

current assets minus current liabilities. available cash minus current liabilities.

A sole proprietorship: provides limited financial liability for its owner. involves significant legal costs during the formation process. has an unlimited life. has its profits taxed as personal income. can generally raise significant capital from non-owner sources.

has its profits taxed as personal income.

If a firm has a negative cash flow from assets every year for several years, the firm: may be continually increasing in size. must also have a negative cash flow from operations each year. is operating at a high level of efficiency. is repaying debt every year. has annual net losses.

may be continually increasing in size.

Cash flow from assets is defined as: the cash flow to shareholders minus the cash flow to creditors. operating cash flow plus the cash flow to creditors plus the cash flow to shareholders. operating cash flow minus the change in net working capital minus net capital spending. operating cash flow plus net capital spending plus the change in net working capital. cash flow to shareholders minus net capital spending plus the change in net working capital.

operating cash flow minus the change in net working capital minus net capital spending.

Common-size financial statements present all balance sheet account values as a percentage of: the forecasted budget. sales. total equity. total assets. last year's account value.

total assets.