FIN Test 1 Multiple Choice

Southern Style Realty has total assets of $485,390, net fixed assets of $250,000, current liabilities of $23,456, and long-term liabilities of $148,000. What is the total debt ratio?

0.35

Allyba Dance Supply has total assets of $550,000 and total debt of $295,000. What is the equity multiplier?

2.16

Security dealers:

operate exclusively in auction markets

All else held constant, which one of the following will decrease if a firm increases its net income?

price-earnings ratio

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation.

Financial statement analysis:

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

The primary goal of financial management is to maximize:

the market value of existing stock.

Common-size financial statements present all balance sheet account values as a percentage of:

total assets

If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is:

zero percent

Last year, a firm earned $67,800 in net income on sales of $934,600. Total assets increased by $62,000 and total equity increased by $43,500 for the year. No new equity was issued and no shares were repurchased. What is the retention ratio?

64.16%

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?

8.26

Plenti-Good Foods has ending net fixed assets of $98,700 and beginning net fixed assets of $84,900. During the year, the firm sold assets with a total book value of $13,200 and also recorded $9,800 in depreciation expense. How much did the company spend to buy new fixed assets?

$36,800

The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

$93,560

Wes Motors has total assets of $98,300, net working capital of $11,300, owners' equity of $41,600, and long-term debt of $38,600. What is the value of the current assets?

- Current Liabilities = $98,300 - 38,600 - 41,600 = $18,100 - Current Assets = $11,300 + 18,100 = $29,400

The Dry Dock has inventory of $431,700, accounts payable of $94,200, cash of $51,950, and accounts receivable of $103,680. What is the cash ratio?

0.55

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?

1.20

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?

1.28

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

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%

ABD common stock is selling for $36.08 a share. The company has earnings per share of $.34 and a book value per share of $12.19. What is the market-to-book ratio?

2.96

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

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?

22.4% inventory / total assets

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?

27,990

Spring Falls Gifts has sales of $680,300, total assets of $589,100, and a profit margin of 4.3 percent. What is the return on assets?

4.97%

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?

6.41%

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?

6.64%

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity

Which one of the following correctly defines a common chain of command within a corporation?

The controller reports directly to the chief financial officer.

Production equipment is classified as:

a tangible fixed asset

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 account payable

Net capital spending is equal to:

ending net fixed assets minus beginning net fixed assets plus depreciation.

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:

had to decrease

Cash flow to creditors is defined as:

interest paid minus net new borrowing.

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?

investments

A corporation:

is a legal entity separate from its owners.

The market value of a firm's fixed assets:

is equal to the estimated current cash value of those assets.

Which one of the following is an advantage of being a limited partner?

losses limited to capital investment

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

noncash items

If a firm has an inventory turnover of 15, the firm:

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

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency conflict

The financial statement that summarizes a firm's accounting value as of a particular date is called the:

Balance Sheet

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:

Capital structure

Which one of the following is an intangible fixed asset?

Copyright

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Corporate accounting and financial fraud

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

Depreciation

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

Income Statement

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?

Limited Partnership

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

average tax rate

Net working capital is defined as:

current assets minus current liabilities

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

For Year 2016, Precision Masters had sales of $42,900, cost of goods sold of $26,800, depreciation expense of $1,900, interest expense of $1,300, and dividends paid of $1,000. At the beginning of the year, net fixed assets were $14,300, current assets were $8,700, and current liabilities were $6,600. At the end of the year, net fixed assets were $13,900, current assets were $9,200, and current liabilities were $7,400. The tax rate was 34 percent. What is the cash flow from assets for 2016?

$10,514

Steve's Music Supply has a return on equity of 19.3 percent, a profit margin of 10.1 percent, and total equity of $645,685. What is the net income?

$124,617.21

Six months ago, Benders Gym repurchased $140,000 of its common stock. The company pays regular dividends totaling $18,500 per quarter. What is the amount of the cash flow to stockholders for the past year if 1,200 new shares were issued and sold for $38 a share?

$168,400 Cash flow to stockholders = ($18,500 ×4) -[(1,200 × $38) - $140,000] = $168,400

Marcia has sales of $79,600. The cost of goods sold is $48,200 and the other costs are $18,700. Depreciation is $8,300 and the tax rate is 35 percent. What is the net income?

$2,860

BR Trucking has total sales of $911,300, a total asset turnover of 1.1, and a profit margin of 5.87 percent. Currently, the firm has 18,500 shares outstanding. What are the earnings per share?

$2.89

Adell Furniture has a profit margin of 8.2 percent on sales of $211,000. The common size ratio of dividends is .03 and total assets are $196,000. What is the plowback ratio?

63.41%

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

Cash flow to stockholders is defined as:

dividend payments - net new equity raised.

Gaspares Agricultural Cooperative has current liabilities of $162,500, net working capital of $28,560, inventory of $175,800, and sales of $1,941,840. What is the quick ratio?

0.09

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

Victoria Photography, a sole proprietorship owes $190,874 in taxes on a taxable income of $608,606. The company has determined that it will owe $195,246 in tax if its taxable income rises to $620,424. What is the marginal tax rate at this level of income?

37%

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?

58.25 percent

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?

59.01 days 365 / ($764,500 / $123,600) = 59.01 days