Finance 331 chapter 3

Which of the following is the correct representation of the total debt ratio?

(total assets - total equity)/(total assets)

which two of the following groups are most interested in liquidity ratios

-supplliers -bankers

BC corportation has a net income 176,000, sales of 1,982,000 and total assets of 2.24 million. What is return on assets?

7.86%=176,000/2.24m

Which of the following are sources of cash?

A decrease in accounts receivable An increase in notes payable

A(n) (blank) in net profit margin will increase ROE

Increase

Alpha has assets of 102 million, net income of 4.3 million, total sales of 97 million, Omega has assets of 12.4 million, net income of 0.76 million and total sales of 9.3 million. Which company is more predictable

Omega

a times interest earned (TIE) ratio of 3.5 times means a firm has (blank) that is(are) 3.5 times greater than the firm's interest expense

earnings before interest and taxes

(blank) are the prime source of information about a firm's financial health

financial statements

The inventory turnover ratios for proctor and gamble over the past three years are 5.09,5.72, and 5.92 time respectively. explaining the upward trend in the inventory turnover ratio requires

further investigation

one of the most important uses of financial statement information within the firm is

performance evaluation

financial managers use common size income statement to determine

which costs are rising or falling as a percentage of sales

which of the following items are among the items used to compute the current ratio

-accounts payable -cash

which of the following are traditional finance ratio categories?

-asset management ratios -profitability ratios -market value ratios

BT Tools has current assets totaling $9.2 million, including $4.3 million in inventory. The company's current liabilities total $8.1 million. What is the quick ratio?

.60

Assume current assets = 48; fixed assets = 125 current liabilities = 42 and equity= 100. What is the total debt ratio.

0.42 (48+125-100)/(48+12)=0.42

Assume current assets = $11,300; long-term liabilities = $45,000; and total debt = $54,800. What is the current ratio?

1.15

Vera's has earnings per share of $3 and dividends per share of $1.20. The stock sells for $30 a share. What is the PE ratio?

10 times

AD corporation has a ROE of 20% on total equity of 800,000. AD generated 1.6 million in sales on 2.7 million in assets. use the DuPoint identity to match each of the values below to its proper component.

10% - profit margin 5.93% - ROA 3.35 times - equity multiplier

Better Life Inc. had net income of $375,000 on sales of $3.5 million and assets of $4.1 million this year. What is the profit margin?

10.71%

BC corp has 1,800 shares outsandding andd earned 2,700 last year on assets of 2 million and equity of 1.5 million. What is the PE ration if the stock is currently selling at 18 per share?

12 times- 18(2700/1800) = 12

Alpha co. has cost of goods sold f $61.2 million, net income of $9.6 million, sales of $120 million, and total assets of $150 million. A common size income statement will show cost of goods sold of (blank) percent and a net profit of (blank) percent

5t : 8

Rock construction has current assets of 45 million, total liabilities and equity of 67 million, and sales of 59 million. How would current assets be expressed on a common-size balance sheet?

67%

financial statements report

book values

how is the price earning ration computed

market price per share/ earning per share

How is the market to book ratio measured?

market value per share/book value per share

Return of equity(ROE) is a measure of (blank)

profitability

A common size income statement helps compare financial results over time but controlling for changes in (blank)

sales

the profit margin is equal to net income divided by (blank)

sales

which of the following represents the receivables turnover ratio

sales/ accounts receivable

at the most fundamental level, firms generate cash and

spend it

Which of following are uses of cash

*Increases in property, plant and equipment *Decreases in accounts payable *Increases in inventory

Which of the following items are among the items used to compute the current ratio

-cash -accounts payable

Financial statements are used to:

-communicate financial information within the firm -communicate financial information to outsiders -assess a company's current financial position

which three of the following are most apt to create problems when comparing financial statements for multiple firms

-differing accounting methods -seasonality -differing fiscal

Nestor's has net income of $315,000, total sales of $3.52 million, total assets of $4.4 million, and total equity of $1.98 million. What is the return on equity?

15.91%

how is the inventory turnover ratio computed

Cost of Goods Sold / Inventory

An important accounting goal is to report financial information to users in a way that is useful for (blank)?

Decision making

what will happen to current ratio if current ratio if current assets increase, while everything else remains unchanged?

it will increase

total capitalization equals total equity plus total

long term debt

Whenever (blank) information is available, it should be used instead of accounting data

market

The Ebitda ratio is similar in spirit to

the PE ratio

the cash coverage ratio adds (blank) to operating earning (ebit) for a better of measure of how much cash is available to meet interest obligations

depreciation

BC corp had sales of 1,000,000 and costs of goods 450,000 for the year. Inventory at year end was 180,000

2.5 times =cost of goods sold/inventory

Alder Inc. has net income of $403,000, operating earnings of $640,000, sales of $1.23 million, and total assets of $1.48 million. What is the return on assets?

27.23%

BC toys has total equity of 584000. there are 35000 shares outstanding at a market price 54 per share. What is the market to book ratio?

3.24 times= 54/(584000/35000)

Alpha Manufacturing has interest expense of $12 million, total assets of $184 million, sales of $176 million, long-term debt of $16.4 million, and net income of $15 million. How will interest expense be recorded in the common-size income statement?

6.82%= 1.2m/17.6m

The information needed to compute the profit margin can be found on the (blank).

income statement

what is the impact on the total asset turnover ration if sales increase significantly while there is no change in any of the other variables

the total asset turnover ratio will increases

A common size balance sheet expresses accounts as a percentage of (blank)?

total assets

(blank) financial statements provide for comparison of firms that differ in size

Standardized

Which one of the following is one way in which financial managers use a common size balance sheet

To track changes in a firm's capital structure

Whenever (blank) information is available, it should be used instead of accounting data

Market

How are firms classified into peer groups for ratio analysis?

according to standard industrial classification codes

Although (blank) are often poor reflections of reality, they are often the best information available

accounting numbers

A firm with a market to book ratio that is greater than 1 is said to have (blank) value for shareholders

created

the cash ratio is found by dividing cash by

current liabilities