Finance Midterm- Ch. 2

The profit margin for 2012 is:

-94%

Assume a 365-day year for your calculations. The collection period in days, based on sales, at the end of 2012 is:

28.8

Assume a 365-day year for your calculations. The inventory turnover, based on cost of goods sold, at the end of 2012 is:

5.2

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

A. asset turnover and control

Which of these ratios, or levers of performance, are the determinants of ROE? I. profit margin II. financial leverage III. times interest earned IV. asset turnover

I, II, and IV only

Which of the following ratios are measures of a firm's liquidity? I. fixed asset turnover ratio II. current ratio III. debt-equity ratio IV. acid test

II and IV only

Which of the following statements best describes how the company's short-term liquidity changed from 2011 to 2012?

Link's short-run liquidity has deteriorated considerably, but from a high initial base.

Breakers Bay Inc. has succeeded in increasing the amount of goods it sells while holding the amount of inventory on hand at a constant level. Assume that both the cost per unit and the selling price per unit also remained constant. All else held constant, how will this accomplishment be reflected in the firm's financial ratios?

increase in the inventory turnover rate

Assume you are a banker who has loaned money to a firm, but that firm is now facing increased competition and reduced cash flows. Which one of the following ratios would you most closely monitor to evaluate the firm's ability to repay its loan?

times burden covered ratio

On a common-size balance sheet, all accounts are expressed as a percentage of:

total assets for the current year.

Assume a 365-day year for your calculations. The payables period in days, based on cost of goods sold, at the end of 2012 is:

24.3

The current ratio at the end of 2012 is:

2.76 Current Ratio = Total current assets/Total current liabilities = 249,801/90,558 = 2.76

Assume a 365-day year for your calculations. The days' sales in cash at the end of 2012 is:

219.6

The gross margin for 2012 is:

None of the above

The most popular yardstick of financial performance among investors and senior managers is the:

ROE

Which one of the following statements does NOT describe a problem with using ROE as a performance measure?

ROE is a forward-looking, one-period measure, while business decisions span the past and present.

Which one of the following statements is correct?

The assets-to-equity ratio can be computed as 1 plus the debt-to-equity ratio.

Ptarmigan Travelers had sales of $420,000 in 2010 and $480,000 in 2011. The firm's current accounts remained constant. Given this information, which one of the following statements must be true?

The collection period decreased.

Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

asset turnover