Finance Study 2

A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-term debt of $109,500, and accounts receivable of $16,600. What is the common-size percentage of the equity? a. 70.60% b. 68.75% c. 42.08% d. 66.87% e. 70.12%

d. 66.87%

Which one of the following statements is correct? a. Peer group analysis is easier when a firm is a conglomerate versus when it has only a single line of business. b. Comparing results across geographic locations is easier since all countries now use a common set of accounting standards. c. Peer group analysis is simplified when firms use varying methods of depreciation. d. Adjustments have to be made when comparing the income statements of firms that use different methods of accounting for inventory. e. Peer group analysis is easier when seasonal firms have different fiscal years.

d. Adjustments have to be made when comparing the income statements of firms that use different methods of accounting for inventory.

A firm has sales of $811,000 for the year. The profit margin is 5.1 percent and the retention ratio is 56 percent. What is the common-size percentage for the dividends paid? a. 1.99% b. 2.86% c. 1.21% d. 1.42% e. 2.24%

e. 2.24%

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? a. 18.42% b. 15.07% c. 20.36% d. 39.96% e. 22.39%

e. 22.39%

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? a. 39.96% b. 15.07% c. 18.42% d. 20.36% e. 22.39%

e. 22.39%

The Blue Heron Company has a return on equity of 23.62 percent, an equity multiplier of 1.48, and a capital intensity ratio of 1.06. What is the profit margin? a. 16.92% b. 15.06% c. 14.60% d. 15.84% e. 13.57%

a. 16.92%

AMC Supply has total assets of $613,000. There are 21,000 shares of stock outstanding with a market value of $13 a share. The firm has a profit margin of 6.2 percent and a total asset turnover of 1.08. What is the price-earnings ratio? a. 6.65 b. 7.41 c. 7.99 d. 6.38 e. 5.12

a. 6.65

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? a. 5.72% b. 11.38% c. 7.12% d. 6.84% e. 6.64%

e. 6.64%

The Inside Door has total debt of $208,600, total equity of $343,560, and a return on equity of 13.27 percent. What is the return on assets? a. 11.45% b. 9.48% c. 9.61% d. 9.14% e. 8.26%

e. 8.26%

McClellan Exports has total assets of $938,280, a total asset turnover rate of 1.18, a debt-equity ratio of .47, and a return on equity of 18.7 percent. What is the firm's net income? $92,236.67 $104,624.14 $119,359.43 $88,303.33 $121,548.09

...

Which one of the following is the abbreviation for the U.S. government coding system that classifies a firm by its specific type of business operations? a. SIC b. BEC c. BID d. SBC e. SED

a. SIC

The DuPont identity can be used to help a financial manager determine the: I degree of financial leverage used by a firm. II operating efficiency of a firm. III utilization rate of a firm's assets. IV rate of return on a firm's assets. a. I, II, and III only b. II and III only c. II, III, and IV only d. I, II, III, and IV

I, II, III, and IV

Turner's Store had a profit margin of 6.8 percent, sales of $498,200, and total assets of $542,000. If management set a goal of increasing the total asset turnover to 1.10 times, what would the new sales figure need to be, assuming no increase in total assets? a. $596,200 b. $488,500 c. $657,480 d. $492,727 e. $467,185

a. $596,200

Fried Donuts has sales of $764,900, total assets of $687,300, total equity of $401,300, net income of $68,200, and dividends paid of $27,000. What is the internal growth rate? a. 6.38% b. 5.48% c. 7.92% d. 5.98% e. 7.34%

a. 6.38%

Which one of the following statements is correct? a. Adjustments have to be made when comparing the income statements of firms that use different methods of accounting for inventory. b. Peer group analysis is simplified when firms use varying methods of depreciation. c. Comparing results across geographic locations is easier since all countries now use a common set of accounting standards. d. Peer group analysis is easier when a firm is a conglomerate versus when it has only a single line of business. e. Peer group analysis is easier when seasonal firms have different fiscal years.

a. Adjustments have to be made when comparing the income statements of firms that use different methods of accounting for inventory.

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions? a. No new external equity and a constant debt-equity ratio b. No new external financing of any kind c. New debt and external equity, provided the debt-equity ratio remains constant d. No new debt but additional external equity equal to the increase in retained earnings e. New debt and external equity in equal proportions

a. No new external equity and a constant debt-equity ratio

A common-size balance sheet helps financial managers determine: a. if changes are occurring in a firm's mix of assets. b. which customers are paying on a timely basis. c. if a firm is generating more or less sales per dollar of assets than in prior years. d. the rate at which the firm's dividend payout is changing. e. if costs are increasing faster or slower than sales.

a. if changes are occurring in a firm's mix of assets.

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

a. total assets.

Element 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? a. $2.58 b. $2.89 c. $2.86 d. $2.92 e. $2.97

b. $2.89

Healthy Foods has a book value per share of $27.89 earnings per share of $2.78, and a price-earnings ratio of 14.5. What is the market-to-book ratio? a. 1.08 b. 1.45 c. 1.99 d. 2.16 e. 1.59

b. 1.45

Firefly, Incorporated, has sales of $1,366,400, cost of goods sold of $897,575, and inventory of $148,630. What is the inventory turnover rate? a. 7.33 times b. 6.04 times c. 8.47 times d. 6.90 times e. 5.70 times

b. 6.04 times

A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-term debt of $109,500, and accounts receivable of $16,600. What is the common-size percentage of the equity? a. 70.12% b. 66.87% c. 70.60% d. 42.08% e. 68.75%

b. 66.87%

Sunshine Rentals has a debt-equity ratio of .67. The return on assets is 8.1 percent, and total equity is $595,000. What is the net income? a. $83,013.69 b. $81,311.29 c. $80,485.65 d. $78,887.02 e. $82,147.09

c. $80,485.65

Discount Outlet has net income of $389,100, a profit margin of 2.8 percent, and a return on assets of 8.6 percent. What is the capital intensity ratio? a. 1.34 b. 3.07 c. .33 d. 1.49 e. .67

c. .33

Last year, Teresa's Fashions earned $2.03 per share and had 15,000 shares of stock outstanding. The firm paid a total of $16,672 in dividends. What is the retention ratio? a. 40.21% b. 54.75% c. 45.25% d. 64.07% e. 52.00%

c. 45.25%

Xinya Controls has a profit margin of 7.5 percent and net income of $112,545. What is the common-size percentage for the cost of goods sold if that expense amounted to $855,425 for the year? a. 61.06% b. 12.19% c. 56.99% d. 58.25% e. 23.50%

c. 56.99%

Raynar 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? a. 7.07% b. 6.44% c. 6.41% d. 7.13% e. 4.16%

c. 6.41%

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? a. 56.25% b. 70.38% c. 64.16% d. 29.62% e. 35.84%

c. 64.16%

Saki Kale Farms has net income of $96,320, total assets of $975,200, total equity of $555,280, and total sales of $1,141,275. What is the common-size percentage for the net income? a. 48.65% b. 7.90% c. 8.44% d. 74.57% e. 13.88%

c. 8.44%

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0. a. Cash purchase of inventory b. Cash sale of inventory at a loss c. Cash payment of an account payable d. Credit sale of inventory at cost e. Cash payment on an account receivable

c. Cash payment of an account payable

Ratio analysis cannot be taken at face value for all of the following except which reason? a. Benchmarks can vary based on industry and company size. b. Different standards and procedures can exist from country to country. c. While GAAP is consistent across the globe, multiple currencies may be considered. d. Large conglomerates can cross more than one industry type. e. No underlying theory exists to pinpoint exact benchmarks.

c. While GAAP is consistent across the globe, multiple currencies may be considered.

Quincy Real Estate pays out a fixed percentage of its net income to its shareholders in the form of annual dividends. Given this, the percentage shown on a common-size income statement for the dividend account will: a. be equal to the dividend amount divided by the net income. b. vary in direct relation to changes in the sales level. c. vary in direct relation to the net profit percentage. d. vary but not in direct relation to any other variable. e. remain constant over time.

c. vary in direct relation to the net profit percentage.

Taylor, Incorporated, has sales of $11,898, total assets of $9,315, and a debt-equity ratio of .55. If its return on equity is 14 percent, what is its net income? a. $911.16 b. $887.16 c. $927.46 d. $841.35 e. $904.10

d. $841.35

Stowell Horse Farms has total assets of $689,400, long-term debt of $198,375, total equity of $364.182, net fixed assets of $512,100, and sales of $1,021,500. The profit margin is 6.2 percent. What is the current ratio? a. .95 b. 1.26 c. 1.12 d. 1.40 e. 1.50

d. 1.40

High Road Transport has a current stock price of $5.60. For the past year, the company had net income of $287,400, total equity of $992,300, sales of $1,511,000, and 750,000 shares outstanding. What is the market-to-book ratio? a. 3.54 b. 3.81 c. 4.47 d. 4.23 e. 3.99

d. 4.23

Lookin' Up earns $.094 in profit on every $1 of sales and has $1.21 in assets for every $1 of sales. The firm pays out 45 percent of its profits to its shareholders. What is the internal growth rate? a. 2.76% b. 2.65% c. 3.82% d. 4.46% e. 6.37%

d. 4.46%

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? a. 61.10 days b. 48.68 days c. 59.01 days d. 52.45 days e. 6.40 days

d. 52.45 days

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing? a. Sustainable growth rate b. Cash flow rate c. DuPont rate d. Internal growth rate e. External growth rate

d. Internal growth rate

Which one of these statements is true concerning the price-earnings (PE) ratio? a. A PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of current earnings. b. The PE ratio is classified as a profitability ratio. c. PE ratios are unaffected by the accounting methods employed by a firm. d. The PE ratio is a constant value for each firm. e. A high PE ratio may indicate that a firm is expected to grow significantly.

e. A high PE ratio may indicate that a firm is expected to grow significantly.