Fin ch 3

The Donut Hut has sales of $68,000, current assets of $11,300, net income of $5,100, net fixed assets of $54,900, total debt of $23,800, and dividends of $800. What is the sustainable growth rate? A. 10.48 percent B. 11.29 percent C. 11.79 percent D. 12.08 percent E. 12.39 percent

B. 11.29 percent

Last year, Blakely's Fashions earned net income of $68,400 and had 12,000 shares of stock outstanding. The dividends per share were $2.20. What is the dividend payout ratio? A. 32.98 percent B. 34.00 percent C. 38.60 percent D. 40.21 percent E. 44.14 percent

C. 38.60 percent

Town Centre Market has sales of $311,800, a profit margin of 2.9 percent, and dividends of $4,500. What is the plowback ratio? A. 46.32 percent B. 49.78 percent C. 50.23 percent D. 51.15 percent E. 53.68 percent

C. 50.23 percent

Valentino's maintains a constant debt-equity ratio of 0.45. The firm had net income of $11,800 for the year and paid $6,500 in dividends. The firm has total assets of $92,000. What is the sustainable growth rate? A. 7.38 percent B. 8.27 percent C. 9.11 percent D. 9.62 percent E. 10.38 percent

C. 9.11 percent

Which one of the following is a measure of long-term solvency? A. Price-earnings ratio B. Profit margin C. Equity multiplier D. Receivables turnover E. Quick ratio

C. Equity multiplier

High Tower Pharmacy pays a fixed percentage of its net income out to its shareholders in the form of annual dividends. Given this, the percent shown on a common-size income statement for the dividend account will: A. remain constant over time. B. be equal to the dividend amount divided by the net income. C. vary in direct relation to the net profit percentage. D. vary in direct relation to changes in the sales level. E. vary but not in direct relation to any other variable.

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

Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of $94,300. How long on average does it take the firm to sell its inventory? A. 6.40 days B. 7.23 days C. 48.68 days D. 57.06 days E. 61.10 days

D. 57.06 days

Gabriel Furniture has a profit margin of 8.2 percent and a dividend payout ratio of 30 percent. What is the plowback ratio? A. 10.66 percent B. 27.33 percent C. 54.60 percent D. 70.00 percent E. 78.20 percent

D. 70.00 percent

A firm has a return on equity of 16 percent, a return on assets of 11 percent, and a 40 percent dividend payout ratio. What is the sustainable growth rate? A. 5.72 percent B. 6.84 percent C. 7.12 percent D. 9.58 percent E. 10.62 percent

E. 10.62 percent

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio? A. 3.45 percent B. 4.71 percent C. 14.34 percent D. 22.85 percent E. 24.04 percent

E. 24.04 percent

86. Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity? A. 8.91 percent B. 12.67 percent C. 18.28 percent D. 32.11 percent E. 41.56 percent

E. 41.56 percent

Delmont Movers has a profit margin of 6.2 percent and net income of $48,900. What is the common-size percentage for the cost of goods sold if that expense amounted to $379,000 for the year? A. 12.90 percent B. 23.50 percent C. 33.25 percent D. 41.06 percent E. 48.05 percent

E. 48.05 percent

A firm has $42,900 in receivables and $211,800 in total assets. The total asset turnover rate is 1.45 and the profit margin is 4.2 percent. How long on average does it take the firm to collect its receivables? A. 7.16 days B. 9.45 days C. 11.68 days D. 31.25 days E. 50.99 days

E. 50.99 days

Peter's Motor Works has total assets of $689,400, long-term debt of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio? A. 0.60 B. 0.91 C. 1.01 D. 1.67 E. 2.16

D. 1.67

The Saw Mill has a return on assets of 6.1 percent, a total asset turnover rate of 1.8, and a debt-equity ratio of 1.6. What is the return on equity? A. 4.26 percent B. 9.76 percent C. 12.28 percent D. 15.86 percent E. 19.03 percent

D. 15.86 percent

Preston's Market has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.6, and a profit margin of 2.4 percent. What is the equity multiplier? A. 0.60 B. 0.63 C. 1.83 D. 2.60 E. 2.84

D. 2.60

Textile Mills has sales of $923,000, cost of goods sold of $748,000, and accounts receivable of $106,700. How long on average does it take the firm's customers to pay for their purchases? A. 8.65 days B. 11.28 days C. 25.01 days D. 42.19 days E. 45.33 days

D. 42.19 days

Underwood Enterprises earns $0.07 in profit on every $1 of sales and has $0.67 in assets for every $1 of sales. The firm pays out 20 percent of its profits to its shareholders. What is the internal growth rate? A. 6.37 percent B. 7.76 percent C. 8.80 percent D. 9.12 percent E. 9.65 percent

D. 9.12 percent

85. The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity? A. 3.48 percent B. 3.73 percent C. 8.01 percent D. 9.46 percent E. 13.61 percent

D. 9.46 percent

21. You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future? A. Times interest earned = 1.7; debt-equity ratio = 1.6 B. Times interest earned = 1.5; debt-equity ratio = 1.2 C. Cash coverage ratio = 0.8; debt-equity ratio = 0.8 D. Cash coverage ratio = 2.6; debt-equity ratio = 0.3 E. Cash coverage ratio = 0.5; total debt ratio = 0.2

D. Cash coverage ratio = 2.6; debt-equity ratio = 0.3

Which one of the following will increase the profit margin of a firm, all else constant? A. Increase in interest paid B. Increase in fixed costs C. Increase in depreciation expense D. Decrease in the tax rate E. Decrease in sales

D. Decrease in the tax rate

28. Donovan Brothers, Inc. would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal? A. Return on assets B. Net income C. Retention ratio D. Dividend payout ratio E. Return on equity

D. Dividend payout ratio

The T-shirt Hut successfully managed to reduce its general and administrative costs this year. This cost improvement will increase which of the following ratios? I. Profit margin II. Return on assets III. Total asset turnover IV. Return on equity A. I and II only B. I and III only C. II, III, and IV only D. I, II, and IV only E. I, II, III, and IV

D. I, II, and IV only

4. Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing? A. Du Pont rate B. External growth rate C. Sustainable growth rate D. Internal growth rate E. Cash flow rate

D. Internal growth rate

6. 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. BEC B. SED C. BID D. SIC E. SBC

D. SIC

Your firm has cash of $3,800, accounts receivable of $9,600, inventory of $33,100, and net working capital of $1,100. What is the cash ratio? A. 0.04 B. 0.08 C. 0.87 D. 1.21 E. 3.45

B. 0.08

Slightly Used Goods has cash of $2,150, inventory of $28,470, fixed assets of $9,860, accounts payable of $11,900, and accounts receivable of $4,660. What is the cash ratio? A. 0.08 B. 0.18 C. 0.32 D. 0.46 E. 0.51

B. 0.18

Denton, Inc. has total equity of $389,600, long-term debt of $116,400, net working capital of $1,600, and total assets of $527,600. What is the total debt ratio? A. 0.22 B. 0.26 C. 0.67 D. 1.49 E. 3.85

B. 0.26

The Jelly Jar has total assets of $79,600 and an equity multiplier of 1.35. What is the debt-equity ratio? A. 0.28 B. 0.35 C. 0.47 D. 0.58 E. 0.67

B. 0.35

45. Tressler Dry Cleaners has inventory of $1,700, accounts payable of $4,200, cash of $1,950, and accounts receivable of $3,680. What is the cash ratio? A. 0.24 B. 0.46 C. 0.53 D. 0.98 E. 1.34

B. 0.46

A firm has total assets of $523,100, current assets of $186,500, current liabilities of $141,000, and total debt of $215,000. What is the debt-equity ratio? A. 0.48 B. 0.70 C. 1.10 D. 1.43 E. 2.13

B. 0.70

83. Swanton Foods has a book value per share of $12.68, earnings per share of $1.21, and a price-earnings ratio of 17.6. What is the market-to-book ratio? A. 1.32 B. 1.68 C. 1.99 D. 2.47 E. 2.61

B. 1.68

The Inside Door has total debt of $78,600, total equity of $214,000, and a return on equity of 14.5 percent. What is the return on assets? A. 9.14 percent B. 10.61 percent C. 21.45 percent D. 34.61 percent E. 39.48 percent

B. 10.61 percent

64. It takes The Corner Store an average of 51 days to sell its inventory and 32 days to collect its accounts receivable. The firm has sales of $568,700 and costs of goods sold of $398,800. What is the accounts receivable turnover rate? A. 11.23 B. 11.41 C. 11.78 D. 12.23 E. 12.55

B. 11.41

71. Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent? A. 12.46 percent B. 12.95 percent C. 13.33 percent D. 15.29 percent E. 16.11 percent

B. 12.95 percent

Russell's Hardware has inventory of $218,000, equity of $421,800, total assets of $647,700, and sales of $587,200. What is the common-size percentage for the inventory account? A. 26.81 percent B. 33.66 percent C. 37.12 percent D. 49.09 percent E. 51.68 percent

B. 33.66 percent

The Global Network has sales of $418,700, cost of goods sold of $264,900, and inventory of $61,900. What is the inventory turnover rate? A. 1.33 B. 4.28 C. 6.76 D. 7.14 E. 8.47

B. 4.28

Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent and a debt-equity ratio of 0.55. What is the return on assets? A. 3.89 percent B. 4.56 percent C. 6.67 percent D. 12.86 percent E. 13.33 percent

B. 4.56 percent

A firm has net income of $5,890 and interest expense of $2,130. The tax rate is 34 percent. What is the firm's times interest earned ratio? A. 4.82 B. 5.19 C. 5.38 D. 5.67 E. 6.33

B. 5.19

Cross Hairs Gun Shop has sales of $189,000, a profit margin of 4.8 percent, and a capital intensity ratio of 0.79. What is the return on assets? A. 5.67 percent B. 6.08 percent C. 6.39 percent D. 6.42 percent E. 6.67 percent

B. 6.08 percent

97. Quick Foods has sales of $238,900, total assets of $217,000, total equity of $121,300, net income of $18,700, and dividends paid of $6,000. What is the internal growth rate? A. 5.48 percent B. 6.22 percent C. 6.67 percent D. 7.34 percent E. 7.92 percent

B. 6.22 percent

100.Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate? A. 6.98 percent B. 7.20 percent C. 7.33 percent D. 7.54 percent E. 7.91 percent

B. 7.20 percent

Kessler, Inc. has accounts receivable of $31,600, total assets of $311,500, cost of goods sold of $208,400, and a capital intensity ratio of 1.08. What is the accounts receivables turnover rate? A. 8.99 B. 9.13 C. 9.42 D. 9.61 E. 9.72

B. 9.13

You are analyzing a company that has cash of $11,200, accounts receivable of $27,800, fixed assets of $124,600, accounts payable of $31,300, and inventory of $56,900. What is the quick ratio? A. 0.30 B. 0.67 C. 0.80 D. 1.25 E. 1.37

D. 1.25

A firm has sales of $428,000 for the year. The profit margin is 3.4 percent and the retention ratio is 60 percent. What is the common-size percentage for the dividends paid? A. 0.99 percent B. 1.18 percent C. 1.21 percent D. 1.36 percent E. 1.42 percent

D. 1.36 percent

New Steel Products has total assets of $991,000, a total asset turnover rate of 1.1, a debt-equity ratio of 0.6, and a return on equity of 8.7 percent. What is the firm's net income? A. $53,885.63 B. $58,303.33 C. $64,624.14 D. $70,548.09 E. $77,236.67

A. $53,885.63

Circle Stores has net income of $41,000, a profit margin of 6.7 percent, and a return on assets of 9 percent. What is the capital intensity ratio? A. 0.74 B. 0.86 C. 1.16 D. 1.34 E. 1.38

A. 0.74

Martha's Fabric House has sales of $137,200, total equity of $74,400, and a debt-equity ratio of 0.45. What is the capital intensity ratio? A. 0.79 B. 0.83 C. 1.06 D. 1.20 E. 1.27

A. 0.79

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets? A. 10.63 percent B. 13.53 percent C. 25.15 percent D. 26.07 percent E. 28.33 percent

A. 10.63 percent

A firm has sales of $311,000 and net income of $21,600. Currently, there are 18,000 shares outstanding at a market price of $36 per share. What is the price-sales ratio? A. 2.08 B. 3.11 C. 4.26 D. 5.15 E. 6.95

A. 2.08

The Berry Patch has sales of $438,000, cost of goods sold of $369,000, depreciation of $37,400, and interest expense of $13,800. The tax rate is 35 percent. What is the times interest earned ratio? A. 2.29 B. 3.46 C. 3.87 D. 4.38 E. 4.79

A. 2.29

98. A firm has adopted a policy whereby it will not seek any additional external financing. Given this, what is the maximum growth rate for the firm if it has net income of $12,100, total equity of $94,000, total assets of $156,000, and a 40 percent dividend payout ratio? A. 4.88 percent B. 5.11 percent C. 6.62 percent D. 7.67 percent E. 8.37 percent

A. 4.88 percent

The Tourist Stop takes an average of 63 days to sell its inventory and an average of 1.5 days to collect payment on its sales. What is the inventory turnover rate? A. 5.79 B. 7.29 C. 8.68 D. 10.18 E. 11.42

A. 5.79

Tessler Farms has a return on equity of 12.71 percent, a debt-equity ratio of 0.75, and a total asset turnover of 0.9. What is the return on assets? A. 7.26 percent B. 8.06 percent C. 13.67 percent D. 15.24 percent E. 17.41 percent

A. 7.26 percent

80. The Green House has a profit margin of 5.6 percent on sales of $311,200. The firm currently has 15,000 shares of stock outstanding at a market price of $11.60 per share. What is the price-earnings ratio? A. 9.98 B. 10.02 C. 11.50 D. 11.93 E. 12.84

A. 9.98

New Century Products is a company that was founded last year. While the outlook for the company is positive, it currently has negative earnings. If you wanted to measure the progress of this firm, which one of the following ratios would probably be best to monitor given the firm's current situation? A. Price-sales ratio B. Market-to-book ratio C. Profit margin D. ROE E. ROA

A. Price-sales ratio

29. If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is: A. zero percent. B. 100 percent. C. equal to the ROA. D. negative. E. infinite.

A. zero percent.

Eastern Hardwood Sales has total equity of $89,000, a profit margin of 4.8 percent, an equity multiplier of 1.5, and a total asset turnover of 1.3. What is the amount of the firm's sales? A. $168,200 B. $173,550 C. $181,430 D. $185,620 E. $187,500

B. $173,550

The Closet Shoppe has total sales of $713,200 and a profit margin of 5.8 percent. Currently, the firm has 12,500 shares outstanding. What are the earnings per share? A. $2.98 B. $3.31 C. $3.56 D. $3.89 E. $4.02

B. $3.31

The Medicine Cabinet has a return on equity of 18.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income? A. $85,608 B. $113,875 C. $134,316 D. $142,311 E. $149,897

C. $134,316

Baxter & Baxter has total assets of $710,000. There are 45,000 shares of stock outstanding with a market value of $28 a share. The firm has a profit margin of 7.1 percent and a total asset turnover of 1.29. What is the price-earnings ratio? A. 16.38 B. 17.99 C. 19.38 D. 20.12 E. 22.41

C. 19.38

Which one of the following transactions will increase the liquidity of a firm? A. Cash purchase of new production equipment B. Payment of an account payable C. Cash purchase of inventory D. Credit sale of inventory at cost E. Cash payment of employee wages

D. Credit sale of inventory at cost

The cash coverage ratio is used to evaluate the: A. liquidity of a firm. B. speed at which a firm generates cash. C. length of time that a firm can pay its bills if no additional cash becomes available. D. ability of a firm to pay the interest on its debt. E. relationship between the firm's cash balance and its current liabilities.

D. ability of a firm to pay the interest on its debt.

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

D. total assets.

Ratzell's Place has a market-to-book ratio of 2.7, net income of $68,400, a book value per share of $37, and 45,000 shares of stock outstanding. What is the price-earnings ratio? A. 24.34 B. 28.16 C. 55.10 D. 59.09 E. 65.72

E. 65.72

Friendly's Shoe Store has earnings before interest and taxes of $21,680 and net income of $12,542. The tax rate is 34 percent. What is the times interest earned ratio? A. 0.88 B. 1.67 C. 3.09 D. 5.59 E. 8.10

E. 8.10

Freedom Health Centers has total equity of $861,300, sales of $1.48 million, and a profit margin of 5.2 percent. What is the return on equity? A. 5.82 percent B. 6.49 percent C. 7.18 percent D. 8.68 percent E. 8.94 percent

E. 8.94 percent

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin? A. 3.10 percent B. 5.23 percent C. 5.67 percent D. 8.21 percent E. 9.62 percent

E. 9.62 percent

Fred is the owner of a local feed store. Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has? A. Current ratio B. Debt ratio C. Cash coverage ratio D. Quick ratio E. Cash ratio

E. Cash ratio

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

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

2. The ratios that are based on financial statement values and used for comparison purposes are called: A. financial ratios. B. industrial statistics. C. equity standards. D. accounting returns. E. analytical standards.

A. financial ratios

The equity multiplier is equal to: A. one plus the debt-equity ratio. B. one plus the total asset turnover. C. total debt divided by total equity. D. total equity divided by total assets. E. one divided by the total asset turnov

A. one plus the debt-equity ratio.

18. Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past? A. Decrease in the total asset turnover B. Decrease in the capital intensity ratio C. Increase in days' sales in receivables D. Decrease in the profit margin E. Decrease in the inventory turnover rate

B. Decrease in the capital intensity ratio

3. The Du Pont identity can be totally defined by which one of the following? A. Return on equity, total asset turnover, and equity multiplier B. Equity multiplier and return on assets C. Profit margin and return on equity D. Total asset turnover, profit margin, and debt-equity ratio E. Equity multiplier, return on assets, and profit margin

B. Equity multiplier and return on assets

Martha's Sweet Shop reduced its fixed assets this year without affecting the shop's operations, sales, or equity. This reduction will increase which of the following ratios? I. Capital intensity ratio II. Return on assets III. Total asset turnover IV. Return on equity A. I and II only B. II and III only C. II, III, and IV only D. I, II, and IV only E. I, II, III, and IV

B. II and III only

Which of the following will increase the sustainable rate of growth for a firm? I. Decreasing the profit margin II. Increasing the dividend payout ratio III. Decreasing the capital intensity ratio IV. Increasing the target debt-equity ratio A. I and II only B. III and IV only C. II and IV only D. I, III, and IV only E. I, II, III, and IV

B. III and IV only

62. Handy Hardware sells its inventory in 85 days, on average. Costs of goods sold for the year are $631,800. What is the average value of the firm's inventory? A. $114,706 B. $123,506 C. $147,132 D. $161,096 E. $182,513

C. $147,132

Wilson's Realty has total assets of $46,800, net fixed assets of $37,400, current liabilities of $6,100, and long-term liabilities of $24,600. What is the total debt ratio? A. 0.41 B. 0.60 C. 0.66 D. 0.78 E. 0.86

C. 0.66

44. Tasty Dee-Lite has current liabilities of $6,630, net working capital of $2,180, inventory of $2,750, and sales of $36,800. What is the quick ratio? A. 0.76 B. 0.84 C. 0.91 D. 1.09 E. 1.19

C. 0.91

Aardvaark & Co. has sales of $291,200, cost of goods sold of $163,300, net profit of $11,360, net fixed assets of $154,500, and current assets of $89,500. What is the total asset turnover rate? A. 1.08 B. 1.11 C. 1.19 D. 1.24 E. 1.28

C. 1.19

A firm has net working capital of $3,800 and current assets of $11,700. What is the current ratio? A. 0.34 B. 0.60 C. 1.48 D. 1.65 E. 2.92

C. 1.48

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio? A. 1.58 B. 1.69 C. 1.75 D. 1.87 E. 1.92

C. 1.75

Webster & Jones has net income of $49,200, sales of $936,800, a capital intensity ratio of 0.74, and an equity multiplier of 1.5. What is the return on equity? A. 6.67 percent B. 8.98 percent C. 10.65 percent D. 12.21 percent E. 14.09 percent

C. 10.65 percent

96. The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate? A. 7.99 percent B. 8.57 percent C. 10.81 percent D. 16.87 percent E. 21.94 percen

C. 10.81 percent

Foreign Travel Services has net income of $48,400, total assets of $219,000, total equity of $154,800, and total sales of $311,700. What is the common-size percentage for the net income? A. 9.00 percent B. 13.90 percent C. 15.53 percent D. 22.10 percent E. 31.27 percent

C. 15.53 percent

A firm has net income of $114,000, a return on assets of 12.6 percent, and a debt-equity ratio of 0.60. What is the return on equity? A. 17.11 percent B. 18.98 percent C. 20.16 percent D. 22.20 percent E. 24.60 percent

C. 20.16 percent

A firm has inventory of $11,400, accounts payable of $9,800, cash of $850, net fixed assets of $12,150, long-term debt of $9,500, accounts receivable of $6,600, and total equity of $11,700. What is the common-size percentage for the net fixed assets? A. 19.60 percent B. 26.67 percent C. 39.19 percent D. 42.08 percent E. 48.75 percent

C. 39.19 percent

The Next Life has sales of $428,300, total assets of $389,100, and a profit margin of 6.2 percent. What is the return on assets? A. 6.29 percent B. 6.54 percent C. 6.83 percent D. 7.01 percent E. 7.27 percen

C. 6.83 percent

Blue Water Cafe has $28,700 in total assets, depreciation of $3,100, and interest of $1,400. The total asset turnover rate is 1.2. Earnings before interest and taxes are equal to 28 percent of sales. What is the cash coverage ratio? A. 6.33 B. 7.51 C. 9.10 D. 10.23 E. 10.98

C. 9.10

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 payment of an account receivable C. Cash payment of an account payable D. Credit sale of inventory at cost E. Cash sale of inventory at a loss

C. Cash payment of an account payable

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 3 years 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? A. Income statement B. Balance sheet C. Common-size income statement D. Common-size balance sheet E. Statement of cash flows

C. Common-size income statement

Which of the following are determinants of a firm's sustainable rate of growth? I. Amount of sales generated from each dollar invested in assets II. Amount of debt per dollar of equity III. Amount of current assets per dollar of current liabilities IV. Percent of net income distributed as dividends A. I and III only B. II and IV only C. I, II, and IV only D. II, III, and IV only E. I, II, III, and IV

C. I, II, and IV only

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

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

Financial statement analysis: A. is primarily used to identify account values that meet the normal standards. B. is limited to internal use by a firm's managers. C. provides useful information that can serve as a basis for forecasting future performance. D. provides useful information to shareholders but not to debt holders. E. is enhanced by comparing results to those of a firm's peers but not by comparing results to prior periods.

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

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate? A. 1.04 B. 1.08 C. 1.13 D. 1.19 E. 1.26

D. 1.19

A firm has net income of $31,300, depreciation of $5,100, taxes of $14,600, and interest paid of $3,100. What is the cash coverage ratio? A. 8.78 B. 10.10 C. 14.14 D. 16.32 E. 17.45

E. 17.45

51. Underwood Homes Sales has total assets of $589,900 and total debt of $318,000. What is the equity multiplier? A. 0.46 B. 0.54 C. 1.21 D. 1.85 E. 2.17

E. 2.17

Healthy Foods has total assets of $129,800, net fixed assets of $71,500, long-term debt of $52,000, and total debt of $78,700. If inventory is $31,800, what is the current ratio? A. 0.33 B. 0.46 C. 0.84 D. 1.18 E. 2.18

E. 2.18

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin? A. 2.76 percent B. 3.57 percent C. 4.90 percent D. 5.28 percent E. 6.46 percent

E. 6.46 percent

The Du Pont 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. II and III only B. I and III only C. II, III, and IV only D. I, II, and III only E. I, II, III, and IV

E. I, II, III, and IV

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 financing of any kind B. No new debt but additional external equity equal to the increase in retained earnings C. New debt and external equity in equal proportions D. New debt and external equity, provided the debt-equity ratio remains constant E. No new equity and a constant debt-equity ratio

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

All else constant, which one of the following will decrease if a firm increases its net income? A. Return on assets B. Profit margin C. Return on equity D. Price-sales ratio E. Price-earnings ratio

E. Price-earnings ratio

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship? A. Receivables turnover B. Equity multiplier C. Profit margin D. Return on assets E. Total asset turnover

E. Total asset turnover

A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm: A. pays cash for its inventory. B. has more than half its current assets invested in inventory. C. has more cash than inventory. D. has more current liabilities than it does current assets. E. has positive net working capital.

E. has positive net working capital.

17. Blooming Gardens has an inventory turnover of 16, This means the firm: A. sells its entire inventory every 16 days. B. only stocks its inventory every 16 days. C. buys 16 days of inventory with each order. D. sells its inventory by granting customers 16 days credit. E. sells its inventory an average of 16 times each year.

E. sells its inventory an average of 16 times each year.

A firm has an equity multiplier of 1.5. This means that the firm has a: A. debt-equity ratio of 0.67. B. debt-equity ratio of 0.33. C. total debt ratio of 0.50. D. total debt ratio of 0.67. E. total debt ratio of 0.33.

E. total debt ratio of 0.33.

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

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