FINANCE Chapter 3 SET 2

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.

Accounts receivable turnover = 365 / 16.8 = 21.73

A firm has net income of $28,740, depreciation of 6,170, taxes of $13,420, and interest paid of $2,605. What is the cash coverage ratio?

Cash coverage ratio = ($28,740 + 13,420 + 2,605 + 6,170) / $2,605 = 19.55

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?

Days' sales in inventory = 365 / ($764,500 / $123,600) = 59.01 days

Leisure Products has sales of $738,800, cost of goods sold of $598,200, and accounts receivable of $86,700. How long on average does it take the firm's customers to pay for their purchases? Assume a 365-day year.

Days' sales in receivables = 365 / ($738,800 / $86,700) = 42.83 days

Peterboro Supply has a current accounts receivable balance of $391,648. Credit sales for the year just ended were $5,338,411. How long did it take on average for credit customers to pay off their accounts during the past year? Assume a 365-day year.

Days' sales in receivables = 365/($5,338,411 / $391,648) = 26.78 days

Allison's Trees has total assets of $846,200 and total debt of $367,500. What is the equity multiplier?

Equity multiplier = $846,200 / ($846,200 - 367,500) = 1.77

Fresh Foods has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.43, and a profit margin of 4.8 percent. What is the equity multiplier?

Equity multiplier = 1 + 1.43 = 2.43

The DuPont identity can be accurately defined as:

Equity multiplier × Return on assets.

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?

Internal growth rate

City Plumbing has inventory of $287,800, equity of $538,800, total assets of $998,700, and sales of $1,027,400. What is the common-size percentage for the inventory account?

Inventory common-size percentage = $287,800/$998,700 = .2882, or 28.82 percent

UXZ has sales of $683,200, cost of goods sold of $512,900, and inventory of $74,315. What is the inventory turnover rate?

Inventory turnover = $512,900 / $74,315 = 6.90 times

Oil Field Services has net income of $120,400, total assets of $1,219,000, total equity of $694,100, and total sales of $1,521,700. What is the common-size percentage for the net income?

Net income common-size percentage = $120,400 / $1,521,700 = .0791, or 7.91 percent

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity?

Return on equity = .132 ×1.54 ×1.06 = .2155, or 21.55 percent

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

total assets.