Module 1

Eric & Jared's Department Store has current liabilities of $7,630, net working capital of $2,180, inventory of $2,750, and sales of $51,800. What is the quick ratio?

0.93

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?

1.19

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?

1.25

A firm has sales of $529,000 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?

1.36 percent

Whitt's BBQ has sales of $348,000, a profit margin of 8.1 percent, and a capital intensity ratio of 0.70. What is the total asset turnover rate?

1.43

A firm has net working capital of $3,800 and current assets of $11,700. What is the current ratio?

1.48

Underwood Homes Sales has total assets of $589,900 and total debt of $318,000. What is the equity multiplier?

2.17

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?

2.29

Fresh Foods has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.7, and a profit margin of 2.4 percent. What is the equity multiplier?

2.70

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?

20.16 percent

Undertaker Enterprises earns $0.17 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?

25.47 percent

A firm has $42,900 in receivables and $211,800 in total assets. The total asset turnover rate is 1.40 and the profit margin is 5.2 percent. How long on average does it take the firm to collect its receivables?

52.81 days

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?

57.06 days

Phil's Hardware sells its inventory in 75 days, on average. Costs of goods sold for the year are $631,800. What is the average value of the firm's inventory?

$129,821

The Medicine Shoppe has a return on equity of 19.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income?

$149,897

Western Hardwood Sales has total equity of $79,000, 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?

$154,050

The Rainbow Company has total sales of $713,200 and a profit margin of 8.5 percent. Currently, the firm has 12,500 shares outstanding. What are the earnings per share?

$4.85

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?

$53,885.63

Your firm has cash of $3,800, accounts receivable of $8,600, inventory of $33,100, and net working capital of $1,100. What is the cash ratio?

0.09

Denbo's, Inc. has total equity of $389,600, long-term debt of $116,400, net working capital of $1,600, and total assets of $627,600. What is the total debt ratio?

0.38

Circle K Stores has net income of $41,000, a profit margin of 3.7 percent, and a return on assets of 9 percent. What is the capital intensity ratio?

0.41

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?

0.46

The Undergrounds Coffee Shop has total assets of $85,300 and an equity multiplier of 1.53. What is the debt-equity ratio?

0.53

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?

0.66

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?

0.70

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?

0.79

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?

0.91

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?

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?

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?

Dividend payout ratio

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?

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?

Price-earnings ratio

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?

Price-sales ratio

Which one of the following statements is correct?

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

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?

Cash ratio

The ratios that are based on financial statement values and used for comparison purposes are called:

financial ratios.

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?

SIC

The cash coverage ratio is used to evaluate the:

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

The DuPont identity can be totally defined by which one of the following?

Equity multiplier and return on assets

Financial statement analysis:

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

Whole Foods has a book value per share of $13.50, earnings per share of $1.21, and a price-earnings ratio of 17.6. What is the market-to-book ratio?

1.58

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?

1.75

Mike's Place has total assets of $123,800, a debt-equity ratio of 0.75, and net income of $7,100. What is the return on equity?

10.04 percent

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?

10.61 percent

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?

10.81 percent

A firm earns $0.18 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?

11.25 percent

It takes The Crossroads Boutique an average of 61 days to sell its inventory and 30 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?

12.17

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?

12.95 percent

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?

15.86 percent

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?

17.45

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?

19.38

The Universal Network has sales of $496,500, cost of goods sold of $264,900, and inventory of $87,100. What is the inventory turnover rate?

3.04

A firm has sales of $311,000 and net income of $31,600. Currently, there are 28,000 shares outstanding at a market price of $36 per share. What is the price-sales ratio?

3.24

Baugh & Essary has net income of $149,200, sales of $936,800, a capital intensity ratio of 0.74, and an equity multiplier of 1.5. What is the return on equity?

32.25 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?

39.19 percent

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?

4.56 percent

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?

4.88 percent

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?

41.56 percent

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?

42.19 days

Tom's Hardware has inventory of $318,000, equity of $421,800, total assets of $647,700, and sales of $687,400. What is the common-size percentage for the inventory account?

49.10 percent

Fried 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 $7,000. What is the internal growth rate?

5.70 percent

A firm has net income of $6,850 and interest expense of $2,130. The tax rate is 34 percent. What is the firm's times interest earned ratio?

5.87

Earth Fare Foods has total assets of $229,800, net fixed assets of $71,500, long-term debt of $52,000, and total debt of $78,700. If inventory is $45,000, what is the current ratio?

5.93

The Space and Rocket Center takes an average of 55 days to sell its inventory and an average of 2.5 days to collect payment on its sales. What is the inventory turnover rate?

6.64

The Blue Lagoon has a return on equity of 18.9 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

6.85 percent

Larry's Gun Shop has sales of $189,000, a profit margin of 5.6 percent, and a capital intensity ratio of 0.79. What is the return on assets?

7.09 percent

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?

7.20 percent

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?

7.26 percent

The After Life has sales of $428,300, total assets of $389,100, and a profit margin of 7.2 percent. What is the return on assets?

7.93 percent

Children's Place has a market-to-book ratio of 2.9, 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?

70.59

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?

8.94 percent

International Travel Services has net income of $48,400, total assets of $219,000, total equity of $154,800, and total sales of $411,700. What is the common-size percentage for the net income?

850.62 percent

Waldale Pools has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.55 and the total asset turnover is 1.6. What is the profit margin?

9.00 percent

Friendly Skies Airline has earnings before interest and taxes of $21,680 and net income of $12,542. The tax rate is 35 percent. What is the times interest earned ratio?

9.09

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?

9.10

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 receivable turnover rate?

9.13

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?

9.98

Which one of the following statements is true concerning the price-earnings (PE) ratio?

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

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.

Cash payment of an account payable

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?

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

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 three years to 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?

Common-size income statement

Which one of the following transactions will increase the liquidity of a firm?

Credit sale of inventory at cost

Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?

Decrease in the capital intensity ratio

Which one of the following will increase the profit margin of a firm, all else constant?

Decrease in the tax rate

Which one of the following is a measure of long-term solvency?

Equity multiplier

Gently Used Goods has cash of $2,950, 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?

Gently Used Goods has cash of $2,950, 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?

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.

I, II, III, and IV

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

I, II, and IV only

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. Percentage of net income distributed as dividends

I, II, and IV only

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

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

III and IV only

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

Internal growth rate

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?

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:

has positive net working capital.

A common-size balance sheet helps financial managers determine:

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

The equity multiplier is equal to:

one plus the debt-equity ratio.

Blooming Gardens has an inventory turnover of 16. This means the firm:

sells its inventory an average of 16 times each year.

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

total assets.

A firm has an equity multiplier of 1.5. This means that the firm has a:

total debt ratio of 0.33.

High Tower Pharmacy 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:

vary in direct relation to the net profit percentage.

If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is:

zero percent.