FIN

DEF Corporation has $40,000 in cash, $22,000 in marketable securities, $8,000 in receivables, and $160,000 in current liabilities. What is DEF Corporation's quick ratio?

0.44 Reason: Correct. Quick ratio = ($40,000 + $22,000 + $8,000)/$160,000 = 0.44.

ABC Corporation has total liabilities of 45,500 and total assets of $63,900. Its total debt ratio is Blank______.

0.712 Reason: Correct. $45,500/$63,900 = 0.712.

ABC Corporation has current assets of $50,000, total assets of $150,000, current liabilities of $35,000, total liabilities of $90,000, and shareholders' equity of $25,000. What is ABC Corporation's current ratio?

1.43 Reason: Correct. Current ratio = Current assets/current liabilities = $50,000/$35,000 = 1.43.

ABC Corporation had sales of $4,000,000 and receivables of $350,000. ABC's receivables turnover ratio is Blank______.

11.43 Reason: Correct. Receivables turnover = Sales/receivables = $4,000,000/$350,000 = 11.43.

ABC Corporation had sales of $125,000. Total assets at the beginning of the year were 53,000 and at the end of the year were $55,000. ABC's asset turnover for the entire year was Blank______. (Use the average total assets to solve)

2.31 Reason: Correct. Sales/average total assets = $125,000/(($53,000+$55,000)/2).

ABC Corporation has long-term debt of $100,000 and equity of $160,000. ABC's long-term debt ratio is Blank______.

38.5% Reason: Correct. Long-term debt ratio = long-term debt/(long-term debt + equity) = $100,000/($100,000 + $160,000) = 0.385 or 38.5%.

ABC Corporation had $370,000 in inventory at the start of the year and a daily cost of goods sold of $8,220. ABC's average days in inventory is Blank______.

45.01 Reason: Correct. Average days in inventory = Inventory at the start of the year/daily cost of goods sold = $370,000/$8,220 = 45.01 days.

ABC Corporation has long-term debt of $100,000 and equity of $160,000. ABC's long-term debt-equity ratio is Blank______.

62.5% Reason: Correct. Long-term debt-equity ratio = long-term debt/equity = $100,000/$160,000 = 0.625 or 62.5%.

ABC Corporation had net income of $75,000 and sales of $1,000,000. ABC's profit margin is Blank______.

7.5% Reason: Correct. Profit margin = Net income/sales = $75,000/$1,000,000 = 0.075 or 7.5%.

ABC Corporation had $3,000,000 in cost of goods sold and $370,000 in inventory. ABC's inventory turnover is Blank______.

8.11 Reason: Correct. Inventory turnover = Cost of goods sold/inventory = $3,000,000/$370,000 = 8.11.

Which of the following are considered disadvantages of using EVA and accounting rates of return over market-value-based measures? assets could be grossly undervalued show current performance not affected by economic factors that move stock market prices current market values of assets are not considered

Current market values of assets are not considered Assets could be grossly undervalued

The average days in inventory ratio is equal to Blank______. Multiple choice question. inventory divided by daily cost of goods sold cost of goods sold divided by inventory sales divided by inventory 365 days divided by inventory

inventory divided by daily cost of goods sold

The long-term debt ratio is equal to Blank______.

long-term debt divided by long-term debt plus equity Reason: Correct. The long-term debt ratio is equal to long-term debt divided by long-term debt plus equity.

Which of the following ratios shows the percent of long-term capital that is financed by debt?

long-term debt ratio

The ratio that measures the proportion of sales that finds its way into profits is

profit margin

The quick ratio is equal to Blank______.

quick assets divided by current liabilities

The receivables turnover ratio is equal to Blank______. Multiple choice question. sales divided by receivables

sales divided by receivables

The asset turnover ratio is equal to Blank______. Multiple choice question. sales divided by total assets total assets divided by sales after-tax operating income divided by total assets net income divided by total assets

sales divided by total assets

An average collection period of 32 states that Blank______. Multiple choice question. the company collected payment on average in 32 days the company's receivables turned over 32 times during the year every dollar in receivables generates $32 in sales the company sold the inventory within 32 days

the company collected payment on average in 32 days

Which of the following statements are possible explanations for a high receivables turnover number?

The firm has a restrictive credit policy. Unpaid bills are a small proportion of sales. The firm has an efficient credit department that is quick to follow up on late payers.

ABC Corporation has current assets of $50,000, total assets of $150,000, current liabilities of $35,000, total liabilities of $90,000, and shareholders' equity of $25,000. What is ABC Corporation's net working capital worth? Multiple choice question.

$15,000 Reason: Correct. Net working capital = Current assets − current liabilities = $50,000 − $35,000 = $15,000.

Which of the following represent questions the financial manager would ask to evaluate financing decisions? (Do not confuse the financing decision with the investment decision) Multiple select question. How profitable are investments relative to the cost of capital? Does the firm have sufficient liquidity? Is the financing strategy prudent? How should profitability be measured?

Does the firm have sufficient liquidity? Is the financing strategy prudent?

When it comes to financial ratios and assessing company performance, management usually look at which of the following?

How the company's financial ratios have changed over time? Comparing ratios with companies in the same line of business.

Balsco's balance sheet shows total assets of $238,000 and total liabilities of $107,000. The firm has 55,000 shares of stock outstanding that sell for $11 a share. What is amount of market value added?

Might be $474,000

Which of the following statements are possible explanations for a high receivables turnover number? Multiple select question. Unpaid bills are a small proportion of sales. The firm has a restrictive credit policy. The firm has an efficient credit department that is quick to follow up on late payers. Unpaid bills are a large proportion of sales.

Unpaid bills are a small proportion of sales. The firm has a restrictive credit policy. The firm has an efficient credit department that is quick to follow up on late payers.

Which of the following ratios shows how much sales are generated by each dollar of total assets? Multiple choice question. average days sales in receivables ratio asset turnover ratio return on assets ratio receivables turnover ratio

asset turnover ratio

Which of the following ratios shows the number of days it takes customers to pay their bills?

average collection period

Which of the following ratios shows the number of days it takes customers to pay their bills?

average collection period Reason: Correct. The average collection period shows the number of days it takes customers to pay their bills.

Which of the following ratios shows the number of days in which a company has sufficient inventories to maintain operations? Multiple choice question. inventory turnover receivables turnover return on assets average days in inventory

average days in inventory

When determining if a ratio is good or bad, managers look at industry norms in order to Blank______.

compare their measures with the measures of companies in the same line of business

The inventory turnover ratio is equal to Blank______. Multiple choice question. inventory at the start of the year divided by daily cost of goods sold average total assets divided by inventory at the end of the year sales divided by total assets cost of goods sold divided by inventory at the start of the year

cost of goods sold divided by inventory at the start of the year

Most firms would prefer both high-profit margin and high turnover; however, this strategy typically leads to lower sales per dollar of assets. The Du Pont formula can help companies Blank______. Multiple select question. determine if they should pursue a high profit margin/low turnover strategy determine if they should pursue a high turnover/low profit margin strategy identify the constraints firms face determine if they should pursue different management hiring practices

determine if they should pursue a high profit margin/low turnover strategy determine if they should pursue a high turnover/low profit margin strategy identify the constraints firms face

A quick ratio of 0.50 states that Blank______.

for every dollar in current liabilities the company has $0.50 cents in quick assets

A current ratio of two states that Blank______.

for every dollar in current liabilities the company has $2 in current assets Reason: Correct. A current ratio of two states that for every dollar in current liabilities the company has $2 in current assets.

A profit margin of 7% states that Blank______.

for every dollar in sales the company generates $0.07 cents in profit