Exam 4: Measuring Corporate Performance

A firm has average daily expenses of $2.13 million and average accounts payable of $112.7 million. On average, how many days does it take the firm to pay its bills?

The asset turnover ratio and inventory turnover ratio are both efficiency ratios.

A firm reports a net profit margin of 10% on sales of $3 million when ignoring the effects of financing. If taxes are $200,000, how much is EBIT?

An increase in which one of the following will have no effect on the cash coverage ratio?

Increasing leverage will always act to increase a firm's ROE.

Instead of increasing its long-term debt by borrowing money from a bank to purchase new stereo equipment, Jay's Jams Inc. decides to lease the equipment on a long-term basis. How will the long-term debt ratio differ if the lease option is selected over the bank-debt option?

ROE is equal to ROA when the firm has no debt.

How would you interpret an inventory turnover ratio of 10.7?

How does the DuPont formula help identify the determinants of the firm's return on its assets and equity?

A firm's after-tax operating income was $1,000,000 in 2013. It started the year with a total capitalization of $8,000,000 and ended the year with a total capitalization of $9,000,000. The additional capital raised during 2013 started to affect the operating income in 2014. Which value best represents the return on capital for 2013?

Last year's asset turnover ratio was 2.0. Sales have increased by 25% and average total assets have increased by 10% since that time. What is the current asset turnover ratio?

Last year's return on equity was 30%. This year the ROE has decreased to 20% even though the firm's earnings equaled last year's earnings. The firm has no preferred stock. What caused the decrease?

Receivable turnover ratio and asset turnover ratio are both efficiency ratios.

Which of these indicates that a firm is efficient?

What is the book value per share for a firm with 2 million shares outstanding at a price of $50, a market-to-book ratio of .75, and a dividend-payout ratio of 50%?

A firm has $600,000 in current assets and $150,000 in current liabilities. Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

The income statement of a firm shows the value of its assets and liabilities over a specified period of time.

The net working capital to total assets ratio is always a larger number than the current ratio.

The board of directors is dissatisfied with last year's ROE of 15%. If the profit margin and asset turnover ratio remain unchanged at 8% and 1.25, respectively, by how much must the leverage ratio (i.e., assets/equity) increase to achieve 20% ROE?

Which one of these ratios is commonly referred to as the acid-test ratio?