Question 1

If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?

Accepted Answer

A) 0.0833 
B) 0.192 
C) 0.5208 
D) 0.75 
A) 0.0833 
B) 0.192 
C) 0.5208 
D) 0.75

Question 2

Tops N Bottoms Corp. reported sales for 2018 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365-day year, how many days did Tops N Bottoms' inventory stay on the premises? How many times per year did Tops N Bottoms' inventory turn over?

Accepted Answer

A) 29.2 days, 12.5 times, respectively 
B) 12.5 days, 29.2 times, respectively 
C) 0.08 days, 12.5 times, respectively 
D) 29.2 days, 0.0345 times, respectively 
A) 29.2 days, 12.5 times, respectively 
B) 12.5 days, 29.2 times, respectively 
C) 0.08 days, 12.5 times, respectively 
D) 29.2 days, 0.0345 times, respectively

Question 3

Tierre'sTs, Inc. reported a debt to equity ratio of 3 times at the end of 2018. If the firm's total assets at year-end are $15 million, how much of their assets is financed with equity?

Accepted Answer

A) $3.75m 
B) $5m 
C) $11.25m 
D) $45m 
A) $3.75m 
B) $5m 
C) $11.25m 
D) $45m

Question 4

A firm has an ROA of 12 percent and an ROE of 52 percent. What is the firm's equity multiplier?

Accepted Answer

A) 0.23 
B) 4.33 
C) 1.63 
D) 2.90 
A) 0.23 
B) 4.33 
C) 1.63 
D) 2.90

Question 5

Which ratio assesses how efficiently a firm uses its fixed assets?

Accepted Answer

A) capital intensity ratio 
B) current ratio 
C) average collection period 
D) fixed asset turnover 
A) capital intensity ratio 
B) current ratio 
C) average collection period 
D) fixed asset turnover

Question 6

A firm reported a profit margin of 8.5 percent, total asset turnover of 0.85 times, debt-to-equity ratio of 0.90 times, net income of $550,000, and dividends paid to common stockholders of $100,000. The firm has no preferred stock outstanding. What is the firm's internal growth rate?

Accepted Answer

A) 3.61 percent 
B) 6.29 percent 
C) 5.91 percent 
D) 11.04 percent 
A) 3.61 percent 
B) 6.29 percent 
C) 5.91 percent 
D) 11.04 percent

Question 7

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent. What is the internal growth rate?

Accepted Answer

A) 1.00 percent 
B) 2.25 percent 
C) 5.26 percent 
D) 100.00 percent 
A) 1.00 percent 
B) 2.25 percent 
C) 5.26 percent 
D) 100.00 percent

Question 8

You have the following information on Universe It Ts, Inc.: sales to working capital = 10 times, profit margin = 25 percent, net income available to common stockholders = $3 million, and current liabilities = $1 million. What is the firm's balance of current assets?

Accepted Answer

A) $1.075m 
B) $1.2m 
C) $2.2m 
D) $5m 
A) $1.075m 
B) $1.2m 
C) $2.2m 
D) $5m

Question 9

Last year Café Creations, Inc. had an ROA of 25 percent, a profit margin of 12 percent, and sales of $4 million. What is Café Creations' total assets?

Accepted Answer

A) $0.12m. 
B) $0.48m. 
C) $1.00m. 
D) $1.92m. 
A) $0.12m. 
B) $0.48m. 
C) $1.00m. 
D) $1.92m.

Question 10

Calculate the times interest earned ratio for Tierre'sTs, Inc. using the following information. Sales = $200,000, cost of goods sold = $50,000, depreciation expense = $13,000, addition to retained earnings = $70,000, dividends per share = $0.50, tax rate = 30 percent, and number of shares of common stock outstanding = 1,000. Tierre'sTs has no preferred stock outstanding.

Accepted Answer

A) 0.1814 
B) 0.4854 
C) 0.685 
D) 3.7756 
A) 0.1814 
B) 0.4854 
C) 0.685 
D) 3.7756

Question 11

The term "spreading the financial statements" refers to

Accepted Answer

A) creating common-size financial statements. 
B) comparing the statements to the industry average. 
C) calculating the internal and sustainable growth rate. 
D) evaluating the debt levels. 
A) creating common-size financial statements. 
B) comparing the statements to the industry average. 
C) calculating the internal and sustainable growth rate. 
D) evaluating the debt levels.

Question 12

Last year, PJ's Ice Cream Parlours, Inc. reported an ROE = 12 percent. The firm's debt ratio was 40 percent, sales were $25 million, and the capital intensity ratio was 0.75 times. What is the net income for PJ's last year?

Accepted Answer

A) $1.35m 
B) $2.40m 
C) $3.00m 
D) $18.75m 
A) $1.35m 
B) $2.40m 
C) $3.00m 
D) $18.75m

Question 13

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $100 million in assets with $10 million in debt and $90 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms?

Accepted Answer

A) LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively 
B) LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively 
C) LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively 
D) LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively 
A) LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively 
B) LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively 
C) LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively 
D) LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively

Question 14

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

Accepted Answer

A) fixed asset to working capital ratio 
B) fixed asset turnover ratio 
C) fixed asset management ratio 
D) sales to working capital ratio 
A) fixed asset to working capital ratio 
B) fixed asset turnover ratio 
C) fixed asset management ratio 
D) sales to working capital ratio

Question 15

Lab R Doors' year-end price on its common stock is $40. The firm has total assets of $75 million, the debt ratio is 60 percent, there is no preferred stock, and there are 4 million shares of common stock outstanding. Calculate the market-to-book ratio for Lab R Doors.

Accepted Answer

A) 2.13 
B) 3.20 
C) 5.33 
D) 10.00 
A) 2.13 
B) 3.20 
C) 5.33 
D) 10.00

Question 16

Which of the following statements is correct?

Accepted Answer

A) The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities. 
B) Holding extremely high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm. 
C) The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt. 
D) The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio. 
A) The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities. 
B) Holding extremely high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm. 
C) The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt. 
D) The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio.

Question 17

A corporation has a total asset turnover of 2 times, ROA of 12 percent and EM of 1.17. What is this firm's profit margin and debt ratio?

Accepted Answer

A) profit margin: 2 percent; debt ratio: 19.45 percent 
B) profit margin: 3 percent; debt ratio: 31.81 percent 
C) profit margin: 4 percent; debt ratio: 12.94 percent 
D) profit margin: 6 percent; debt ratio: 14.53 percent 
A) profit margin: 2 percent; debt ratio: 19.45 percent 
B) profit margin: 3 percent; debt ratio: 31.81 percent 
C) profit margin: 4 percent; debt ratio: 12.94 percent 
D) profit margin: 6 percent; debt ratio: 14.53 percent

Question 18

Which statement is true?

Accepted Answer

A) The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress. 
B) The lower the liquidity ratios, the less liquidity risk a firm has. 
C) Liquid assets generate profits for the firm. 
D) Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets. 
A) The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress. 
B) The lower the liquidity ratios, the less liquidity risk a firm has. 
C) Liquid assets generate profits for the firm. 
D) Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets.

Question 19

You have the following information on Zip's Diner, Inc.: sales to working capital = 8 times, profit margin = 5 percent, net income available to common stockholders = $20 million, and current liabilities = $4 million. What is the firm's balance of current assets?

Accepted Answer

A) $4.125m 
B) $6.5m 
C) $46m 
D) $54m 
A) $4.125m 
B) $6.5m 
C) $46m 
D) $54m

Question 20

Bree's Tennis Supply's market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree's Tennis Supply's common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share?

Accepted Answer

A) $1.025, $2.1809, respectively 
B) $2.1809, $1.025, respectively 
C) $410.00, $192.70, respectively 
D) $192.70, $410.00, respectively 
A) $1.025, $2.1809, respectively 
B) $2.1809, $1.025, respectively 
C) $410.00, $192.70, respectively 
D) $192.70, $410.00, respectively

If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?

Tops N Bottoms Corp. reported sales for 2018 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365-day year, how many days did Tops N Bottoms' inventory stay on the premises? How many times per year did Tops N Bottoms' inventory turn over?

Tierre'sTs, Inc. reported a debt to equity ratio of 3 times at the end of 2018. If the firm's total assets at year-end are $15 million, how much of their assets is financed with equity?

A firm has an ROA of 12 percent and an ROE of 52 percent. What is the firm's equity multiplier?

Which ratio assesses how efficiently a firm uses its fixed assets?

A firm reported a profit margin of 8.5 percent, total asset turnover of 0.85 times, debt-to-equity ratio of 0.90 times, net income of $550,000, and dividends paid to common stockholders of $100,000. The firm has no preferred stock outstanding. What is the firm's internal growth rate?

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent. What is the internal growth rate?

You have the following information on Universe It Ts, Inc.: sales to working capital = 10 times, profit margin = 25 percent, net income available to common stockholders = $3 million, and current liabilities = $1 million. What is the firm's balance of current assets?

Last year Café Creations, Inc. had an ROA of 25 percent, a profit margin of 12 percent, and sales of $4 million. What is Café Creations' total assets?

The term "spreading the financial statements" refers to

Last year, PJ's Ice Cream Parlours, Inc. reported an ROE = 12 percent. The firm's debt ratio was 40 percent, sales were $25 million, and the capital intensity ratio was 0.75 times. What is the net income for PJ's last year?

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

Lab R Doors' year-end price on its common stock is $40. The firm has total assets of $75 million, the debt ratio is 60 percent, there is no preferred stock, and there are 4 million shares of common stock outstanding. Calculate the market-to-book ratio for Lab R Doors.

Which of the following statements is correct?

A corporation has a total asset turnover of 2 times, ROA of 12 percent and EM of 1.17. What is this firm's profit margin and debt ratio?

Which statement is true?

You have the following information on Zip's Diner, Inc.: sales to working capital = 8 times, profit margin = 5 percent, net income available to common stockholders = $20 million, and current liabilities = $4 million. What is the firm's balance of current assets?

Bree's Tennis Supply's market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree's Tennis Supply's common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 3: Analyzing Financial Statements

If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?

Tops N Bottoms Corp. reported sales for 2018 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365-day year, how many days did Tops N Bottoms' inventory stay on the premises? How many times per year did Tops N Bottoms' inventory turn over?

Tierre'sTs, Inc. reported a debt to equity ratio of 3 times at the end of 2018. If the firm's total assets at year-end are $15 million, how much of their assets is financed with equity?

A firm has an ROA of 12 percent and an ROE of 52 percent. What is the firm's equity multiplier?

Which ratio assesses how efficiently a firm uses its fixed assets?

A firm reported a profit margin of 8.5 percent, total asset turnover of 0.85 times, debt-to-equity ratio of 0.90 times, net income of $550,000, and dividends paid to common stockholders of $100,000. The firm has no preferred stock outstanding. What is the firm's internal growth rate?

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent. What is the internal growth rate?

You have the following information on Universe It Ts, Inc.: sales to working capital = 10 times, profit margin = 25 percent, net income available to common stockholders = $3 million, and current liabilities = $1 million. What is the firm's balance of current assets?

Last year Café Creations, Inc. had an ROA of 25 percent, a profit margin of 12 percent, and sales of $4 million. What is Café Creations' total assets?

The term "spreading the financial statements" refers to

Last year, PJ's Ice Cream Parlours, Inc. reported an ROE = 12 percent. The firm's debt ratio was 40 percent, sales were $25 million, and the capital intensity ratio was 0.75 times. What is the net income for PJ's last year?

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

Lab R Doors' year-end price on its common stock is $40. The firm has total assets of $75 million, the debt ratio is 60 percent, there is no preferred stock, and there are 4 million shares of common stock outstanding. Calculate the market-to-book ratio for Lab R Doors.

Which of the following statements is correct?

A corporation has a total asset turnover of 2 times, ROA of 12 percent and EM of 1.17. What is this firm's profit margin and debt ratio?

Which statement is true?

You have the following information on Zip's Diner, Inc.: sales to working capital = 8 times, profit margin = 5 percent, net income available to common stockholders = $20 million, and current liabilities = $4 million. What is the firm's balance of current assets?

Bree's Tennis Supply's market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree's Tennis Supply's common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters