Question 1

Which of these ratios show the combined effects of liquidity, asset management, and debt management on the overall operation results of the firm?

Accepted Answer

A) Liquidity 
B) Coverage 
C) Financial 
D) Profitability

Question 2

Oasis Products, Inc. has current liabilities = $10 million, current ratio = 1.5 times, inventory turnover ratio = 12 times, average collection period = 20 days, and sales = $100 million. What is the value of their cash and marketable securities?

Accepted Answer

A) $1,187,215 
B) $8,333,333 
C) $15,000,000 
D) $17,146,188

Question 3

Rachets R Us Corp. reported sales for 2013 of $200,000. Rachets R Us listed $25,000 of inventory on its balance sheet. Using a 365-day year, how many days did Rachets R Us's inventory stay on the premises? How many times per year did Rachets R Us's inventory turnover?

Accepted Answer

A) 0.125 days, 8 times, respectively 
B) 0.125 days, 5 times, respectively 
C) 45.625 days, 8 times, respectively 
D) 45.625 days, 5 times respectively

Question 4

A firm reported an ROE of 19 percent. The firm's debt ratio was 45 percent, sales were $12 million, and the capital intensity ratio was 1.1 times. Calculate the net income for the firm.

Accepted Answer

A) 0.34 million 
B) 1.38 million 
C) 1.93 million 
D) 2.06 million

Question 5

A firm reported year-end sales of $20 million. It listed $7 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm's inventory stay on the premises?

Accepted Answer

A) 127.75 days 
B) 157.75 days 
C) 97.75 days 
D) 87.75 days

Question 6

Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent. What is the internal growth rate?

Accepted Answer

A) 4.75 percent 
B) 0.50 percent 
C) 50.00 percent 
D) 52.63 percent

Question 7

Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?

Accepted Answer

A) Times interest earned 
B) Basic earning power 
C) Fixed charge coverage ratio 
D) ROA

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

Question 9

Ernie's Mufflers has current liabilities of $45 million. Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets. Ernie's current ratio = 1.5 times. What is the value of inventory listed on the firm's balance sheet?

Accepted Answer

A) $13.75m 
B) $20.25m 
C) $30.375m 
D) $33.75m

Question 10

You are thinking of investing in Ski Sports, Inc. You have only the following information on the firm at year-end 2013: net income = $50,000, total debt = $1 million, and debt ratio = 70 percent. What is Ski's ROE for 2013?

Accepted Answer

A) 2.94 percent 
B) 3.49 percent 
C) 7.14 percent 
D) 11.67 percent

Question 11

Which of these statements is true?

Accepted Answer

A) The age of a firm's cash will affect the current ratio level. 
B) The age of a firm's accounts receivable will affect the current ratio level. 
C) The age of a firm's fixed assets will affect the fixed asset turnover ratio level. 
D) The age of a firm's fixed assets will affect the current ratio level.

Question 12

Which of the following is the maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings?

Accepted Answer

A) Internal growth rate 
B) Retained earnings growth rate 
C) Sustainable growth rate 
D) Weighted growth rate

Question 13

Which of these is NOT considered a coverage ratio?

Accepted Answer

A) Cash coverage ratio 
B) Current ratio 
C) Fixed-charge coverage ratio 
D) Times interest earned

Question 14

Paige's Purses, Inc. reported a debt to equity ratio of 2.4 times at the end of 2013. If the firm's total assets at year-end are $27 million, how much of their assets is financed with equity?

Accepted Answer

A) $7.94m 
B) $11.25m 
C) $19.06m 
D) $64.8m

Question 15

A firm ended the year with an average collection period of 50 days. The firm's credit sales were $11 million. What is the firm's year-end balance in accounts receivable?

Accepted Answer

A) $1.27 million 
B) $0.85 million 
C) $1.51 million 
D) $2.05 million

Question 16

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

Question 17

Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent. What is the internal growth rate?

Accepted Answer

A) 1.19 percent 
B) 13.64 percent 
C) 25.40 percent 
D) 33.33 percent

Question 18

Which ratio measures a firm's ability to pay short-term obligations with its available cash and market securities?

Accepted Answer

A) Cash 
B) Current 
C) Internal-growth 
D) Quick or acid test

Question 19

Lab R Doors' year-end price on its common stock is $40. The firm has a profit margin of 10 percent, total assets of $30 million, a total asset turnover ratio of 2, no preferred stock, and there are 4 million shares of common stock outstanding. What is the PE ratio for Lab R Doors?

Accepted Answer

A) 0.375 
B) 0.750 
C) 6.667 
D) 26.667

Question 20

Which of the following statements is correct?

Accepted Answer

A) A low average payment period and a high accounts payable turnover are a sign of good management. 
B) A high average payment period and a low accounts payable turnover are a sign of good management. 
C) A high average payment period and a high accounts payable turnover are a sign of good management. 
D) A low average payment period and a low accounts payable turnover are a sign of good management.

Exam 3: Analyzing Financial Statements