Question 1

Which ratio measures the overall return on the firm's assets including financial leverage and taxes?

Accepted Answer

A)  ROA 
B)  ROE 
C)  basic earning power 
D)  profit margin

Question 2

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 3

You are evaluating the balance sheet for Blue Jays Corporation.From the balance sheet you find the following balances: cash and marketable securities = $200,000,accounts receivable = $800,000,inventory = $1,000,000,accrued wages and taxes = $250,000,accounts payable = $400,000,and notes payable = $300,000.What are Blue Jays' current ratio,quick ratio,and cash ratio,respectively?

Accepted Answer

A)  1.05263, 1.05263, 0.21053 
B)  2.10526, 1.05263, 0.21053 
C)  3.07692, 1.53846, 0.30769 
D)  3.07692, 1.05263, 0.30769

Question 4

Which of these ratios measure the extent to which the firm uses debt (or financial leverage)versus equity to finance its assets?

Accepted Answer

A)  debt management ratios 
B)  equity ratios 
C)  financial ratios 
D)  liquidity ratios

Question 5

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 6

Will's Wheels,Inc.reported a debt-to-equity ratio of 0.65 times at the end of 2018.If the firm's total debt at year-end was $5 million,how much equity does Will's Wheels have?

Accepted Answer

A)  $0.65 million 
B)  $3.25 million 
C)  $5 million 
D)  $7.69 million

Question 7

Last year Mocha Java,Inc.had an ROA of 10 percent,a profit margin of 5 percent,and sales of $25 million.What is Mocha Java's total assets?

Accepted Answer

A)  $0.125m. 
B)  $1.25m. 
C)  $12.5m. 
D)  $12m.

Question 8

A firm ended the year with an average collection period of 20 days.The firm's credit sales were $50 million.What is the firm's year-end balance in accounts receivable?

Accepted Answer

A)  $1.46 million 
B)  $2.50 million 
C)  $2.74 million 
D)  $4.00 million

Question 9

Tierre's Ts,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

Question 10

Which of the following refers to the amount of debt versus equity a firm has on its balance sheet?

Accepted Answer

A)  capital coverage 
B)  capital structure 
C)  debt structure 
D)  financial structure

Question 11

Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm's debt?

Accepted Answer

A)  fixed-charge coverage ratio 
B)  times interest earned 
C)  cash coverage ratio 
D)  ROA

Question 12

Which ratio measures the percentage of total assets financed by debt?

Accepted Answer

A)  debt 
B)  debt-to-equity 
C)  equity multiplier 
D)  liquidity

Question 13

Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times.If Tina's Track Supply's common stock is currently selling at $100 per share,what is the book value per share and earnings per share?

Accepted Answer

A)  $450, $1,050, respectively 
B)  $1,050, $450, respectively 
C)  $22.2222, $9.5238, respectively 
D)  $9.5238, $22.2222, respectively

Question 14

You have located the following information on Maize Company: debt ratio = 20 percent,capital intensity ratio = 1.25 times,profit margin = 12 percent,and dividend payout ratio = 10 percent.What is the sustainable growth rate for Maize?

Accepted Answer

A)  1.20 percent 
B)  10.10 percent 
C)  12.11 percent 
D)  73.26 percent

Question 15

Calculate the times interest earned ratio using the following information.Sales = $1.5 million,cost of goods sold = $800,000,depreciation expense = $100,000,addition to retained earnings = $85,000,dividends per share = $1.2,tax rate = 30 percent,and number of shares of common stock outstanding = 100,000.Assume the firm has no preferred stock.

Accepted Answer

A)  2.25 times 
B)  1.25 times 
C)  1.95 times 
D)  2.75 times

Question 16

Which of the following statements is true about return on equity (ROE)?

Accepted Answer

A)  It measures the return on common stockholders' investment in the assets of the firm. 
B)  The value of the firm's ROE is affected by net income. 
C)  The value of the firm's ROE is affected by the amount of financial leverage or debt that the firm uses. 
D)  All of these choices are correct.

Question 17

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

Question 18

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.

Question 19

Nicole's Neon Signs,Inc.reported a debt to equity ratio of 1.9 times at the end of 2018.If the firm's total assets at year-end are $100 million,how much of their assets is financed with equity?

Accepted Answer

A)  $34.48m 
B)  $65.52m 
C)  $52.63m 
D)  $100m

Question 20

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

Exam 3: Analyzing Financial Statements