Question 1

Skylar's Bed and Breakfast has $126,500 in total assets, depreciation of 3,500, and interest of $1,850.The total asset turnover rate is 1.02.Earnings before interest and taxes are equal to 24 percent of sales.What is the cash coverage ratio?

Accepted Answer

A)   9.37
B)  16.74
C)  18.63
D)  20.72
E)  22.82F) C) and D)
G) B) and D)

Question 2

Sunshine Rentals has a debt-equity ratio of .67.The return on assets is 8.1 percent, and total equity is $595,000.What is the net income?

Accepted Answer

A)  $82,147.09
B)  $81,311.29
C)  $80,485.65
D)  $78,887.02
E)  $83,013.69F) C) and D)
G) A) and B)

Question 3

Builder's Outlet just hired a new chief financial officer.To get a feel for the company, she wants to compare the firm's sales and costs over the past three years to determine if any trends are present and also determine where the firm might need to make changes.Which one of the following statements will best suit her purposes?

Accepted Answer

A)  Income statement
B)  Balance sheet
C)  Common-size income statement
D)  Common-size balance sheet
E)  Statement of cash flowsF) D) and E)
G) A) and B)

Question 4

Lawler's BBQ has sales of $311,800, a profit margin of 3.9 percent, and dividends of $4,500.What is the plowback ratio?

Accepted Answer

A)  46.32 percent
B)  49.78 percent
C)  50.23 percent
D)  58.09 percent
E)  62.99 percentF) A) and D)
G) B) and C)

Question 5

Prisqua Rentals has inventory of $147,500, equity of $320,000, total assets of $658,800, and sales of $800,780.What is the common-size percentage for the inventory account?

Accepted Answer

A)  15.07 percent
B)  18.42 percent
C)  20.36 percent
D)  22.39 percent
E)  39.96 percentF) C) and E)
G) All of the above

Question 6

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?

Accepted Answer

A)  DuPont rate
B)  External growth rate
C)  Sustainable growth rate
D)  Internal growth rate
E)  Cash flow rateF) A) and B)
G) C) and D)

Question 7

Which one of the following statements is correct?

Accepted Answer

A)  Peer group analysis is easier when a firm is a conglomerate versus when it has only a single line of business.
B)  Peer group analysis is easier when seasonal firms have different fiscal years.
C)  Peer group analysis is simplified when firms use varying methods of depreciation.
D)  Comparing results across geographic locations is easier since all countries now use a common set of accounting standards.
E)  Adjustments have to be made when comparing the income statements of firms that use different methods of accounting for inventory.F) C) and D)
G) B) and C)

Question 8

Common-size financial statements present all balance sheet account values as a percentage of:

Accepted Answer

A)  the forecasted budget.
B)  sales.
C)  total equity.
D)  total assets.
E)  last year's account value.F) A) and B)
G) A) and C)

Question 9

Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends.Given this, the percentage shown on a common-size income statement for the dividend account will:

Accepted Answer

A)  remain constant over time.
B)  be equal to the dividend amount divided by the net income.
C)  vary in direct relation to the net profit percentage.
D)  vary in direct relation to changes in the sales level.
E)  vary but not in direct relation to any other variable.F) None of the above
G) A) and D)

Question 10

A firm has net income of $4,238 and interest expense of $898.The tax rate is 35 percent.What is the firm's times interest earned ratio?

Accepted Answer

A)  7.33
B)  7.26
C)  5.38
D)  8.26
E)  9.33F) All of the above
G) A) and B)

Question 11

Tony's Machinery has total equity of $815,280, long-term debt of $391,900, net working capital of $49,500, and total assets of $1,292,485.What is the total debt ratio?

Accepted Answer

A)  ..50
B)  .37
C)  ..64
D)  ..46
E)  ..60F) A) and E)
G) A) and D)

Question 12

A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent.The current profit margin is 7.5 percent and the firm uses no external financing sources.What must be the total asset turnover?

Accepted Answer

A)  .98
B)  1.06
C)  1.21
D)  1.44
E)  1.59F) B) and E)
G) C) and D)

Question 13

Gently Used Goods has cash of $2,950, inventory of $28,470, fixed assets of $9,860, accounts payable of $11,900, and accounts receivable of $4,660.What is the cash ratio?

Accepted Answer

A)  .08
B)  .25
C)  .30
D)  .46
E)  .51F) C) and D)
G) B) and D)

Question 14

The Dry Dock has inventory of $431,700, accounts payable of $94,200, cash of $51,950, and accounts receivable of $103,680.What is the cash ratio?

Accepted Answer

A)  .64
B)  .55
C)  .53
D)  .98
E)  1.34F) B) and E)
G) None of the above

Question 15

The equity multiplier is equal to:

Accepted Answer

A)  one plus the debt-equity ratio.
B)  one plus the total asset turnover.
C)  total debt divided by total equity.
D)  total equity divided by total assets.
E)  one divided by the total asset turnover.F) A) and C)
G) A) and B)

Question 16

Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500.The dividend payout ratio is .30.What is the internal growth rate?

Accepted Answer

A)  2.32 percent
B)  3.57 percent
C)  5.60 percent
D)  2.87 percent
E)  4.94 percentF) C) and E)
G) A) and E)

Question 17

The Donut Hut has sales of $68,000, current assets of $11,300, net income of $5,100, net fixed assets of $54,900, total debt of $23,800, and dividends of $800.What is the sustainable growth rate?

Accepted Answer

A)  10.48 percent
B)  11.29 percent
C)  11.79 percent
D)  12.08 percent
E)  12.39 percentF) B) and D)
G) A) and B)

Question 18

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06.What is the return on equity?

Accepted Answer

A)  18.91 percent
B)  12.67 percent
C)  18.28 percent
D)  22.11 percent
E)  21.55 percentF) C) and D)
G) B) and D)

Question 19

The DuPont identity can be used to help a financial manager determine the:
I.degree of financial leverage used by a firm.
II.operating efficiency of a firm.
III.utilization rate of a firm's assets.
IV.rate of return on a firm's assets.

Accepted Answer

A)  II and III only
B)  I and III only
C)  II, III, and IV only
D)  I, II, and III only
E)  I, II, III, and IVF) B) and D)
G) A) and C)

Exam 3: Working With Financial Statements

Common-size financial statements present all balance sheet account values as a percentage of:

Correct Answer
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A firm has net income of $4,238 and interest expense of $898.The tax rate is 35 percent.What is the firm's times interest earned ratio?

Correct Answer
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Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends.Given this, the percentage shown on a common-size income statement for the dividend account will:

Correct Answer
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Gently Used Goods has cash of $2,950, inventory of $28,470, fixed assets of $9,860, accounts payable of $11,900, and accounts receivable of $4,660.What is the cash ratio?

Correct Answer
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A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent.The current profit margin is 7.5 percent and the firm uses no external financing sources.What must be the total asset turnover?

Correct Answer
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Sunshine Rentals has a debt-equity ratio of .67.The return on assets is 8.1 percent, and total equity is $595,000.What is the net income?

Correct Answer
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Prisqua Rentals has inventory of $147,500, equity of $320,000, total assets of $658,800, and sales of $800,780.What is the common-size percentage for the inventory account?

Correct Answer
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Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500.The dividend payout ratio is .30.What is the internal growth rate?

Correct Answer
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The DuPont identity can be used to help a financial manager determine the: I.degree of financial leverage used by a firm. II.operating efficiency of a firm. III.utilization rate of a firm's assets. IV.rate of return on a firm's assets.

Correct Answer
verified

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?

Correct Answer
verified

Skylar's Bed and Breakfast has $126,500 in total assets, depreciation of 3,500, and interest of $1,850.The total asset turnover rate is 1.02.Earnings before interest and taxes are equal to 24 percent of sales.What is the cash coverage ratio?

Correct Answer
verified

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06.What is the return on equity?

Correct Answer
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The equity multiplier is equal to:

Correct Answer
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Tony's Machinery has total equity of $815,280, long-term debt of $391,900, net working capital of $49,500, and total assets of $1,292,485.What is the total debt ratio?

Correct Answer
verified

Correct Answer
verified

The Donut Hut has sales of $68,000, current assets of $11,300, net income of $5,100, net fixed assets of $54,900, total debt of $23,800, and dividends of $800.What is the sustainable growth rate?

Correct Answer
verified

Lawler's BBQ has sales of $311,800, a profit margin of 3.9 percent, and dividends of $4,500.What is the plowback ratio?

Correct Answer
verified

Which one of the following statements is correct?

Correct Answer
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The Dry Dock has inventory of $431,700, accounts payable of $94,200, cash of $51,950, and accounts receivable of $103,680.What is the cash ratio?

Correct Answer
verified

Exam 3: Working With Financial Statements

Common-size financial statements present all balance sheet account values as a percentage of:

Correct AnswerverifiedShow Answer

A firm has net income of $4,238 and interest expense of $898.The tax rate is 35 percent.What is the firm's times interest earned ratio?

Correct AnswerverifiedShow Answer

Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends.Given this, the percentage shown on a common-size income statement for the dividend account will:

Correct AnswerverifiedShow Answer

Gently Used Goods has cash of $2,950, inventory of $28,470, fixed assets of $9,860, accounts payable of $11,900, and accounts receivable of $4,660.What is the cash ratio?

Correct AnswerverifiedShow Answer

A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent.The current profit margin is 7.5 percent and the firm uses no external financing sources.What must be the total asset turnover?

Correct AnswerverifiedShow Answer

Sunshine Rentals has a debt-equity ratio of .67.The return on assets is 8.1 percent, and total equity is $595,000.What is the net income?

Correct AnswerverifiedShow Answer

Prisqua Rentals has inventory of $147,500, equity of $320,000, total assets of $658,800, and sales of $800,780.What is the common-size percentage for the inventory account?

Correct AnswerverifiedShow Answer

Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500.The dividend payout ratio is .30.What is the internal growth rate?

Correct AnswerverifiedShow Answer

The DuPont identity can be used to help a financial manager determine the: I.degree of financial leverage used by a firm. II.operating efficiency of a firm. III.utilization rate of a firm's assets. IV.rate of return on a firm's assets.

Correct AnswerverifiedShow Answer

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?

Correct AnswerverifiedShow Answer

Skylar's Bed and Breakfast has $126,500 in total assets, depreciation of 3,500, and interest of $1,850.The total asset turnover rate is 1.02.Earnings before interest and taxes are equal to 24 percent of sales.What is the cash coverage ratio?

Correct AnswerverifiedShow Answer

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06.What is the return on equity?

Correct AnswerverifiedShow Answer

The equity multiplier is equal to:

Correct AnswerverifiedShow Answer

Tony's Machinery has total equity of $815,280, long-term debt of $391,900, net working capital of $49,500, and total assets of $1,292,485.What is the total debt ratio?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Donut Hut has sales of $68,000, current assets of $11,300, net income of $5,100, net fixed assets of $54,900, total debt of $23,800, and dividends of $800.What is the sustainable growth rate?

Correct AnswerverifiedShow Answer

Lawler's BBQ has sales of $311,800, a profit margin of 3.9 percent, and dividends of $4,500.What is the plowback ratio?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

The Dry Dock has inventory of $431,700, accounts payable of $94,200, cash of $51,950, and accounts receivable of $103,680.What is the cash ratio?

Correct AnswerverifiedShow Answer

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