Question 1

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate?

Accepted Answer

A)  1.04 
B)  1.08 
C)  1.13 
D)  1.19 
E)  1.26 
A)  1.04 
B)  1.08 
C)  1.13 
D)  1.19 
E)  1.26

Question 2

Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

Accepted Answer

A)  6.98 percent 
B)  7.20 percent 
C)  7.33 percent 
D)  7.54 percent 
E)  7.91 percent 
A)  6.98 percent 
B)  7.20 percent 
C)  7.33 percent 
D)  7.54 percent 
E)  7.91 percent

Question 3

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

Accepted Answer

A)  7.99 percent 
B)  8.57 percent 
C)  10.81 percent 
D)  16.87 percent 
E)  21.94 percent 
A)  7.99 percent 
B)  8.57 percent 
C)  10.81 percent 
D)  16.87 percent 
E)  21.94 percent

Question 4

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Accepted Answer

A)  1.58 
B)  1.69 
C)  1.75 
D)  1.87 
E)  1.92 
A)  1.58 
B)  1.69 
C)  1.75 
D)  1.87 
E)  1.92

Question 5

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve?

Accepted Answer

A)  4.68 percent 
B)  5.29 percent 
C)  6.33 percent 
D)  6.97 percent 
E)  8.19 percent 
A)  4.68 percent 
B)  5.29 percent 
C)  6.33 percent 
D)  6.97 percent 
E)  8.19 percent

Question 6

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

Accepted Answer

A)  8.91 percent 
B)  12.67 percent 
C)  18.28 percent 
D)  32.11 percent 
E)  41.56 percent 
A)  8.91 percent 
B)  12.67 percent 
C)  18.28 percent 
D)  32.11 percent 
E)  41.56 percent

Question 7

The Du Pont identity can be totally defined by which one of the following?

Accepted Answer

A)  Return on equity, total asset turnover, and equity multiplier 
B)  Equity multiplier and return on assets 
C)  Profit margin and return on equity 
D)  Total asset turnover, profit margin, and debt-equity ratio 
E)  Equity multiplier, return on assets, and profit margin 
A)  Return on equity, total asset turnover, and equity multiplier 
B)  Equity multiplier and return on assets 
C)  Profit margin and return on equity 
D)  Total asset turnover, profit margin, and debt-equity ratio 
E)  Equity multiplier, return on assets, and profit margin

Question 8

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

Accepted Answer

A)  12.46 percent 
B)  12.95 percent 
C)  13.33 percent 
D)  15.29 percent 
E)  16.11 percent 
A)  12.46 percent 
B)  12.95 percent 
C)  13.33 percent 
D)  15.29 percent 
E)  16.11 percent

Question 9

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

Accepted Answer

A)  Du Pont rate 
B)  External growth rate 
C)  Sustainable growth rate 
D)  Internal growth rate 
E)  Cash flow rate 
A)  Du Pont rate 
B)  External growth rate 
C)  Sustainable growth rate 
D)  Internal growth rate 
E)  Cash flow rate

Question 10

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

Accepted Answer

A)  2.76 percent 
B)  3.57 percent 
C)  4.90 percent 
D)  5.28 percent 
E)  6.46 percent 
A)  2.76 percent 
B)  3.57 percent 
C)  4.90 percent 
D)  5.28 percent 
E)  6.46 percent

Question 11

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

Accepted Answer

A)  Receivables turnover 
B)  Equity multiplier 
C)  Profit margin 
D)  Return on assets 
E)  Total asset turnover 
A)  Receivables turnover 
B)  Equity multiplier 
C)  Profit margin 
D)  Return on assets 
E)  Total asset turnover

Question 12

Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Accepted Answer

Ratios allow managers to compare the fin

Question 13

You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?

Accepted Answer

A)  Times interest earned = 1.7; debt-equity ratio = 1.6 
B)  Times interest earned = 1.5; debt-equity ratio = 1.2 
C)  Cash coverage ratio = 0.8; debt-equity ratio = 0.8 
D)  Cash coverage ratio = 2.6; debt-equity ratio = 0.3 
E)  Cash coverage ratio = 0.5; total debt ratio = 0.2 
A)  Times interest earned = 1.7; debt-equity ratio = 1.6 
B)  Times interest earned = 1.5; debt-equity ratio = 1.2 
C)  Cash coverage ratio = 0.8; debt-equity ratio = 0.8 
D)  Cash coverage ratio = 2.6; debt-equity ratio = 0.3 
E)  Cash coverage ratio = 0.5; total debt ratio = 0.2

Question 14

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio?

Accepted Answer

A)  3.45 percent 
B)  4.71 percent 
C)  14.34 percent 
D)  22.85 percent 
E)  24.04 percent 
A)  3.45 percent 
B)  4.71 percent 
C)  14.34 percent 
D)  22.85 percent 
E)  24.04 percent

Question 15

The Du Pont 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 IV 
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 IV

Question 16

Delmont Movers has a profit margin of 6.2 percent and net income of $48,900. What is the common-size percentage for the cost of goods sold if that expense amounted to $379,000 for the year?

Accepted Answer

A)  12.90 percent 
B)  23.50 percent 
C)  33.25 percent 
D)  41.06 percent 
E)  48.05 percent 
A)  12.90 percent 
B)  23.50 percent 
C)  33.25 percent 
D)  41.06 percent 
E)  48.05 percent

Question 17

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Accepted Answer

A)  10.63 percent 
B)  13.53 percent 
C)  25.15 percent 
D)  26.07 percent 
E)  28.33 percent 
A)  10.63 percent 
B)  13.53 percent 
C)  25.15 percent 
D)  26.07 percent 
E)  28.33 percent

Question 18

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Accepted Answer

A)  $860,333 
B)  $984,320 
C)  $1,088,500 
D)  $1,117,200 
E)  $1,257,480 
A)  $860,333 
B)  $984,320 
C)  $1,088,500 
D)  $1,117,200 
E)  $1,257,480

Question 19

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

Accepted Answer

A)  3.10 percent 
B)  5.23 percent 
C)  5.67 percent 
D)  8.21 percent 
E)  9.62 percent 
A)  3.10 percent 
B)  5.23 percent 
C)  5.67 percent 
D)  8.21 percent 
E)  9.62 percent

Question 20

The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity?

Accepted Answer

A)  3.48 percent 
B)  3.73 percent 
C)  8.01 percent 
D)  9.46 percent 
E)  13.61 percent 
A)  3.48 percent 
B)  3.73 percent 
C)  8.01 percent 
D)  9.46 percent 
E)  13.61 percent

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate?

Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve?

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

The Du Pont identity can be totally defined by which one of the following?

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

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

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio?

The Du Pont 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.

Delmont Movers has a profit margin of 6.2 percent and net income of $48,900. What is the common-size percentage for the cost of goods sold if that expense amounted to $379,000 for the year?

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters

Exam 3: Working With Financial Statements

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate?

Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, and a dividend payout ratio of 30 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the firm achieve?

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

The Du Pont identity can be totally defined by which one of the following?

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

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

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio?

The Du Pont 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.

Delmont Movers has a profit margin of 6.2 percent and net income of $48,900. What is the common-size percentage for the cost of goods sold if that expense amounted to $379,000 for the year?

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters