Question 1

A fire has destroyed a large percentage of the financial records of the Strongwell Co.You have the task of piecing together information in order to release a financial report.You have found the return on equity to be 13.8 percent.Sales were $979,000, the total debt ratio was .42, and total debt was $548,000.What is the return on assets?

Accepted Answer

A)  6.92 percent
B)  8.00 percent
C)  8.45 percent
D)  9.03 percent
E)  9.29 percent B

Question 2

Turner's Store had a profit margin of 6.8 percent, sales of $498,200, and total assets of $542,000.If management set a goal of increasing the total asset turnover to 1.10 times, what would the new sales figure need to be, assuming no increase in total assets?

Accepted Answer

A)  $467,185
B)  $492,727
C)  $488,500
D)  $596,200
E)  $657,480 D

Question 3

Which of the following is true regarding the Internal Growth Rate?

Accepted Answer

A)  It represents the maximum possible growth rate a firm can achieve without external equity financing while maintaining a constant debt-equity ratio.
B)  It represents the maximum possible growth rate a firm can achieve without external financing of any kind.
C)  It represents the potential growth of the company based only on internal management controls.
D)  It represents the potential growth of the company after the addition of fixed assets.
E)  It represents the potential growth of the company if more common stock is issued and sold. A

Question 4

Mike's Place has total assets of $152,080, a debt-equity ratio of .62, and net income of $14,342 What is the return on equity?

Accepted Answer

A)  13.48 percent
B)  13.73 percent
C)  15.74 percent
D)  15.28 percent
E)  14.61 percent

Question 5

The Saw Mill has a return on assets of 7.92 percent, a total asset turnover rate of 1.18, and a debt-equity ratio of 1.46.What is the return on equity?

Accepted Answer

A)  14.26 percent
B)  13.64 percent
C)  12.28 percent
D)  19.48 percent
E)  12.03 percent

Question 6

Which one of the following will increase the profit margin of a firm, all else held constant?

Accepted Answer

A)  Increase in interest paid
B)  Increase in fixed costs
C)  Increase in depreciation expense
D)  Decrease in the tax rate
E)  Decrease in sales

Question 7

Delmont Movers has a profit margin of 7.1 percent and net income of $63,700.What is the common-size percentage for the cost of goods sold if that expense amounted to $522,600 for the year?

Accepted Answer

A)  12.19 percent
B)  23.50 percent
C)  53.25 percent
D)  61.06 percent
E)  58.25 percent

Question 8

Jaminda's Holistic Healing has sales of $980,000, cost of goods sold of $765,250, and accounts receivable of $88,640.How long on average does it take the firm's customers to pay for their purchases? Assume a 365-day year.

Accepted Answer

A)  8.63 days
B)  15.5 days
C)  32.56 days
D)  33.01 days
E)  42.56 days

Question 9

A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-term debt of $109,500, and accounts receivable of $16,600.What is the common-size percentage of the equity?

Accepted Answer

A)  70.60 percent
B)  70.12 percent
C)  66.87 percent
D)  42.08 percent
E)  68.75 percent

Question 10

KBJ has total assets of $613,000.There are 21,000 shares of stock outstanding with a market value of $13 a share.The firm has a profit margin of 6.2 percent and a total asset turnover of 1.08.What is the price-earnings ratio?

Accepted Answer

A)  6.38
B)  7.99
C)  6.65
D)  5.12
E)  7.41

Question 11

Use the following financial information to answer this question.  
What are the values of the three components of the DuPont identity? Use ending balance sheet values.

Accepted Answer

A)  .1168; 1.01; .5241
B)  .1153; 1.01; .4259
C)  .1153; 1.01; 1.9080
D)  .1168; .99; .5241
E)  .1153; .99; 1.9080

Question 12

Jessica's Sports Wear has $38,100 in receivables and $523,700 in total assets.The total asset turnover rate is 1.17 and the profit margin is 7.3 percent.How long on average does it take to collect the receivables? Assume a 365-day year.

Accepted Answer

A)  26.91 days
B)  19.45 days
C)  11.68 days
D)  31.07 days
E)  22.70 days

Question 13

The Conference Center has cash of $7800, accounts receivable of $15600, inventory of $48,850, and net working capital of $ 5,000.What is the cash ratio?

Accepted Answer

A)  ..08
B)  ..12
C)  .15
D)  .42
E)  .45

Question 14

Fresh Foods has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.43, and a profit margin of 4.8 percent.What is the equity multiplier?

Accepted Answer

A)  .30
B)  .43
C)  1.93
D)  2.43
E)  2.30

Question 15

Saki Kale Farms has net income of $96,320, total assets of $975,200, total equity of $555,280, and total sales of $1,141,275.What is the common-size percentage for the net income?

Accepted Answer

A)  7.90 percent
B)  8.44 percent
C)  13.88 percent
D)  48.65 percent
E)  74.57 percent

Question 16

The Wood Shop generates $.97 in sales for every $1 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

Question 17

Gorilla Movers has sales of $645,560, cost of goods sold of $425,890, depreciation of $32,450, and interest expense of $12,500.The tax rate is 30 percent.What is the times interest earned ratio?

Accepted Answer

A)  14.98
B)  12.75
C)  11.63
D)  6.25
E)  2.75

Question 18

Western Hardwoods has total equity of $318,456, a profit margin of 3.79 percent, an equity multiplier of 1.68, and a total asset turnover of .97.What is the amount of the firm's sales?

Accepted Answer

A)  $518,956
B)  $473,550
C)  $195,420
D)  $190,839
E)  $639,440

Question 19

Which one of these transactions will increase the liquidity of a firm?

Accepted Answer

A)  Cash purchase of new production equipment
B)  Payment of an account payable
C)  Cash purchase of inventory
D)  Credit sale of inventory at cost
E)  Cash payment of employee wages

Question 20

Taylor, Inc.has sales of $11,898, total assets of $9,315, and a debt-equity ratio of .55.If its return on equity is 14 percent, what is its net income?

Accepted Answer

A)  $841.35
B)  $887.16
C)  $904.10
D)  $911.16
E)  $927.46

Exam 3: Working With Financial Statements