Question 1

Allyba Dance Supply has total assets of $550,000 and total debt of $295,000.What is the equity multiplier?

Accepted Answer

A) .46 
B) 1.0 
C) 1.075 
D) 1.86 
E) 2.16

Question 2

Leon is the owner of a corner store.Which ratio should he compute if he wants to know how long the store can pay its bills given its current level of cash and accounts receivable? Assume all receivables are collectible when due.

Accepted Answer

A) Current ratio 
B) Debt ratio 
C) Cash coverage ratio 
D) Cash ratio 
E) Quick ratio

Question 3

Last year, Teresa's Fashions earned $2.03 per share and had 15,000 shares of stock outstanding.The firm paid a total of $16,672 in dividends.What is the retention ratio?

Accepted Answer

A) 45.25 percent 
B) 64.07 percent 
C) 52.00 percent 
D) 40.21 percent 
E) 54.75 percent

Question 4

Whitt's BBQ has sales of $1,318,000, a profit margin of 7.4 percent, and a capital intensity ratio of .78.What is the total asset turnover rate?

Accepted Answer

A) 1.04 
B) 1.08 
C) 1.13 
D) 1.43 
E) 1.28

Question 5

Peterboro Supply has a current accounts receivable balance of $391,648.Credit sales for the year just ended were $5,338,411.How long did it take on average for credit customers to pay off their accounts during the past year? Assume a 365-day year.

Accepted Answer

A) 24.78 days 
B) 26.78 days 
C) 29.09 days 
D) 31.15 days 
E) 33.33 days

Question 6

Donovan's would like to increase its internal rate of growth.Decreasing which one of the following will help the firm achieve its goal?

Accepted Answer

A) Return on assets 
B) Net income 
C) Retention ratio 
D) Dividend payout ratio 
E) Return on equity

Question 7

SRC, Inc., sells its inventory in an average of 43 days and collects its receivables in 3.6 days, on average.What is the inventory turnover rate? Assume a 365-day year.

Accepted Answer

A) 8.49 
B) 7.29 
C) 8.68 
D) 10.18 
E) 7.13

Question 8

Suppose Healey Corp.has the following characteristics:
Shares outstanding: 68,500
Current share price: $13.50
Total debt: $438,500
Total cash: $63,100
Based on the formula above, what is the enterprise value of this company?

Accepted Answer

A) $948,850 
B) $1,300,150 
C) $1,500,400 
D) $880,900 
E) $1,125,600

Question 9

Which one of these statements is true concerning the price-earnings (PE) ratio?

Accepted Answer

A) A high PE ratio may indicate that a firm is expected to grow significantly. 
B) A PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of current earnings. 
C) PE ratios are unaffected by the accounting methods employed by a firm. 
D) The PE ratio is classified as a profitability ratio. 
E) The PE ratio is a constant value for each firm.

Question 10

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?

Accepted Answer

A) No new external financing of any kind 
B) No new debt but additional external equity equal to the increase in retained earnings 
C) New debt and external equity in equal proportions 
D) New debt and external equity, provided the debt-equity ratio remains constant 
E) No new external equity and a constant debt-equity ratio

Question 11

The Inside Door has total debt of $208,600, total equity of $343,560, and a return on equity of 13.27 percent.What is the return on assets?

Accepted Answer

A) 9.14 percent 
B) 8.26 percent 
C) 11.45 percent 
D) 9.61 percent 
E) 9.48 percent

Question 12

A firm has sales of $811,000 for the year.The profit margin is 5.1 percent and the retention ratio is 56 percent.What is the common-size percentage for the dividends paid?

Accepted Answer

A) 1.99 percent 
B) 2.86 percent 
C) 1.21 percent 
D) 2.24 percent 
E) 1.42 percent

Question 13

Healthy Foods has a book value per share of $32.68, earnings per share of $3.09, and a price-earnings ratio of 16.8.What is the market-to-book ratio?

Accepted Answer

A) 1.08 
B) 1.59 
C) 1.99 
D) 2.47 
E) 2.16

Question 14

BR Trucking has total sales of $911,300, a total asset turnover of 1.1, and a profit margin of 5.87 percent.Currently, the firm has 18,500 shares outstanding.What are the earnings per share?

Accepted Answer

A) $2.92 
B) $2.97 
C) $2.86 
D) $2.58 
E) $2.89

Question 15

Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?

Accepted Answer

A) A decrease in the total asset turnover 
B) A decrease in the capital intensity ratio 
C) An increase in days' sales in receivables 
D) A decrease in the profit margin 
E) A decrease in the inventory turnover rate

Question 16

A firm has total assets of $638,727, current assets of $203,015, current liabilities of $122,008, and total debt of $348,092.What is the debt-equity ratio?

Accepted Answer

A) 1.03 
B) 1.20 
C) 1.31 
D) 1.43 
E) .87

Question 17

Philippe Organic Farms has total assets of $689,400, long-term debt of $198,375, total equity of $364.182, net fixed assets of $512,100, and sales of $1,021,500.The profit margin is 6.2 percent.What is the current ratio?

Accepted Answer

A) ..95 
B) .1.12 
C) 1.26 
D) 1.40 
E) 1.50

Question 18

Al's Markets earns $.12 in profit for every $1 of equity and borrows $.65 for every $1 of equity.What is the firm's return on assets?

Accepted Answer

A) 12.00 percent 
B) 7.27 percent 
C) 15.15 percent 
D) 13.75 percent 
E) 8.33 percent

Question 19

Lookin' Up earns $.094 in profit on every $1 of sales and has $1.21 in assets for every $1 of sales.The firm pays out 45 percent of its profits to its shareholders.What is the internal growth rate?

Accepted Answer

A) 6.37 percent 
B) 2.76 percent 
C) 3.82 percent 
D) 4.46 percent 
E) 2.65 percent

Question 20

Which one of the following is a measure of long-term solvency?

Accepted Answer

A) Price-earnings ratio 
B) Profit margin 
C) Cash coverage ratio 
D) Receivables turnover 
E) Quick ratio

Exam 3: Working With Financial Statements