Question 1

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)  0.15; 1.02; 0.35
B)  0.15; 2.02; 0.35
C)  0.15; 0.98; 2.86
D)  0.16; 0.98; 0.35
E)  0.16; 1.02; 2.86F) All of the above
G) B) and D)

Question 2

Freedom Health Centers has total equity of $861,300,sales of $1.48 million,and a profit margin of 5.2 percent.What is the return on equity?

Accepted Answer

A)  5.82 percent
B)  6.49 percent
C)  7.18 percent
D)  8.68 percent
E)  8.94 percentF) A) and B)
G) A) and E)

Question 3

The T-shirt Hut successfully managed to reduce its general and administrative costs this year.This cost improvement will increase which of the following ratios?
I.Profit margin
II.Return on assets
III.Total asset turnover
IV.Return on equity

Accepted Answer

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

Question 4

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

Accepted Answer

A)  Decrease in the total asset turnover
B)  Decrease in the capital intensity ratio
C)  Increase in days' sales in receivables
D)  Decrease in the profit margin
E)  Decrease in the inventory turnover rateF) A) and B)
G) C) and D)

Question 5

Children's Place has a market-to-book ratio of 2.9,net income of $68,400,a book value per share of $37,and 45,000 shares of stock outstanding.What is the price-earnings ratio?

Accepted Answer

A)  24.34
B)  28.16
C)  55.10
D)  63.25
E)  70.59F) A) and D)
G) D) and E)

Question 6

Fred is the owner of a local feed store.Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has?

Accepted Answer

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

Question 7

The cash coverage ratio is used to evaluate the:

Accepted Answer

A)  liquidity of a firm.
B)  speed at which a firm generates cash.
C)  length of time that a firm can pay its bills if no additional cash becomes available.
D)  ability of a firm to pay the interest on its debt.
E)  relationship between the firm's cash balance and its current liabilities.F) B) and D)
G) C) and E)

Question 8

A firm has $42,900 in receivables and $211,800 in total assets.The total asset turnover rate is 1.40 and the profit margin is 5.2 percent.How long on average does it take the firm to collect its receivables?

Accepted Answer

A)  6.91 days
B)  9.45 days
C)  11.68 days
D)  31.25 days
E)  52.81 daysF) B) and D)
G) A) and B)

Question 9

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 the total asset turnover be?

Accepted Answer

A)  0.98
B)  1.06
C)  1.21
D)  1.44
E)  1.59F) C) and D)
G) B) and E)

Question 10

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 percentF) A) and D)
G) C) and E)

Question 11

Taylor,Inc.has sales of $11,898,total assets of $9,315,and a debt-equity ratio of 0.55.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)  $927.46F) A) and B)
G) C) and D)

Question 12

Which of the following will increase the sustainable rate of growth for a firm?
I.Decreasing the profit margin
II.Increasing the dividend payout ratio
III.Decreasing the capital intensity ratio
IV.Increasing the target debt-equity ratio

Accepted Answer

A)  I and II only
B)  III and IV only
C)  II and IV only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and E)
G) All of the above

Question 13

Last year,a firm earned $31,200 in net income on sales of $217,600.The company paid $8,500 in dividends.What is the dividend payout ratio?

Accepted Answer

A)  3.45 percent
B)  4.71 percent
C)  16.25 percent
D)  22.85 percent
E)  27.24 percentF) None of the above
G) C) and D)

Question 14

A firm has net income of $31,300,depreciation of $5,100,taxes of $14,600,and interest paid of $3,100.What is the cash coverage ratio?

Accepted Answer

A)  8.78
B)  10.10
C)  14.14
D)  16.32
E)  17.45F) All of the above
G) None of the above

Question 15

Earth Fare Foods has total assets of $229,800,net fixed assets of $71,500,long-term debt of $52,000,and total debt of $78,700.If inventory is $45,000,what is the current ratio?

Accepted Answer

A)  0.20
B)  0.46
C)  0.84
D)  1.18
E)  5.93F) C) and E)
G) None of the above

Question 16

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

Accepted Answer

A)  Price-earnings ratio
B)  Profit margin
C)  Equity multiplier
D)  Receivables turnover
E)  Quick ratioF) A) and D)
G) None of the above

Question 17

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 C)
G) A) and B)

Question 18

Tessler Farms has a return on equity of 12.71 percent,a debt-equity ratio of 0.75,and a total asset turnover of 0.9.What is the return on assets?

Accepted Answer

A)  7.26 percent
B)  8.06 percent
C)  13.67 percent
D)  15.24 percent
E)  17.41 percentF) A) and B)
G) B) and E)

Question 19

The After Life has sales of $428,300,total assets of $389,100,and a profit margin of 7.2 percent.What is the return on assets?

Accepted Answer

A)  6.30 percent
B)  6.54 percent
C)  6.83 percent
D)  7.01 percent
E)  7.93 percentF) D) and E)
G) A) and D)

Question 20

Wilson's Realty has total assets of $46,800,net fixed assets of $37,400,current liabilities of $6,100,and long-term liabilities of $24,600.What is the total debt ratio?

Accepted Answer

A)  0.41
B)  0.60
C)  0.66
D)  0.78
E)  0.86F) C) and D)
G) D) and E)

Exam 3: Working With Financial Statements

The cash coverage ratio is used to evaluate the:

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The After Life has sales of $428,300,total assets of $389,100,and a profit margin of 7.2 percent.What is the return on assets?

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Wilson's Realty has total assets of $46,800,net fixed assets of $37,400,current liabilities of $6,100,and long-term liabilities of $24,600.What is the total debt ratio?

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Tessler Farms has a return on equity of 12.71 percent,a debt-equity ratio of 0.75,and a total asset turnover of 0.9.What is the return on assets?

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Taylor,Inc.has sales of $11,898,total assets of $9,315,and a debt-equity ratio of 0.55.If its return on equity is 14 percent,what is its net income?

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The T-shirt Hut successfully managed to reduce its general and administrative costs this year.This cost improvement will increase which of the following ratios? I.Profit margin II.Return on assets III.Total asset turnover IV.Return on equity

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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?

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A firm has $42,900 in receivables and $211,800 in total assets.The total asset turnover rate is 1.40 and the profit margin is 5.2 percent.How long on average does it take the firm to collect its receivables?

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

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

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Last year,a firm earned $31,200 in net income on sales of $217,600.The company paid $8,500 in dividends.What is the dividend payout ratio?

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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 the total asset turnover be?

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A firm has net income of $31,300,depreciation of $5,100,taxes of $14,600,and interest paid of $3,100.What is the cash coverage ratio?

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Earth Fare Foods has total assets of $229,800,net fixed assets of $71,500,long-term debt of $52,000,and total debt of $78,700.If inventory is $45,000,what is the current ratio?

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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.

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Fred is the owner of a local feed store.Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has?

Correct AnswerverifiedShow Answer

Which of the following will increase the sustainable rate of growth for a firm? I.Decreasing the profit margin II.Increasing the dividend payout ratio III.Decreasing the capital intensity ratio IV.Increasing the target debt-equity ratio

Correct AnswerverifiedShow Answer

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

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Freedom Health Centers has total equity of $861,300,sales of $1.48 million,and a profit margin of 5.2 percent.What is the return on equity?

Correct AnswerverifiedShow Answer

Children's Place has a market-to-book ratio of 2.9,net income of $68,400,a book value per share of $37,and 45,000 shares of stock outstanding.What is the price-earnings ratio?

Correct AnswerverifiedShow Answer

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