Question 1

Last year, Blakely's Fashions earned net income of $68,400 and had 12,000 shares of stock outstanding. The dividends per share were $2.20. What is the dividend payout ratio?

Accepted Answer

A)   32.98 percent
B)   34.00 percent
C)   38.60 percent
D)   40.21 percent
E)   44.14 percentF) A) and E)
G) C) and D)

Question 2

A common-size balance sheet helps financial managers determine:

Accepted Answer

A)   which customers are paying on a timely basis.
B)   if costs are increasing faster or slower than sales.
C)   if changes are occurring in a firm's mix of assets.
D)   if a firm is generating more or less sales per dollar of assets than in prior years.
E)   the rate at which the firm's dividends are changing.F) A) and B)
G) A) and E)

Question 3

Slightly Used Goods has cash of $2,150, 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)   0.08
B)   0.18
C)   0.32
D)   0.46
E)   0.51F) A) and B)
G) C) and D)

Question 4

The Medicine Cabinet has a return on equity of 18.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income?

Accepted Answer

A)   $85,608
B)   $113,875
C)   $134,316
D)   $142,311
E)   $149,897F) C) and D)
G) A) and B)

Question 5

Global Ventures has a return on equity of 9.8 percent, a retention ratio of 60 percent, and a profit margin of 4.5 percent. The company paid $378 in dividends and has net working capital of $100. Net fixed assets are $18,550 and current liabilities are $520. What is the total equity of the firm?

Accepted Answer

A)   $6,457
B)   $6,890
C)   $7,360
D)   $9,643
E)   $11,480F) A) and D)
G) B) and D)

Question 6

The Berry Patch has sales of $438,000, cost of goods sold of $369,000, depreciation of $37,400, and interest expense of $13,800. The tax rate is 35 percent. What is the times interest earned ratio?

Accepted Answer

A)   2.29
B)   3.46
C)   3.87
D)   4.38
E)   4.79F) A) and B)
G) D) and E)

Question 7

The Closet Shoppe has total sales of $713,200 and a profit margin of 5.8 percent. Currently, the firm has 12,500 shares outstanding. What are the earnings per share?

Accepted Answer

A)   $2.98
B)   $3.31
C)   $3.56
D)   $3.89
E)   $4.02F) A) and B)
G) C) and E)

Question 8

The Saw Mill has a return on assets of 6.1 percent, a total asset turnover rate of 1.8, and a debt-equity ratio of 1.6. What is the return on equity?

Accepted Answer

A)   4.26 percent
B)   9.76 percent
C)   12.28 percent
D)   15.86 percent
E)   19.03 percentF) A) and E)
G) C) and D)

Question 9

Explain why the DuPont identity is so useful to a financial manager.

Accepted Answer

Student answers will vary but a good ans...

Question 10

Which one of the following will increase the profit margin of a firm, all else 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 salesF) A) and B)
G) C) and E)

Question 11

Handy Hardware sells its inventory in 85 days, on average. Costs of goods sold for the year are $631,800. What is the average value of the firm's inventory?

Accepted Answer

A)   $114,706
B)   $123,506
C)   $147,132
D)   $161,096
E)   $182,513F) B) and E)
G) A) and D)

Question 12

A firm has an equity multiplier of 1.5. This means that the firm has a:

Accepted Answer

A)   debt-equity ratio of 0.67.
B)   debt-equity ratio of 0.33.
C)   total debt ratio of 0.50.
D)   total debt ratio of 0.67.
E)   total debt ratio of 0.33.F) C) and E)
G) A) and E)

Question 13

Swanton Foods has a book value per share of $12.68, earnings per share of $1.21, and a price-earnings ratio of 17.6. What is the market-to-book ratio?

Accepted Answer

A)   1.32
B)   1.68
C)   1.99
D)   2.47
E)   2.61F) B) and C)
G) B) and D)

Question 14

A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm:

Accepted Answer

A)   pays cash for its inventory.
B)   has more than half its current assets invested in inventory.
C)   has more cash than inventory.
D)   has more current liabilities than it does current assets.
E)   has positive net working capital.F) A) and C)
G) A) and B)

Question 15

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

Question 16

Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent and a debt-equity ratio of 0.55. What is the return on assets?

Accepted Answer

A)   3.89 percent
B)   4.56 percent
C)   6.67 percent
D)   12.86 percent
E)   13.33 percentF) C) and E)
G) D) and E)

Question 17

A firm has total assets of $523,100, current assets of $186,500, current liabilities of $141,000, and total debt of $215,000. What is the debt-equity ratio?

Accepted Answer

A)   0.48
B)   0.70
C)   1.10
D)   1.43
E)   2.13F) A) and B)
G) C) and D)

Question 18

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) C) and D)
G) B) and C)

Question 19

Peter's Motor Works has total assets of $689,400, long-term debt of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio?

Accepted Answer

A)   0.60
B)   0.91
C)   1.01
D)   1.67
E)   2.16F) B) and D)
G) C) and D)

Question 20

Which of the following are determinants of a firm's sustainable rate of growth? I. Amount of sales generated from each dollar invested in assets
II)  Amount of debt per dollar of equity
III)  Amount of current assets per dollar of current liabilities
IV)  Percent of net income distributed as dividends

Accepted Answer

A)   I and III only
B)   II and IV only
C)   I, II, and IV only
D)   II, III, and IV only
E)   I, II, III, and IVF) None of the above
G) B) and D)

Exam 3: Working With Financial Statements

The Medicine Cabinet has a return on equity of 18.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income?

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Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent and a debt-equity ratio of 0.55. What is the return on assets?

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Slightly Used Goods has cash of $2,150, 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?

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A common-size balance sheet helps financial managers determine:

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Swanton Foods has a book value per share of $12.68, earnings per share of $1.21, and a price-earnings ratio of 17.6. What is the market-to-book ratio?

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Explain why the DuPont identity is so useful to a financial manager.

Correct AnswerverifiedStudent answers will vary but a good ans...View AnswerShow Answer

The Closet Shoppe has total sales of $713,200 and a profit margin of 5.8 percent. Currently, the firm has 12,500 shares outstanding. What are the earnings per share?

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A firm has total assets of $523,100, current assets of $186,500, current liabilities of $141,000, and total debt of $215,000. What is the debt-equity ratio?

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A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm:

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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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Last year, Blakely's Fashions earned net income of $68,400 and had 12,000 shares of stock outstanding. The dividends per share were $2.20. What is the dividend payout ratio?

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Which of the following are determinants of a firm's sustainable rate of growth? I. Amount of sales generated from each dollar invested in assets II) Amount of debt per dollar of equity III) Amount of current assets per dollar of current liabilities IV) Percent of net income distributed as dividends

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The cash coverage ratio is used to evaluate the:

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Handy Hardware sells its inventory in 85 days, on average. Costs of goods sold for the year are $631,800. What is the average value of the firm's inventory?

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Global Ventures has a return on equity of 9.8 percent, a retention ratio of 60 percent, and a profit margin of 4.5 percent. The company paid $378 in dividends and has net working capital of $100. Net fixed assets are $18,550 and current liabilities are $520. What is the total equity of the firm?

Correct AnswerverifiedShow Answer

Peter's Motor Works has total assets of $689,400, long-term debt of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio?

Correct AnswerverifiedShow Answer

A firm has an equity multiplier of 1.5. This means that the firm has a:

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The Saw Mill has a return on assets of 6.1 percent, a total asset turnover rate of 1.8, and a debt-equity ratio of 1.6. What is the return on equity?

Correct AnswerverifiedShow Answer

The Berry Patch has sales of $438,000, cost of goods sold of $369,000, depreciation of $37,400, and interest expense of $13,800. The tax rate is 35 percent. What is the times interest earned ratio?

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

Correct AnswerverifiedShow Answer

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