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Book/movie review
22/08/2022
Ch. 3
Company J and Company K each recently reported the same earnings per share (EPS). Company J’s stock, however, trades at a higher price. Which of the following statements is correct?
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Question 2 of 20 |
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Which of the following statements is correct?
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Question 3 of 20 |
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Which of the following actions can a firm take to increase its current ratio?
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Question 4 of 20 |
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Which of the following actions will cause an increase in the quick ratio in the short run?
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Question 5 of 20 |
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Company A is financed with 90 percent debt, whereas Company B, which has the same amount of total assets, is financed entirely with equity. Both companies have a marginal tax rate of 35 percent. Which of the following statements is correct?
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Question 6 of 20 |
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The Wilson Corporation has the following relationships:
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Sales/Total assets |
2.0 |
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Return on assets (ROA) |
4% |
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Return on equity (ROE) |
6% |
What is Wilson’s profit margin and debt ratio?
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Q Corp. has a basic earnings power (BEP) ratio of 15 percent, and has a times interest earned (TIE) ratio of 6. Total assets are $100,000. The corporate tax rate is 40 percent. What is Q Corp.’s return on assets (ROA)?
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Kansas Office Supply had $24,000,000 in sales last year. The company’s net income was $400,000. Its total assets turnover was 6.0. The company’s ROE was 15 percent. The company is financed entirely with debt and common equity. What is the company’s debt ratio?
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E. e. 0.66 |
Question 9 of 20= Inc.
Net income = $200,000
Earnings per share = $2.00
Stockholders’ equity = $2,000,000
Market/Book ratio = 0.20
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A. a. $20.00 |
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B. b. $ 8.00 |
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C. c. $ 4.00 |
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D. d. $ 2.00 |
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E. e. $ 1.00 |
Taft Technologies has the following relationships:
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annual sales |
$1,200,000 |
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current liabilities |
$375,000 |
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days sales outstanding(DSO)(360-day year) |
40 |
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Inventory Turnover Ratio |
4.8 |
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current ratio |
1.2 |
The company’s current assets consist of cash, inventories, and accounts receivable. How much cash does Taft have on its balance sheet?
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A. -$ 8,333 |
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B. $ 66,667 |
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C. $125,000 |
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D. $200,000 |
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E. $316,667 |
Info Technics Inc. has an equity multiplier of 2.50. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio?
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A. a. 51.20% |
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B. b. 26.00% |
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C. c. 39.36% |
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D. d. 65.00% |
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E. e. 60.00% |
Cutler Enterprises has current assets equal to $5 million. The company’s current ratio is 1.25, and its quick ratio is 0.75. What is the firm’s level of current liabilities (in millions)?
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A. a. $2.85 |
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B. b. $3.0 |
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C. c. $4.0 |
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D. d. $0.9 |
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E. e. 1.9 |
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Question 13 of 20 |
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Lewis Inc. has sales of $3,600,000 per year, all of which are credit sales. Its days sales outstanding is 42 days. What is its average accounts receivable balance? Assume 360 days per year.
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A. a. $238,090 |
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B. b. $420,000 |
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C. c. $280,000 |
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D. d. $386,000 |
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E. e. $400,000 |
A firm has total interest charges of $20,000 per year, sales of $2,800,000, a tax rate of 40 percent, and a profit margin of 6 percent. What is the firm’s times-interest-earned ratio?
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A. a. 15 |
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B. b. 12.5 |
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C. c. 11.5 |
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D. d. 15.8 |
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E. e. 16 |
A fire has destroyed many of the financial records at Anderson Associates. You are assigned to piece together information to prepare a financial report. You have found that the firm’s return on equity is 12 percent and its debt ratio is 0.20. What is its return on assets?
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A. a. 6.40% |
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B. b. 4.85% |
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C. c. 9.60% |
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D. d. 8.50% |
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E. e. 6.90% |
Rowe and Company has a debt ratio of 0.20, a total assets turnover of 0.25, and a profit margin of 10 percent. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 14 percent and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14 percent profit margin, is required to double the return on equity?
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A. a. 0.50 |
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B. b. 0.56 |
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C. c. 0.88 |
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D. d. 0.78 |
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E. e. 0.44 |
Pinkerton Packaging’s ROE last year was 4.5 percent, but its management has developed a new operating plan designed to improve things. The new plan calls for a total debt ratio of 50 percent, which will result in interest charges of $240 per year. Management projects an EBIT of $800 on sales of $8,000, and it expects to have a total assets turnover ratio of 1.6. Under these conditions, the federal-plus-state tax rate will be 40 percent. If the changes are made, what return on equity will Pinkerton earn?
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A. a. 2.50% |
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B. b. 13.44% |
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C. c. 13.00% |
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D. d. 14.02% |
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E. e. 14.57% |
Examining the ratios of a particular firm against the same measures for a small group of firms from the same industry, at a point in time, is an example of
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A. a. Trend analysis. |
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B. b. Benchmarking. |
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C. c. Du Pont analysis. |
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D. d. Simple ratio analysis. |
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E. e. Industry analysis. |
Which of the following statements is correct?
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A. a. Having a high current ratio and a high quick ratio is always a good indication that a firm is managing its liquidity position well. |
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B. b. A decline in the inventory turnover ratio suggests that the firm’s liquidity position is improving. |
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C. c. If a firm’s times-interest-earned ratio is relatively high, then this is one indication that the firm should be able to meet its debt obligations. |
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D. d. Since ROA measures the firm’s effective utilization of assets (without considering how these assets are financed), two firms with the same EBIT must have the same ROA. |
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E. e. If, through specific managerial actions, a firm has been able to increase its ROA, then, because of the fixed mathematical relationship between ROA and ROE, it must also have increased its ROE. |
Which of the following statements is correct?
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