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Gracie Human Resource Consulting has total revenue of $285,400, cost of goods sold equal to 68 percent of sales, and a profit margin of 9.2 percent.Net fixed assets are $126,400 and current assets are $65,880.What is the total asset turnover rate?


A) 1.01
B) 1.30
C) 1.48
D) 1.84
E) 4.81

F) B) and D)
G) All of the above

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A firm can increase its sustainable rate of growth by decreasing its:


A) profit margin.
B) dividends.
C) total asset turnover.
D) target debt-equity ratio.
E) equity multiplier.

F) B) and C)
G) A) and E)

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DJ's has a total asset turnover rate of 1.13, an equity multiplier of 1.46, a profit margin of 5.28 percent, a retention ratio of .74, and total assets of $138,000.What is the sustainable growth rate?


A) 6.98 percent
B) 6.89 percent
C) 7.33 percent
D) 7.04 percent
E) 7.21 percent

F) C) and D)
G) A) and B)

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Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of .45, and a dividend payout ratio of 30 percent.The ratio of total assets to sales is constant at 1.25.What profit margin must the firm achieve?


A) 4.68 percent
B) 5.29 percent
C) 6.33 percent
D) 6.97 percent
E) 8.19 percent

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

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Maren's House of Pancakes has sales of $635,400, total equity of $268,000, and a debt-equity ratio of ..6.What is the capital intensity ratio?


A) ..67
B) .59
C) .72
D) .89
E) 1.67

F) B) and E)
G) B) and C)

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If sales are $211,000, the profit margin is 6.3 percent, and the capital intensity ratio is .94, what is the return on assets?


A) 4.42 percent
B) 6.08 percent
C) 6.39 percent
D) 6.92 percent
E) 6.70 percent

F) A) and B)
G) A) and C)

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Galaxy Sales has sales of $938,300, cost of goods sold of $764,500, and inventory of $123,600.How long on average does it take the firm to sell its inventory?


A) 6.40 days
B) 7.23 days
C) 48.68 days
D) 59.01 days
E) 61.10 days

F) A) and E)
G) D) and E)

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Pizza Pie maintains a constant debt-equity ratio of .55.The firm had net income of $14,800 for the year and paid $12,000 in dividends.The firm has total assets of $248,000.What is the sustainable growth rate?


A) 3.38 percent
B) 2.27 percent
C) 1.78 percent
D) 3.62 percent
E) 4.97 percent

F) A) and B)
G) C) and D)

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Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.


A) Cash purchase of inventory
B) Cash payment on an account receivable
C) Cash payment of an account payable
D) Credit sale of inventory at cost
E) Cash sale of inventory at a loss

F) A) and B)
G) C) and D)

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Assume earnings before interest and taxes of $56,850 and net income of $23,954.The tax rate is 30 percent.What is the times interest earned ratio?


A) 1.51
B) 1.73
C) 2.37
D) 2.47
E) 2.51

F) B) and D)
G) A) and D)

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Financial statement analysis:


A) is primarily used to identify account values that meet the normal standards.
B) is limited to internal use by a firm's managers.
C) provides useful information that can serve as a basis for forecasting future performance.
D) provides useful information to shareholders but not to debt holders.
E) is enhanced by comparing results to those of a firm's peers but not by comparing results to prior periods.

F) B) and C)
G) None of the above

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A common-size balance sheet helps financial managers determine:


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 dividend payout is changing.

F) B) and C)
G) A) and E)

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A firm has a return on equity of 17.8 percent, a return on assets of 11.3 percent, and a 65 percent dividend payout ratio.What is the sustainable growth rate?


A) 5.72 percent
B) 6.84 percent
C) 7.12 percent
D) 11.38 percent
E) 6.64 percent

F) A) and E)
G) A) and B)

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Bed Bug Inn has annual sales of $137,000.Earnings before interest and taxes are equal to 5.8 percent of sales.For the period, the firm paid $4,700 in interest.What is the profit margin if the tax rate is 34 percent?


A) −2.43 percent
B) 1.56 percent
C) 3.33 percent
D) −5.29 percent
E) −6.11 percent

F) B) and E)
G) A) and E)

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You would like to borrow money three years from now to build a new building.In preparation for applying for that loan, you are in the process of developing target ratios for your firm.Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?


A) Times interest earned = 1.7; debt-equity ratio = 1.6
B) Times interest earned = 1.5; debt-equity ratio = 1.2
C) Cash coverage ratio = .8; debt-equity ratio = .8
D) Cash coverage ratio = 2.6; debt-equity ratio = .3
E) Cash coverage ratio = .5; total debt ratio = .2

F) B) and E)
G) A) and E)

Correct Answer

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Discount Outlet has net income of $389,100, a profit margin of 2.8 percent, and a return on assets of 8.6 percent.What is the capital intensity ratio?


A) .33
B) .67
C) 1.49
D) 1.34
E) 3.07

F) A) and B)
G) C) and D)

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It takes K's Boutique an average of 53 days to sell its inventory and an average of 16.8 days to collect its accounts receivable.The firm has sales of $942,300 and costs of goods sold of $692,800.What is the accounts receivable turnover rate? Assume a 365-day year.


A) 23.69
B) 11.41
C) 21.73
D) 24.23
E) 19.55

F) A) and B)
G) All of the above

Correct Answer

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A firm has net income of $28,740, depreciation of 6,170, taxes of $13,420, and interest paid of $2,605.What is the cash coverage ratio?


A) 8.78
B) 20.10
C) 14.14
D) 16.32
E) 19.55

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

Correct Answer

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If a firm has an inventory turnover of 15, the firm:


A) sells its entire inventory every 15 days.
B) stocks its inventory only once every 15 days.
C) delivers inventory to its customers every 15 days.
D) sells its inventory by granting customers 15 days' of free credit.
E) sells its entire inventory an average of 15 times each year.

F) A) and B)
G) B) and C)

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Phil's Carvings sells its inventory in 93 days, on average.Costs of goods sold for the year are $187,200.What is the average value of the firm's inventory? Assume a 365-day year.


A) $20,129
B) $47,698
C) $57,132
D) $61,096
E) $32,513

F) B) and C)
G) A) and B)

Correct Answer

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