Question 1

Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Accepted Answer

Ratios allow managers to compare the fin...

Question 2

The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity?

Accepted Answer

A)   3.48 percent
B)   3.73 percent
C)   8.01 percent
D)   9.46 percent
E)   13.61 percentF) A) and B)
G) C) and E)

Question 3

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?

Accepted Answer

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 = 0.8; debt-equity ratio = 0.8
D)   Cash coverage ratio = 2.6; debt-equity ratio = 0.3
E)   Cash coverage ratio = 0.5; total debt ratio = 0.2F) None of the above
G) B) and D)

Question 4

Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

Accepted Answer

A)   6.98 percent
B)   7.20 percent
C)   7.33 percent
D)   7.54 percent
E)   7.91 percentF) C) and D)
G) All of the above

Question 5

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

Accepted Answer

A)   2.76 percent
B)   3.57 percent
C)   4.90 percent
D)   5.28 percent
E)   6.46 percentF) None of the above
G) C) and D)

Question 6

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

Accepted Answer

A)   Receivables turnover
B)   Equity multiplier
C)   Profit margin
D)   Return on assets
E)   Total asset turnoverF) A) and B)
G) A) and C)

Question 7

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Accepted Answer

A)   10.63 percent
B)   13.53 percent
C)   25.15 percent
D)   26.07 percent
E)   28.33 percentF) A) and B)
G) B) and E)

Question 8

The Du Pont identity can be totally defined by which one of the following?

Accepted Answer

A)   Return on equity, total asset turnover, and equity multiplier
B)   Equity multiplier and return on assets
C)   Profit margin and return on equity
D)   Total asset turnover, profit margin, and debt-equity ratio
E)   Equity multiplier, return on assets, and profit marginF) A) and C)
G) A) and B)

Question 9

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

Accepted Answer

A)   7.99 percent
B)   8.57 percent
C)   10.81 percent
D)   16.87 percent
E)   21.94 percentF) B) and D)
G) A) and D)

Question 10

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

Accepted Answer

A)   3.10 percent
B)   5.23 percent
C)   5.67 percent
D)   8.21 percent
E)   9.62 percentF) D) and E)
G) All of the above

Question 11

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Accepted Answer

A)   1.58
B)   1.69
C)   1.75
D)   1.87
E)   1.92F) All of the above
G) None of the above

Question 12

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio?

Accepted Answer

A)   3.45 percent
B)   4.71 percent
C)   14.34 percent
D)   22.85 percent
E)   24.04 percentF) A) and B)
G) All of the above

Question 13

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

Accepted Answer

A)   12.46 percent
B)   12.95 percent
C)   13.33 percent
D)   15.29 percent
E)   16.11 percentF) B) and E)
G) C) and D)

Question 14

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate?

Accepted Answer

A)   1.04
B)   1.08
C)   1.13
D)   1.19
E)   1.26F) C) and D)
G) A) and E)

Question 15

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, 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?

Accepted Answer

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

Question 16

The Du Pont identity can be used to help a financial manager determine the: I. degree of financial leverage used by a firm.
II)  operating efficiency of a firm.
III)  utilization rate of a firm's assets.
IV)  rate of return on a firm's assets.

Accepted Answer

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

Question 17

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

Question 18

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Accepted Answer

A)   $860,333
B)   $984,320
C)   $1,088,500
D)   $1,117,200
E)   $1,257,480F) B) and E)
G) None of the above

Question 19

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

Accepted Answer

A)   Du Pont rate
B)   External growth rate
C)   Sustainable growth rate
D)   Internal growth rate
E)   Cash flow rateF) A) and B)
G) A) and C)

Question 20

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

Accepted Answer

A)   8.91 percent
B)   12.67 percent
C)   18.28 percent
D)   32.11 percent
E)   41.56 percentF) A) and B)
G) A) and C)

Exam 3: Working With Financial Statements

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

Correct Answer
verified

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Correct Answer
verified

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?

Correct Answer
verified

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate?

Correct Answer
verified

The Du Pont identity can be used to help a financial manager determine the: I. degree of financial leverage used by a firm. II) operating efficiency of a firm. III) utilization rate of a firm's assets. IV) rate of return on a firm's assets.

Correct Answer
verified

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

Correct Answer
verified

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Correct Answer
verified

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

Correct Answer
verified

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

Correct Answer
verified

Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

Correct Answer
verified

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

Correct Answer
verified

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

Correct Answer
verified

Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Correct Answer
verified
Ratios allow managers to compare the fin...
View Answer

The Du Pont identity can be totally defined by which one of the following?

Correct Answer
verified

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Correct Answer
verified

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, 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?

Correct Answer
verified

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio?

Correct Answer
verified

The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity?

Correct Answer
verified

Correct Answer
verified

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

Correct Answer
verified

Exam 3: Working With Financial Statements

Tally Ho Inn has annual sales of $737,000. Earnings before interest and taxes is equal to 21 percent of sales. For the period, the firm paid $7,900 in interest. What is the profit margin if the tax rate is 35 percent?

Correct AnswerverifiedShow Answer

The common stock of The Burger Hut is selling for $16.25 a share. The company has earnings per share of $0.42 and a book value per share of $9.28. What is the market-to-book ratio?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Holiday House has sales of $648,000, a profit margin of 6.1 percent, and a capital intensity ratio of 0.84. What is the total asset turnover rate?

Correct AnswerverifiedShow Answer

The Du Pont identity can be used to help a financial manager determine the: I. degree of financial leverage used by a firm. II) operating efficiency of a firm. III) utilization rate of a firm's assets. IV) rate of return on a firm's assets.

Correct AnswerverifiedShow Answer

Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

Correct AnswerverifiedShow Answer

Turner's Store had a profit margin of 6.8 percent, sales of $898,200, and total assets of $798,000. If management set a goal of increasing the total asset turnover to 1.40 times, what would the new sales figure need to be, assuming no increase in total assets?

Correct AnswerverifiedShow Answer

The Blue Lantern has a return on equity of 17.8 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

Correct AnswerverifiedShow Answer

The Veggie Hut has net income of $26,400, total equity of $102,700, and total assets of $189,500. The dividend payout ratio is 0.30. What is the internal growth rate?

Correct AnswerverifiedShow Answer

Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Morrison Motors has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.45 and the total asset turnover is 1.6. What is the profit margin?

Correct AnswerverifiedShow Answer

Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Correct AnswerverifiedRatios allow managers to compare the fin...View AnswerShow Answer

The Du Pont identity can be totally defined by which one of the following?

Correct AnswerverifiedShow Answer

A firm earns $0.17 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

Correct AnswerverifiedShow Answer

Donegal's Industrial Products wishes to maintain a growth rate of 6 percent a year, a debt-equity ratio of 0.45, 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?

Correct AnswerverifiedShow Answer

Last year, a firm earned $31,200 in net income on sales of $217,600. The company paid $7,500 in dividends. What is the dividend payout ratio?

Correct AnswerverifiedShow Answer

The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net income of $7,100. What is the return on equity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship?

Correct AnswerverifiedShow Answer

Correct Answer
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Ratios allow managers to compare the fin...
View Answer

Correct Answer
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