Finance 303 - Financial Management » Fall 2022 » Ch4 Assignment

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Question #1
A common-size balance sheet presents the amounts in asset, liability, and owners’ equity accounts as a
A.   percentage of total sales.
B.   percentage of total net income.
C.   percentage of total net cash flow.
D.   percentage of total assets.
Question #2
All else being equal, which of the following will decrease a firm's current ratio?
A.   An increase in accounts payable
B.   None of these
C.   A decrease in depreciation expense
D.   A decrease in the net fixed assets
Question #3
Coverage ratios, like times interest earned and cash coverage ratio, allow:
A.   a firm's creditors to assess how well the firm will meet its short-term liabilities other than interest expense.
B.   a firm's management to assess how well they meet short-term liabilities.
C.   a firm's creditors to assess how well the firm will meet its interest obligations.
D.   a firm's shareholders to assess how well the firm will meet its short-term liabilities.
Question #4
Ronaldinho Trading Co. is required by its bank to maintain a current ratio of at least 1.75, and its current ratio now is 2.1. The firm plans to acquire additional inventory to meet an unexpected surge in the demand for its products and will pay for the inventory with short-term debt. How much inventory can the firm purchase without violating its debt agreement, if their total current assets equal $3.5 million? (Round your final answer to the nearest dollar.)
A.   $777,777
B.   None of these
C.   $1 million
D.   $0
Question #5
Jet, Inc., has net sales of $712,478 and accounts receivable of $167,435. What are the firm's accounts receivable turnover and days' sales outstanding? (Round your accounts receivable turnover to two decimal places and days' sales outstanding to nearest day.)
A.   5.2 times; 61 days
B.   0.24 times; 79 days
C.   None of these.
D.   4.26 times; 86 days
Question #6
Trident Corp., has debt of $3.35 million with an interest rate of 6.875 percent. The company has an EBIT of $2,766,009. What is its times-interest-earned ratio? (Round your final answer to nearest number.)
A.   12 times
B.   None of these
C.   11 times
D.   13 times
Question #7
Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio? (Round your final answer to two decimal places.)
A.   $2
B.   3.47
C.   $1
D.   1.47
Question #8
What will be a firm's equity multiplier given a debt ratio of 0.45? (Round your final answer to two decimal places.)
A.   None of these
B.   1.82
C.   $2
D.   $1
Question #9
RTR Corp. has reported a net income of $812,425 for the year. The company's share price is $13.45, and the company has 312,490 shares outstanding. Compute the firm's price-earnings ratio. (Round your final answer to two decimal places.)
A.   4.87 times
B.   5.17 times
C.   None of these
D.   8.12 times
Question #10
GenTech Pharma has reported the following information: Sales/Total assets = 2.89; ROA = 10.74%; ROE = 20.36% What are the firm's profit margin and equity multiplier? (Round your profit margin answer to one decimal place, and equity multiplier answer to two decimal places.)
A.   3.7%; 0.53
B.   7.1%; 1.90
C.   7.1%; 0.53
D.   3.7%; 1.90
Question #11
The quick ratio may be a better indicator of liquidity than the current ratio because _____ may be relatively difficult to convert to cash in a short period of time.
A.   marketable securities
B.   accounts payable
C.   plant and equipment
D.   inventory
Question #12
Kelvy & Sons has a current ratio of 1.2, current assets of $508,315, and inventory of $98,666. What is the firm's quick ratio?
A.   $1
B.   1.1
C.   0.97
Question #13
Sandhill Jewelers management announced that the company had net earnings of $4,496,000 for this year. The company has 3,997,000 shares outstanding, and the year-end stock price is $59.65. What are Sandhill’s earnings per share and P/E ratio? (Round answers to 2 decimal places, e.g. 12.25)
A.   $2.5 & 51.14
B.   $1.12 & 53.26
C.   $1.97 & 50.66
D.   $2.14 & 49.26
Question #14
Crane Corporation has current liabilities of $452,000, a quick ratio of 1.9, inventory turnover of 5.6, and a current ratio of 4.9. What is the cost of goods sold for Crane Corporation? Cost of goods sold $
A.   $7,055,323
B.   $6,993,450
C.   $8,346,200
D.   $7,593,600
Question #15
Bobcat Industries has a net profit margin of 3%, a total asset turnover of 2 times; and a debt ratio of 40%. What is the firm’s ROE?
A.   10%
B.   20%
C.   25%
D.   15%
Question #16
Oriole, Inc., a manufacturer of electrical supplies, has an ROE of 23.1 percent, a profit margin of 4.20 percent, and a total asset turnover ratio of 2.50 times. Its peer group also has an ROE of 23.1 percent, but has outperformed Oriole with a net profit margin of 5.5 percent and a total asset turnover ratio of 3.0 times. Calculate the Oriole's equity multiplier and peer group equity multiplier. (Round answers to 2 decimal places, e.g.12.55.) Oriole’s equity multiplier is ___ times, and the peer group equity multiplier is ___ times.
A.   3.0, 1.8
B.   1.5, 2.7
C.   2.5, 1.5
D.   2.2, 1.4
Question #17
Which one of the following statements is NOT true?
A.   The more days that it takes a firm to collect on its receivables, the more efficient the firm is.
B.   Days' sales outstanding measures in days, the time a firm takes to convert its receivables into cash.
C.   One ratio that measures the efficiency of a firm's collection policy is days' sales outstanding.
D.   The accounts receivables turnover ratio measures how quickly the firm collects its credit sales.
Question #18
Which of the following is NOT true of liquidity ratios?
A.   For manufacturing firms, quick ratios will tend to be much larger than current ratios.
B.   There are two commonly used ratios to measure liquidity—current ratio and quick ratio.
C.   The higher the liquidity ratios, the more liquid the firm and the better its ability to pay its short-term bills.
D.   They measure the ability of a firm to meet short-term obligations with short-term assets without putting the firm in financial trouble.
Question #19
Which of the following statements is correct?
A.   The lower the level of a firm's debt, the lower the firm's equity multiplier.
B.   The tax benefit from using debt financing reduces a firm's risk.
C.   The lower the level of a firm's debt, the higher the firm's equity multiplier.
D.   The lower the level of a firm's debt, the higher the firm's leverage.
Question #20
Sorenstam Corp. has an equity multiplier of 2.34 times, total assets of $4,512,895, a ROE of 17.5 percent, and a total assets turnover of 3.1 times. Calculate the firm's ROA. Round your percentage answer to two decimal places.
A.   4.53%
B.   6.23%
C.   7.48%
D.   5.79%
Question #21
Saunders, Inc., has a ROE of 18.7 percent, an equity multiplier of 2.53 times, sales of $2.75 million, and a total assets turnover of 2.7 times. What is the firm's net income? (Round your final answer to two decimal places.)
A.   $51,425.00
B.   $7,528.10
C.   $514,250.00
D.   $75,281.80
Question #22
Wildhorse reported the following information for its fiscal year end: On net sales of $51.800 billion, the company earned net income after taxes of $6.734 billion. It had a cost of goods sold of $24.346 billion and EBIT of $9.842 billion. What are the company’s gross profit margin, operating profit margin, and net profit margin? (Round answers to 1 decimal place, e.g.12.5%.)
A.   49%, 18%, 10%
B.   60%, 21%, 15%
C.   53%, 19%, 13%
D.   55%, 12%, 16%
Question #23
ReelTime Video has reported a total asset turnover of 2.3 times and an ROA of 17% and ROE of 25%. What is the firm's net profit margin?
A.   7.4%
B.   9.20%
C.   39.10%
D.   10.90%
Question #24
Financial managers can benchmark their firm’s performance by collecting data . ________analysis allows managers to determine if ratios have changed over time.
A.   sensitivity
B.   peer group
C.   trend
D.   industry average
Question #25
Financial managers can benchmark their firm’s performance by collecting data . ________analysis is performed by comparing ratios to the averages of firms that have similar product lines and sales
A.   trend
B.   peer group
C.   industry average
D.   sensitivity
Question #26
Financial managers can benchmark their firm’s performance by collecting data . ________analysis involves comparing ratios those of direct competitors.
A.   peer group
B.   industry average
C.   sensitivity
D.   trend
Question #27
Sheridan Corp. has a gross profit margin of 40.00 percent, sales of $41,000,000, and inventory of $20,000,000. What is its inventory turnover ratio? (Round answer to 2 decimal places, e.g. 15.25.)
A.   1.12
B.   2.25
C.   1.5
D.   1.23

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