Question 1

What is wrong with the following performance objective written for a shop specializing in furs: "To earn $1,000,000 in profit during calendar year 2011"?

Accepted Answer

The performance objective makes no mention of the resources needed to achieve it.The next fiscal year is a time frame.Objectives should be measurable,and qualitative objectives are not.

Question 2

An appliance store has total assets of $2,800,000,accounts receivable of $900,000,accounts payable of $700,000,inventory valued at $1,500,000,and total liabilities of $2,500,000.In 1999,its net sales were $2,100,000,and its net profit equaled $42,000. Calculate the store's return on assets.

Accepted Answer

Return on assets equals net profit ($42,000)divided by total assets ($2,800,000)converted to a percentage.

Question 3

A store that sells books,magazines and newspapers has an average inventory of $15,000 at cost.Its cost of goods for last year was $62,000,and its net profit was $9,000.Calculate the retailer's inventory turnover.

Accepted Answer

Cost of Goods/Average Inventory at cost = $62,000/$15,000.

Question 4

Melanie's Bead Shoppe has total assets of $45,000,accounts receivable of $2,000,accounts payable of $3,100 and inventory valued at $20,000.Last year,her net sales were $29,000 and her net profit equaled $14,000.What is her return on assets?

Accepted Answer

Return on assets equals net profit of $14,000 divided by total assets of $45,000 equals 31.1%.

Question 5

What ratio measures the retailer's ability to pay its suppliers with assets such as cash and accounts receivable?

Accepted Answer

The current ratio is short term assets divided by short term liabilities,which indicates the retailer's ability to pay its short term liabilities.

Question 6

What ratio would an investor use to determine the financial health and risk of bankruptcy of a retailer?

Accepted Answer

The debt-to-equity ratio measures how much money a company can safely borrow over long periods of time.

Question 7

_______________ equals a company's net sales divided by its total assets.

Accepted Answer

Asset turnover is net sales divided by total assets.The ratio indicates how many dollars are generated for each dollar of assets.

Question 8

If you had $50,000 and you wanted to invest in either Walgreens or CVS stock,which of the following ratios would best help you to decide what to do?

Accepted Answer

Return on assets is effective in evaluating the profitability of individual investments in assets because it can be easily compared with yields of other investments of similar risks.

Question 9

When Chris charges a gallon of chlorine for his pool at Pinch-A-Penny to his store account,he creates a(n)______________ for the retailer.

Accepted Answer

Accounts receivable are what is owned to the retailer by customers who have purchased merchandise.

Question 10

Which of the following is NOT an example of a fixed asset for a lawn care service?

Accepted Answer

Buildings,stocks,and equipment,which cannot be converted into cash quickly,are fixed assets.

Question 11

What ratio would a retailer utilize to best compare the performance of the brand name vendors in their assortment to one another?

Accepted Answer

Gross margin dollars divided by net sales gives gross margin percentage.This ratio then can be utilized to compare the performance of various types of merchandise to one another.

Question 12

The strategic profit model is useful to retailers because it:

Accepted Answer

Both net profit margin and asset turnover are important to evaluate.

Question 13

Which of the following is an example of a fixed asset for a music store?

Accepted Answer

Fixed assets require more than a year to convert to cash.Examples would be owned buildings,distribution centers,display fixtures and equipment.

Question 14

Calculate the return on assets for a gun shop that has total assets of $410,000,current assets of $74,000,total liabilities of $280,000,accounts receivable of $12,000,net sales of $64,000 and net profit of $30,000.

Accepted Answer

Return on assets equals net profit ($30,000)divided by total assets ($410,000)converted to a percentage.

Question 15

Outstanding invoices that have not yet been paid to the vendor by the retailer,are the retailer's ___________.

Accepted Answer

Liabilities are money that the retailer owes others.

Question 16

By knowing the return on assets for his bakery shop,Chuck will know:

Accepted Answer

Return on assets is calculated from information found on the balance sheet AND income statement.It equals net profit divided by total assets.

Question 17

Operating profit margin,gross margin minus operating and extraordinary nonrecurring expenses,is also known as ___________.

Accepted Answer

Earnings before interest and taxes is the operating profit margin.

Question 18

What is wrong with the following performance objective which was set for a retailer that specializes in advertising collectibles: "To increase sales by three percent on a $400,000 investment in inventory and real estate"?

Accepted Answer

Objectives should be measurable with a specific time frame to achieve it.

Question 19

Asset turnover ________________.

Accepted Answer