Question 1

A firm has sales of $2,400,net income of $125,total assets of $1,100,and total equity of $750.Interest expense is $200.What is the common-size statement value of the interest expense?
A)13.33%
B)7.10%
C)8.33%
D)18.18%
E)26.67%

Accepted Answer

Common-size interest = $200/$2,400 = .0833,or 8.33%

Question 2

A firm has a debt-equity ratio of .40.What is the total debt ratio?
A).24
B).29
C).67
D)1.40
E)2.50

Accepted Answer

A debt-equity ratio of .40 implies that for every $40 of debt there is $100 of equity and $140 of assets.Total debt ratio = ($140 - 100)/$140 = .29

Question 3

Jessica's Boutique has cash of $460,accounts receivable of $630,accounts payable of $1,200,and inventory of $1,450.What is the value of the quick ratio?
A).29 times
B).38 times
C).75 times
D).84 times
E).91 times

Accepted Answer

Quick ratio = ($460 + 630)/$1,200 = .91 times

Question 4

The internal rate of growth is based on the assumption that:
A)the dividend amount is held constant.
B)no external funding of any type is obtained.
C)the return on equity is held constant.
D)the only additional outside capital obtained is long-term debt.
E)the debt-equity ratio is held constant.

Accepted Answer

The internal rate of growth assumes that no external funding of any type is obtained, meaning that the growth of a company is entirely self-funded through reinvesting profits. Therefore, choice B is the correct answer. A, C, D, and E are not accurate assumptions of the internal rate of growth.

Question 5

Parker's Meats has total assets of $411,900,a price-earnings ratio of 8.4,a debt-equity ratio of .65,and earnings per share of $1.22.What is the market to book ratio if there are 45,000 shares of stock outstanding?
A)1.85 times
B).79 times
C)2.24 times
D)5.46 times
E)2.80 times

Accepted Answer

Equity multiplier = 1 + .65 = 1.65Total equity = Total assets/Equity multiplier = $411,900/1.65 = $249,636.36Market to book ratio = (8.4 × $1.22)/($249,636.36/45,000)= 1.85 times

Question 6

Tree Top Furniture has current sales of $311,000 and fixed assets of $198,000.The firm is currently operating at 83 percent of capacity.What is the maximum percentage increase the firm can have in sales without investing in additional fixed assets?
A)20.48%
B)17.00%
C)19.25%
D)23.09%
E)36.33%

Accepted Answer

Maximum output = $311,000/.83 = $374,698.80Maximum percentage increase = ($374,698.80 - 311,000)/$311,000 = .2048,or 20.48%

Question 7

A firm has total assets of $262,000,long-term debt of $105,000,stockholders' equity of $111,000,and current liabilities of $46,000.The retention ratio is 60 percent and the profit margin is 6 percent.Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity.What is the external financing need if the current sales of $275,000 are projected to increase by 10 percent?
A)$210
B)$14,340
C)$6,200
D)$10,890
E)$10,710

Accepted Answer

Projected total assets = 1.1($262,000)= $288,200Projected current liabilities = 1.1($46,000)= $50,600Projected long-term debt = $105,000 (no change)Projected shareholders equity = $111,000 + (1.1 × $275,000 × .06 × .60)= $121,890EFN = $288,200 - 50,600 - 105,000 - $121,890 = $10,710

Question 8

A firm has total assets of $162,000,long-term debt of $46,000,stockholders' equity of $95,000,and current liabilities of $21,000.The dividend payout ratio is 60 percent and the profit margin is 8 percent.Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity.What is the external financing need if the current sales of $150,000 are projected to increase by 10 percent?
A)$4,220
B)$54,820
C)$16,200
D)$38,700
E)$8,820

Accepted Answer

Projected total assets = 1.1($162,000)= $178,200Projected current liabilities = 1.1($21,000)= $23,100Projected long-term debt = $46,000 (no change)Projected shareholders equity = $95,000 + (1.1 × $150,000 × .08 × (1 - .60))= $100,280EFN = $178,200 - 23,100 - 46,000 - $100,280 = $8,820

Question 9

A firm has total debt of $1,500 and a debt-equity ratio of .40.What is the value of the total assets?
A)$1,560
B)$3,000
C)$5,250
D)$6,500
E)$7,200

Accepted Answer

Total equity = $1,500/.4 = $3,750Total assets = $1,500 + 3,750 = $5,250

Question 10

Rosario's has sales of $114,500,total debt of $46,300,total equity of $68,400,and a profit margin of 5 percent.What is the return on assets?
A)5.21%
B)4.99%
C)7.39%
D)8.37%
E)19.97%

Accepted Answer

Return on assets = (.05 × $114,500)/($46,300 + 68,400)= .0499,or 4.99%

Question 11

Western Wear has net working capital of $3,500,net fixed assets of $42,000,sales of $69,000,and current liabilities of $9,800.From each $1 in total assets,the firm generates sales of:
A)$1.43
B)$1.52
C)$1.25
D)$1.64
E)$1.39

Accepted Answer

Total asset turnover = $69,000/($3,500 + 9,800 + 42,000)= 1.25 timesEvery $1 in total assets generates $1.25 in sales.

Question 12

A firm has sales of $142,600,net income of $22,800,net fixed assets of $94,300,and current assets of $42,600,of which $31,400 is inventory.What is the common-size statement value of inventory?
A)22.02%
B)12.56%
C)22.94%
D)73.71%
E)37.71%

Accepted Answer

Common-size inventory value = $31,400/($94,300 + 42,600)= .2294,or 22.94%

Question 13

A firm has sales of $83,600,costs of $52,800,interest paid of $1,600,and depreciation of $11,400.The tax rate is 34 percent.What is the value of the cash coverage ratio?
A)3.78 times
B)11.13 times
C)26.94 times
D)19.25 times
E)16.47 times

Accepted Answer

Cash coverage ratio = ($83,600 - 52,800)/$1,600 = 19.25 times

Question 14

Les' Motors has sales of $482,800,cost of goods sold of $297,400,inventory of $169,600,and accounts receivable of $52,900.How many days,on average,does it take the firm to sell its inventory?
A)65.27 days
B)85.20 days
C)208.15 days
D)128.22 days
E)284.67 days

Accepted Answer

Inventory turnover = $297,400/$169,600 = 1.75Days in inventory = 365/1.75 = 208.15 days

Question 15

Financial planning,when properly executed:
A)helps ensure that adequate financing is in place to support the desired level of growth.
B)ensures that the primary goals of senior management are fully achieved.
C)reduces the necessity of daily management oversight of the business operations.
D)ignores the normal restraints encountered by a firm.
E)eliminates the need to plan more than one year in advance.

Accepted Answer

Financial planning helps ensure that adequate financing is in place to support the desired level of growth. It involves forecasting and budgeting to allocate resources effectively and efficiently, which is crucial for long-term success.

Question 16

Vaun's Pet Store paid $16,950 in interest and $21,300 in dividends last year.The times interest earned ratio is 3.8 and the depreciation expense is $84,200.What is the value of the cash coverage ratio?
A)4.81 times
B)6.22 times
C)7.75 times
D)8.77 times
E)8.20 times

Accepted Answer

EBIT = 3.8 × $16,950 = $64,410Cash coverage ratio = ($64,410 + 84,200)/$16,950 = 8.77 timesThis can also be calculated as:Cash coverage ratio = 3.8 + ($84,200/$16,950)= 8.77 times

Question 17

Burnside's has accounts receivable of $33,700,inventory of $54,200,sales of $364,200,and cost of goods sold of $193,400.How long does it take the firm to sell its inventory and collect payment on the sale?
A)128.14 days
B)88.09 days
C)163.78 days
D)136.06 days
E)154.08 days

Accepted Answer

Inventory turnover = $193,400/$54,200 = 3.57Days in inventory = 365/3.57 = 102.29 daysAccounts receivable turnover = $364,200/$33,700 = 10.81Days' sales in receivables = 365/10.81 = 33.77 daysTotal days in inventory and receivables = 102.29 + 33.77 = 136.06 days

Question 18

Juno's has sales of $389,000,a tax rate of 34 percent,a dividend payout ratio of 45 percent,and a profit margin of 6 percent.What is the addition to retained earnings?
A)$10,503.00
B)$12,837.00
C)$141,207.00
D)$8,472.42
E)$15,913.64

Accepted Answer

Addition to retained earnings = $389,000 × .06 × (1 - .45)= $12,837.00

Question 19

Jensen's Boats has sales of $387,000,cost of goods sold of $204,000,depreciation of $32,000,and selling and general costs of $21,000.The firm has a loan balance of $87,400 with an interest rate of 7 percent.What is the value of the interest bearing debt to EBITDA measure?
A).67 times
B).54 times
C)1.49 times
D)1.85 times
E)1.78 times

Accepted Answer

EBITDA = $387,000 - 204,000 - 21,000 = $162,000Interest bearing debt/EBITDA = $87,400/$162,000 = .54 times

Question 20

Charlotte's has current sales of $122,000,current liabilities of $16,400,and net working capital of $2,100.The projected sales for next year are $134,000.All net working capital accounts change directly with sales.What is the projected value of current assets for next year?
A)$2,306.56
B)$18,013.11
C)$22,626.23
D)$20,319.67
E)$15,706.56

Accepted Answer

Projected current assets = ($16,400 + 2,100)/$122,000 × $134,000 = $20,319.67

Quiz 3: Financial Statements Analysis and Financial Models

A firm has sales of $2,400,net income of $125,total assets of $1,100,and total equity of $750.Interest expense is $200.What is the common-size statement value of the interest expense?

A firm has a debt-equity ratio of .40.What is the total debt ratio?

Jessica's Boutique has cash of $460,accounts receivable of $630,accounts payable of $1,200,and inventory of $1,450.What is the value of the quick ratio?

The internal rate of growth is based on the assumption that:

Parker's Meats has total assets of $411,900,a price-earnings ratio of 8.4,a debt-equity ratio of .65,and earnings per share of $1.22.What is the market to book ratio if there are 45,000 shares of stock outstanding?

Tree Top Furniture has current sales of $311,000 and fixed assets of $198,000.The firm is currently operating at 83 percent of capacity.What is the maximum percentage increase the firm can have in sales without investing in additional fixed assets?

A firm has total debt of $1,500 and a debt-equity ratio of .40.What is the value of the total assets?

Rosario's has sales of $114,500,total debt of $46,300,total equity of $68,400,and a profit margin of 5 percent.What is the return on assets?

Western Wear has net working capital of $3,500,net fixed assets of $42,000,sales of $69,000,and current liabilities of $9,800.From each $1 in total assets,the firm generates sales of:

A firm has sales of $142,600,net income of $22,800,net fixed assets of $94,300,and current assets of $42,600,of which $31,400 is inventory.What is the common-size statement value of inventory?

A firm has sales of $83,600,costs of $52,800,interest paid of $1,600,and depreciation of $11,400.The tax rate is 34 percent.What is the value of the cash coverage ratio?

Les' Motors has sales of $482,800,cost of goods sold of $297,400,inventory of $169,600,and accounts receivable of $52,900.How many days,on average,does it take the firm to sell its inventory?

Financial planning,when properly executed:

Vaun's Pet Store paid $16,950 in interest and $21,300 in dividends last year.The times interest earned ratio is 3.8 and the depreciation expense is $84,200.What is the value of the cash coverage ratio?

Burnside's has accounts receivable of $33,700,inventory of $54,200,sales of $364,200,and cost of goods sold of $193,400.How long does it take the firm to sell its inventory and collect payment on the sale?

Juno's has sales of $389,000,a tax rate of 34 percent,a dividend payout ratio of 45 percent,and a profit margin of 6 percent.What is the addition to retained earnings?

Jensen's Boats has sales of $387,000,cost of goods sold of $204,000,depreciation of $32,000,and selling and general costs of $21,000.The firm has a loan balance of $87,400 with an interest rate of 7 percent.What is the value of the interest bearing debt to EBITDA measure?

Charlotte's has current sales of $122,000,current liabilities of $16,400,and net working capital of $2,100.The projected sales for next year are $134,000.All net working capital accounts change directly with sales.What is the projected value of current assets for next year?