Question 1

Health Centers,Inc.,has total equity of $948,300,sales of $1.523 million,and a profit margin of 4.4 percent.What is the return on equity?

Accepted Answer

A)  4.21 percent
B)  6.49 percent
C)  7.18 percent
D)  8.68 percent
E)  7.07 percentF) C) and E)
G) None of the above

Question 2

A common-size balance sheet helps financial managers determine:

Accepted Answer

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 changingF) C) and D)
G) C) and E)

Question 3

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?

Accepted Answer

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

Question 4

Bed Bug Inn has annual sales of $137,000.Earnings before interest and taxes is 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?

Accepted Answer

A)  &#8211;2.43 percent
B)  1.56 percent
C)  3.33 percent
D)  &#8211;5.29 percent
E)  &#8211;6.11 percentF) C) and D)
G) A) and B)

Question 5

The ratios that are based on financial statement values and used for comparison purposes are called:

Accepted Answer

A)  financial ratios.
B)  industrial statistics.
C)  equity standards.
D)  accounting returns.
E)  analytical standards.F) B) and D)
G) C) and D)

Question 6

The sustainable growth rate is based on the premise that:

Accepted Answer

A)  an additional dollar of debt will be acquired only if an additional dollar in equity shares is issued.
B)  no additional equity will be added to the firm.
C)  the debt-equity ratio will be held constant.
D)  the dividend payout ratio will be zero.
E)  the dividend payout ratio will increase at a steady rate.F) C) and D)
G) All of the above

Question 7

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?

Accepted Answer

A)  5.72 percent
B)  6.84 percent
C)  7.12 percent
D)  11.38 percent
E)  6.64 percentF) B) and E)
G) All of the above

Question 8

Bamp;C Co.has net income of $48,200,sales of $947,100,a capital intensity ratio of .87,and an equity multiplier of 1.53.What is the return on equity?

Accepted Answer

A)  6.77 percent
B)  5.93 percent
C)  8.95 percent
D)  12.21 percent
E)  14.09 percentF) A) and E)
G) None of the above

Question 9

Sweet Candies reduced its fixed assets this year without affecting the shop's operations,sales,or equity.This reduction will increase which of the following ratios?
I.Capital intensity ratio
II.Return on assets
III.Total asset turnover
IV.Return on equity

Accepted Answer

A)  I and II only
B)  II and III only
C)  II, III, and IV only
D)  I, II, and IV only
E)  I, II, III, and IVF) B) and C)
G) None of the above

Question 10

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?

Accepted Answer

A)  8.78
B)  20.10
C)  14.14
D)  16.32
E)  19.55F) B) and C)
G) B) and E)

Question 11

Mercier United has net income of $128,470.There are currently 32.67 days' sales in receivables.Total assets are $1,419,415,total receivables are $122,306,and the debt-equity ratio is .40.What is the return on equity?

Accepted Answer

A)  11.42 percent
B)  12.67 percent
C)  13.09 percent
D)  13.48 percent
E)  15.03 percentF) A) and E)
G) A) and B)

Question 12

City Plumbing has inventory of $287,800,equity of $538,800,total assets of $998,700,and sales of $1,027,400.What is the common-size percentage for the inventory account?

Accepted Answer

A)  28.01 percent
B)  33.66 percent
C)  53.42 percent
D)  28.82 percent
E)  31.68 percentF) A) and D)
G) C) and D)

Question 13

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?

Accepted Answer

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

Question 14

Which one of the following will increase the profit margin of a firm,all else held constant?

Accepted Answer

A)  Increase in interest paid
B)  Increase in fixed costs
C)  Increase in depreciation expense
D)  Decrease in the tax rate
E)  Decrease in salesF) B) and E)
G) A) and D)

Question 15

A firm has inventory of $46,500,accounts payable of $17,400,cash of $1,250,net fixed assets of $318,650,long-term debt of $109,500,and accounts receivable of $16,600.What is the common-size percentage of the equity?

Accepted Answer

A)  70.60 percent
B)  70.12 percent
C)  66.87 percent
D)  42.08 percent
E)  68.75 percentF) A) and B)
G) A) and C)

Question 16

Suppose Healey Corp.has the following characteristics:
Shares outstanding:
68,500 
Current share price:
$13.50&nbsp
Total debt:
$438,500 
Total cash:
$63,100 
Based on the formula above,what is the enterprise value of this company?

Accepted Answer

A)  $948,850
B)  $1,300,150
C)  $1,500,400
D)  $880,900
E)  $1,125,600F) C) and E)
G) C) and D)

Question 17

The equity multiplier is equal to:

Accepted Answer

A)  one plus the debt-equity ratio.
B)  one plus the total asset turnover.
C)  total debt divided by total equity.
D)  total equity divided by total assets.
E)  one divided by the total asset turnoverF) C) and D)
G) B) and E)

Question 18

The Wood Shop generates $.97 in sales for every $1 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 C)
G) A) and D)

Question 19

Fried Donuts has sales of $764,900,total assets of $687,300,total equity of $401,300,net income of $68,200,and dividends paid of $27,000.What is the internal growth rate?

Accepted Answer

A)  5.48 percent
B)  6.38 percent
C)  5.98 percent
D)  7.34 percent
E)  7.92 percentF) C) and E)
G) D) and E)

Question 20

The Fabric House has sales of $411,800,total equity of $237,400,and a debt-equity ratio of .55.What is the capital intensity ratio?

Accepted Answer

A)  .89
B)  .83
C)  1.06
D)  1.20
E)  1.27F) B) and E)
G) A) and E)

Exam 3: Working With Financial Statements

City Plumbing has inventory of $287,800,equity of $538,800,total assets of $998,700,and sales of $1,027,400.What is the common-size percentage for the inventory account?

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Health Centers,Inc.,has total equity of $948,300,sales of $1.523 million,and a profit margin of 4.4 percent.What is the return on equity?

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Sweet Candies reduced its fixed assets this year without affecting the shop's operations,sales,or equity.This reduction will increase which of the following ratios? I.Capital intensity ratio II.Return on assets III.Total asset turnover IV.Return on equity

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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?

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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?

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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?

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A firm has inventory of $46,500,accounts payable of $17,400,cash of $1,250,net fixed assets of $318,650,long-term debt of $109,500,and accounts receivable of $16,600.What is the common-size percentage of the equity?

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The ratios that are based on financial statement values and used for comparison purposes are called:

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A common-size balance sheet helps financial managers determine:

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The equity multiplier is equal to:

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Bamp;C Co.has net income of $48,200,sales of $947,100,a capital intensity ratio of .87,and an equity multiplier of 1.53.What is the return on equity?

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Bed Bug Inn has annual sales of $137,000.Earnings before interest and taxes is 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?

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The Fabric House has sales of $411,800,total equity of $237,400,and a debt-equity ratio of .55.What is the capital intensity ratio?

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Mercier United has net income of $128,470.There are currently 32.67 days' sales in receivables.Total assets are $1,419,415,total receivables are $122,306,and the debt-equity ratio is .40.What is the return on equity?

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Which one of the following will increase the profit margin of a firm,all else held constant?

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Fried Donuts has sales of $764,900,total assets of $687,300,total equity of $401,300,net income of $68,200,and dividends paid of $27,000.What is the internal growth rate?

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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?

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The Wood Shop generates $.97 in sales for every $1 invested in total assets.Which one of the following ratios would reflect this relationship?

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Suppose Healey Corp.has the following characteristics: Shares outstanding: 68,500 Current share price: $13.50 Total debt: $438,500 Total cash: $63,100 Based on the formula above,what is the enterprise value of this company?

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The sustainable growth rate is based on the premise that:

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