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Exam 3: Analyzing Financial Statements

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Question 21

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Which of these statements is true?

A) In general, the lower the total asset turnover and the lower the capital intensity ratio, the more efficient the overall asset management of the firm will be.
B) In general, the lower the total asset turnover and the higher the capital intensity ratio, the more efficient the overall asset management of the firm will be.
C) In general, the higher the total asset turnover and the lower the capital intensity ratio, the more efficient the overall asset management of the firm will be.
D) In general, the higher the total asset turnover and the higher the capital intensity ratio, the more efficient the overall asset management of the firm will be.

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Question 22

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DuPont Analysis You are considering investing in Totally Tire Services. You have been able to locate the following information on the firm: total assets = $50 million, accounts receivable = $10 million, ACP = 15 days, net income = $4.5 million, and debt-to-equity ratio = 0.75 times. What is the ROE for the firm?

A) 1.58%
B) 9.00%
C) 15.75%
D) 28.81%

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Question 23

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A firm reported year-end sales of $20 million. It listed $7 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm's inventory stay on the premises?

These ratios measure how efficiently a firm uses its assets, as well as how efficiently the firm manages its accounts payable.

Ratio Analysis Use the following information to complete the balance sheet below. Current ratio = 1.5 Current liabilities = $80 million Profit margin = 12% Credit sales = 200 million Return on equity = 15% Debt ratio = 60%

DuPont Analysis Last year, PJ's Ice Cream Parlors, Inc. reported an ROE = 12%. The firm's debt ratio was 40%, sales were $25 million, and the capital intensity ratio was 0.75 times. What is the net income for PJ's last year?

A firm ended the year with an average collection period of 50 days. The firm's credit sales were $11 million. What is the firm's year-end balance in accounts receivable?

Calculate the times interest earned ratio using the following information. Sales = $1.5 million, cost of goods sold = $800,000, depreciation expense = $100,000, addition to retained earnings = $85,000, dividends per share = $1.2, tax rate = 30%, and number of shares of common stock outstanding = 100,000. Assume the firm has no preferred stock.

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?

Which of the following statements is correct?

Common-size financial statements:

Asset Management and Debt Management Ratios Use the following information to calculate current assets: Sales = $12 million, capital intensity ratio = 4 times, debt ratio = 45%, and fixed asset turnover ratio = 2.5 times.

This ratio measures the number of dollars of sales produced per dollar of inventory.

Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 16.5% and a dividend payout ratio of 40%. What is the sustainable growth rate?

Profitability Ratios DJ's Soda Fountain has asked you to help piece together financial information on the firm for the most current year. Managers give you the following information: sales = $20 million, total debt = $3 million, debt ratio = 75%, ROE = 27%. Using this information, what is DJ's ROA?

Which of the following will increase a firm's quick ratio assuming no other accounts change?

The maximum growth rate that can be achieved financing asset growth with new debt and retained earnings is called the __________.

Sustainable Growth Rate You have located the following information on Rock Company: debt ratio = 40%, capital intensity ratio = 2.25 times, profit margin = 8%, and dividend payout ratio = 25%. What is the sustainable growth rate for Rock?

A firm has a debt ratio of 45%, capital intensity ratio is 1.3 times, profit margin is 10%, and dividend payout ratio is 30%. Calculate the sustainable growth rate for the firm.

A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000. Interest expense totals $7,000. What is the firm's cash coverage ratio?