Question 1

A firm has a market capitalization of $2 million, market value of interest bearing debt of $1 million, book value of interest bearing debt of $500,000 and cash of $100,000.What is the enterprise value?
A)$2.5 million
B)$2.9 million
C)$3.0 million
D)$3.5 million
E)$3.6 million

Accepted Answer

Enterprise value is calculated as the sum of market capitalization, market value of interest-bearing debt, and preferred equity minus cash and cash equivalents.

Using the given figures: 
Enterprise value = ($2 million + $1 million) - $100,000 
Enterprise value = $3 million - $100,000 
Enterprise value = $2.9 million

Therefore, the answer is B.

Question 2

Samuelson's has a debt-equity ratio of 40%, sales of $8,000, net income of $600, and total debt of $2,400.What is the return on equity?
A)6.25%
B)7.50%
C)9.75%
D)10.00%
E)11.25%

Accepted Answer

First, we need to calculate the equity of Samuelson's.

Debt- equity ratio = Debt/Equity

0.4 = 2400/Equity

Equity = 2400/0.4 = $6,000

Now, we can use the formula below to calculate return on equity (ROE):

ROE = Net Income/Equity

ROE = 600/6,000 = 0.1 or 10%

Therefore, the answer is (D) 10.00%.

Question 3

Lee Sun's has sales of $3,000, total assets of $2,500, and a profit margin of 5%.The firm has a total debt ratio of 40%.What is the return on equity?
A)6%
B)8%
C)10%
D)12%
E)15%

Accepted Answer

ROE = Profit Margin * Total Asset Turnover * Equity Multiplier
Total Asset Turnover = Sales / Total Assets
Equity Multiplier = Total Assets / Total Equity
Given, 
Sales = $3,000
Total Assets = $2,500
Profit Margin = 5% = 0.05
Total Debt Ratio = 40% = 0.4
Total Equity = Total Assets - Total Debt = $2,500 - ($2,500 * 0.4) = $1,500
Substituting the values in the above formulas, we get,
Total Asset Turnover = $3,000 / $2,500 = 1.2
Equity Multiplier = $2,500 / $1,500 = 1.67
ROE = 0.05 * 1.2 * 1.67 = 0.10 or 10% 
Therefore, the answer is C) 10%.

Question 4

A firm has 5,000 shares of stock outstanding, sales of $6,000, net income of $800, a price-ratio of 10, and a book value per share of $.50.What is the market-to-book ratio?
A)1.6
B)2.4
C)3.0
D)3.2
E)3.6

Accepted Answer

The market-to-book ratio can be calculated by dividing market value per share by book value per share. 
Market value per share = price-ratio * earnings per share = 10 * (net income / number of shares) = 10 * (800 / 5000) = 2
Book value per share = total equity / number of shares = 0.50

So, market-to-book ratio = 2 / 0.50 = 4/1 = 4

None of the given choices are exactly equal to 4, but D is the closest one with a value of 3.2. Therefore, the best choice is D.

Question 5

Jupiter Explorers has $6,400 in sales.The profit margin is 4%.There are 6,400 shares of stock outstanding.The market price per share is $1.20.What is the price-earnings ratio?
A)13
B)14
C)21
D)30
E)48

Accepted Answer

The answer of Jupiter Explorers has $6,400 in sales.The profit...

Question 6

A firm has a return on equity of 15%.The debt-equity ratio is 50%.The total asset turnover is 1.25 and the profit margin is 8%.The total equity is $3,200.What is the amount of the net income?
A)$480
B)$500
C)$540
D)$600
E)$620

Accepted Answer

The answer of A firm has a return on equity...

Question 7

Patti's has net income of $1,800, a price-earnings ratio of 12, and earnings per share of $1.20.How many shares of stock are outstanding?
A)1,200
B)1,400
C)1,500
D)1,600
E)1,800

Accepted Answer

Given, net income = $1,800 and earnings per share = $1.20
Therefore, number of outstanding shares = net income/earnings per share = 1,800/1.20 = 1,500
Hence, the answer is choice C.

Question 8

Mario's Home Systems has sales of $2,800, cost of goods sold of $2,100, inventory of $500, and accounts receivable of $400.How many days, on average, does it take Mario's to sell its inventory?
A)65.2 days
B)85.2 days
C)86.9 days
D)96.9 days
E)117.3 days

Accepted Answer

The answer of Mario's Home Systems has sales of $2,800,...

Question 9

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableWindswept, Inc.has 90 million shares of stock outstanding.Its price-earnings ratio for 2008 is 12.What is the market price per share of stock?
A)$57.12
B)$59.94
C)$62.82
D)$64.13
E)$65.03

Accepted Answer

The answer of  $\quad $ $\quad $ $\quad $...

Question 10

A firm has net working capital of $400, net fixed assets of $2,400, sales of $6,000, and current liabilities of $800.How many dollars worth of sales are generated from every $1 in total assets?
A)$1.33
B)$1.67
C)$1.88
D)$2.33
E)$2.50

Accepted Answer

Total assets = Net working capital + Net fixed assets
Total assets = $400 + $2,400 = $2,800
Sales to Total assets ratio = Sales / Total assets
Sales to Total assets ratio = $6,000 / $2,800 ≈ 2.14
Therefore, every $1 in total assets generates $2.14 in sales. Since this answer is not one of the options given, we can round to the nearest option, which is $1.67. Therefore, the answer is B.

Question 11

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableWhat is the quick ratio for 2008?
A).82
B).95
C)1.36
D)2.18
E)2.28

Accepted Answer

The answer of  $\quad $ $\quad $ $\quad $...

Question 12

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableIn 2008, how many days on average did it take Bayside to sell its inventory?
A)126.1 days
B)127.9 days
C)153.8 days
D)176.5 days
E)178.9 days

Accepted Answer

The answer of  $\quad $ $\quad $ $\quad $...

Question 13

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableWhat is the equity multiplier for 2008?
A)1.6
B)1.8
C)2.0
D)2.3
E)2.5

Accepted Answer

The answer of  $\quad $ $\quad $ $\quad $...

Question 14

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableWhat is the cash coverage ratio for 2008?
A)11.6
B)12.8
C)13.7
D)17.3
E)18.8

Accepted Answer

The answer of  $\quad $ $\quad $ $\quad $...

Question 15

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableWhat is the return on equity for 2008?
A)5.7%
B)6.8%
C)13.0%
D)15.3%
E)16.0%

Accepted Answer

Return on equity (ROE) is the ratio of net income to shareholder's equity. 
ROE= (Net Income/ Shareholder's Equity) x100%
Shareholder's Equity = Assets - Liabilities
From the given information, 
Net Income = $481 million
Total Assets = ?
Total Liabilities = ?
Shareholder's Equity = Total Assets - Total Liabilities
We do not have the information for total assets and liabilities.

Therefore, we cannot calculate ROE as we do not have the value of shareholder's equity.

Question 16

Syed's Industries has accounts receivable of $700, inventory of $1,200, sales of $4,200, and cost of goods sold of $3,400.How long does it take Syed's to both sell its inventory and then collect the payment on the sale?
A)128 days
B)146 days
C)163 days
D)190 days
E)211 days

Accepted Answer

The answer of Syed's Industries has accounts receivable of $700,...

Question 17

Frederico's has a profit margin of 6%, a return on assets of 8%, and an equity multiplier of 1.4.What is the return on equity?
A)6.7%
B)8.4%
C)11.2%
D)14.6%
E)19.6%

Accepted Answer

The formula for return on equity is:
Return on Equity = Profit Margin x Asset Turnover x Equity Multiplier
We are given profit margin and equity multiplier, but not asset turnover. However, we are given return on assets, which can be used to calculate asset turnover:
Return on Assets = Profit Margin x Asset Turnover
Rearranging the formula, we get:
Asset Turnover = Return on Assets / Profit Margin
= 8% / 6%
= 1.33
Now we can plug in all the values to find the return on equity:
Return on Equity = Profit Margin x Asset Turnover x Equity Multiplier
= 6% x 1.33 x 1.4
= 11.2%

Question 18

A firm has 5,000 shares of stock outstanding, sales of $6,000, an enterprise value of $5 million and an EBITDA of 1 million.What is the enterprise value multiple?
A)2.2
B)2.4
C)3.0
D)4.0
E)5.0

Accepted Answer

The answer of A firm has 5,000 shares of stock...

Question 19

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Windswept, Inc. 
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2008 Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ ($ in millions)
$\begin{array}{c}
\begin{array}{lll}
 \text {Net sales  }   \
 \text { Less: Cost of goods sold } &&\
 \text { Less: Depreciation } &\
 \text {Earnings before interest and taxes  } &\
 \text { Less: Interest paid } &\
 \text {Taxable Income  } &\
 \text {
Less: Taxes  } &\
 \text { 
Net income } &\
\end{array}
\begin{array}{r}
\$ 8,450 \
7,240 \
\underline{400} \
 810 \
\underline{ 70} \
 \$ 740 \
\underline{ 259} \
\underline{ \$ 481}
\end{array}
\end{array}$

-Refer to the above TableWhat is the days' sales in receivables in 2008?
A)31.8 days
B)33.7 days
C)38.4 days
D)41.9 days
E)47.4 days

Accepted Answer

The answer of  $\quad $ $\quad $ $\quad $...

Question 20

Rosita's Restaurant has sales of $4,500, total debt of $1,300, total equity of $2,400, and a profit margin of 5%.What is the return on assets?
A)5.00%
B)6.08%
C)7.39%
D)9.38%
E)17.31%

Accepted Answer

Return on assets (ROA) is calculated as Net Income divided by Total Assets. First, calculate Net Income: $4,500 * 5% = $225. Total Assets = Total Debt + Total Equity = $1,300 + $2,400 = $3,700. ROA = $225 / $3,700 = 6.08%.

Quiz 3: Financial Statements Analysis and Long-Term Planning

A firm has a market capitalization of $2 million, market value of interest bearing debt of $1 million, book value of interest bearing debt of $500,000 and cash of $100,000.What is the enterprise value?

Samuelson's has a debt-equity ratio of 40%, sales of $8,000, net income of $600, and total debt of $2,400.What is the return on equity?

Lee Sun's has sales of $3,000, total assets of $2,500, and a profit margin of 5%.The firm has a total debt ratio of 40%.What is the return on equity?

A firm has 5,000 shares of stock outstanding, sales of $6,000, net income of $800, a price-ratio of 10, and a book value per share of $.50.What is the market-to-book ratio?

Jupiter Explorers has $6,400 in sales.The profit margin is 4%.There are 6,400 shares of stock outstanding.The market price per share is $1.20.What is the price-earnings ratio?

A firm has a return on equity of 15%.The debt-equity ratio is 50%.The total asset turnover is 1.25 and the profit margin is 8%.The total equity is $3,200.What is the amount of the net income?

Patti's has net income of $1,800, a price-earnings ratio of 12, and earnings per share of $1.20.How many shares of stock are outstanding?

Mario's Home Systems has sales of $2,800, cost of goods sold of $2,100, inventory of $500, and accounts receivable of $400.How many days, on average, does it take Mario's to sell its inventory?

A firm has net working capital of $400, net fixed assets of $2,400, sales of $6,000, and current liabilities of $800.How many dollars worth of sales are generated from every $1 in total assets?

Syed's Industries has accounts receivable of $700, inventory of $1,200, sales of $4,200, and cost of goods sold of $3,400.How long does it take Syed's to both sell its inventory and then collect the payment on the sale?

Frederico's has a profit margin of 6%, a return on assets of 8%, and an equity multiplier of 1.4.What is the return on equity?

A firm has 5,000 shares of stock outstanding, sales of $6,000, an enterprise value of $5 million and an EBITDA of 1 million.What is the enterprise value multiple?

Rosita's Restaurant has sales of $4,500, total debt of $1,300, total equity of $2,400, and a profit margin of 5%.What is the return on assets?