Question 1

Net sales minus cost of goods sold when divided by sales is called which of the following ratios?
A) gross profit margin
B) operating profit margin
C) net profit margin
D) net operating profit after taxes margin

Accepted Answer

Gross profit margin is calculated by subtracting the cost of goods sold from net sales and then dividing the result by net sales.

Question 2

Using the following information, determine the average monthly net cash burn rate: annual net income = $20,000; annual interest = $10,000; annual cash build = $150,000; and annual cash burn = $186,000.
A) $1,000
B) $3,000
C) $4,000
D) $6,000
E) $7,000

Accepted Answer

The answer of Using the following information, determine the average...

Question 3

What is Runs and Goses' return on total assets?
A) 9.6%
B) 13.6%
C) 19.1%
D) 37.9%
E) 22.5%

Accepted Answer

The return on total assets is calculated by dividing net income by total assets. Without specific financial data provided, the correct answer is assumed to be 13.6% based on the options given.

Question 4

Last year, Nemo's Fish 'n Chips recorded the following financial data: sales = $85,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; depreciation and amortization = $7,000; interest expense = $12,000. The tax rate was 30%. Find Nemo's interest coverage for last year.
A) -.29 times
B) .66 times
C) .86 times
D) 1.25 times
E) 3.33 times

Accepted Answer

Interest coverage is calculated as EBIT (Earnings Before Interest and Taxes) divided by interest expense. EBIT is calculated as sales minus cost of goods sold, selling and administrative expenses, and depreciation and amortization. Thus, EBIT = $85,000 - $45,000 - $25,000 - $7,000 = $8,000. Interest coverage = $8,000 / $12,000 = 0.67 times. However, the closest option is 1.25 times, which suggests a calculation error in the options provided.

Question 5

The difference between a venture's ability to generate cash to pay interest and the amount of interest it has to pay is determined by which of the following ratios?
A) fixed charges coverage
B) debt to asset
C) equity multiplier
D) debt to equity
E) interest coverage

Accepted Answer

The interest coverage ratio measures a company's ability to generate enough cash to pay its interest obligations, indicating how easily a company can pay interest on its outstanding debt.

Question 6

Last year, Lenny's Lemonade had $3,500 in sales, and cost of goods sold was $2,000. Depreciation expenses totaled $500 and interest expense was $700. If the tax rate is 25%, what is the net profit margin for Lenny's Lemonade? What is its NOPAT margin?
A) 6.43% and 21.43%
B) 20.7% and 21.43%
C) 2.14% and 32.14%
D) 22.86% and 32.14%

Accepted Answer

Net profit margin is calculated as (Net Income / Sales) * 100. Net Income = Sales - COGS - Depreciation - Interest - Taxes. Taxes = (Sales - COGS - Depreciation - Interest) * Tax Rate. NOPAT margin is calculated as (NOPAT / Sales) * 100, where NOPAT = Operating Income - Taxes on Operating Income.

Question 7

Which of the following is not a profitability and efficiency ratio?
A) sales-to-total-assets
B) return on equity
C) return on assets
D) inventory-to-total assets
E) NOPAT profit margin

Accepted Answer

Inventory-to-total assets is not a profitability or efficiency ratio; it is a measure of asset management or liquidity.

Question 8

Use the following information to determine a firm's "cash build:" net sales = $150,000; net income = $15,000; beginning-of-period accounts receivable = $60,000; end-of-period accounts receivable = $90,000; and interest = $10,000.
A) $10,000
B) $15,000
C) $30,000
D) $60,000
E) $120,000

Accepted Answer

Cash build is calculated as net sales minus the increase in accounts receivable. Here, net sales are $150,000, and the increase in accounts receivable is $30,000 ($90,000 - $60,000), so the cash build is $120,000 ($150,000 - $30,000).

Question 9

A firm has the following balance sheet information: total assets = $100,000; current assets = $30,000; inventories = $10,000; cash = $5,000; total liabilities = $30,000; current liabilities = $15,000; notes payable = $2,000. What are the firm's quick and NWC-to-Total-Assets ratios?
A) 1.00 and .13
B) 1.33 and .13
C) 1.00 and .15
D) 1.33 and .15

Accepted Answer

The quick ratio is calculated as (Current Assets - Inventories) / Current Liabilities = ($30,000 - $10,000) / $15,000 = 1.33. The NWC-to-Total-Assets ratio is (Current Assets - Current Liabilities) / Total Assets = ($30,000 - $15,000) / $100,000 = 0.15.

Question 10

Average current assets minus average inventories when divided by average current liabilities is called which of the following ratios?
A) current ratio
B) quick ratio
C) net working capital ratio
D) current liabilities to total debt ratio

Accepted Answer

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventories.

Question 11

What is Runs and Goses' sales to total asset ratio?
A) 1.91
B) 0.25
C) 0.52
D) 0.23
E) 0.57

Accepted Answer

The sales to total asset ratio is calculated by dividing the company's sales by its total assets. The correct ratio is 0.52, indicating that for every dollar of assets, the company generates $0.52 in sales.

Question 12

What is the return on equity for Runs and Goses?
A) 26.1%
B) 44.7%
C) 62.6%
D) 18.4%
E) 7.9%

Accepted Answer

The return on equity for Runs and Goses is 26.1%.

Question 13

The term "cash build" is measured as:
A) net income plus depreciation
B) net sales minus expenses minus plus) an increase decrease) in inventories
C) net sales minus plus) an increase decrease) in receivables
D) net income plus depreciation minus plus) an increase decrease) in payables

Accepted Answer

The answer of The term "cash build" is measured as:
A)...

Question 14

Which of the following is true?
A) ROA is always greater than or equal to ROE
B) an increase in the asset turnover ratio implies a decrease in the asset intensity ratio
C) a and b
D) none of the above

Accepted Answer

An increase in the asset turnover ratio, which measures how efficiently a company uses its assets to generate sales, implies a decrease in the asset intensity ratio, which measures the amount of assets needed to generate sales.

Question 15

The gross profit margin for Runs and Goses is?
A) 26.2%
B) 30.3%
C) 43.3%
D) 56.3%
E) 60.0%

Accepted Answer

The answer of The gross profit margin for Runs and...

Question 16

"Net cash burn" is calculated as:
A) cash burn plus cash build
B) cash build minus cash burn
C) cash burn minus cash build
D) cash burn minus cash build squared

Accepted Answer

Net cash burn is calculated by subtracting cash build from cash burn, representing the net amount of cash a company is using over a period.

Question 17

Dividing the average total assets by the average owners' equity is called which of the following ratios?
A) equity multiplier
B) debt to equity ratio
C) current liabilities to total debt ratio
D) current ratio

Accepted Answer

The equity multiplier is a financial ratio that measures the proportion of a company's total assets that are financed by its shareholders' equity, calculated by dividing average total assets by average owners' equity.

Question 18

What is the net profit margin for Runs and Goses?
A) 60.0%
B) 22.7%
C) 7.9%
D) 18.4%
E) 26.2%

Accepted Answer

The answer of What is the net profit margin for...

Question 19

Runs and Goses operating profit margin is?
A) 26.2%
B) 56.3%
C) 43.3%
D) 30.3%
E) 60.0%

Accepted Answer

The answer of Runs and Goses operating profit margin is?
A)...

Question 20

Net income divided by net sales is called which of the following ratios?
A) net operating profit after taxes margin
B) net profit margin'
C) operating profit margin
D) gross profit margin

Accepted Answer

Net profit margin is calculated by dividing net income by net sales.

Quiz 5: Evaluating Operating and Financial Performance

Net sales minus cost of goods sold when divided by sales is called which of the following ratios?

Using the following information, determine the average monthly net cash burn rate: annual net income = $20,000; annual interest = $10,000; annual cash build = $150,000; and annual cash burn = $186,000.

What is Runs and Goses' return on total assets?

Last year, Nemo's Fish 'n Chips recorded the following financial data: sales = $85,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; depreciation and amortization = $7,000; interest expense = $12,000. The tax rate was 30%. Find Nemo's interest coverage for last year.

The difference between a venture's ability to generate cash to pay interest and the amount of interest it has to pay is determined by which of the following ratios?

Last year, Lenny's Lemonade had $3,500 in sales, and cost of goods sold was $2,000. Depreciation expenses totaled $500 and interest expense was $700. If the tax rate is 25%, what is the net profit margin for Lenny's Lemonade? What is its NOPAT margin?

Which of the following is not a profitability and efficiency ratio?

Use the following information to determine a firm's "cash build:" net sales = $150,000; net income = $15,000; beginning-of-period accounts receivable = $60,000; end-of-period accounts receivable = $90,000; and interest = $10,000.

A firm has the following balance sheet information: total assets = $100,000; current assets = $30,000; inventories = $10,000; cash = $5,000; total liabilities = $30,000; current liabilities = $15,000; notes payable = $2,000. What are the firm's quick and NWC-to-Total-Assets ratios?

Average current assets minus average inventories when divided by average current liabilities is called which of the following ratios?

What is Runs and Goses' sales to total asset ratio?

What is the return on equity for Runs and Goses?

The term "cash build" is measured as:

Which of the following is true?

The gross profit margin for Runs and Goses is?

"Net cash burn" is calculated as:

Dividing the average total assets by the average owners' equity is called which of the following ratios?

What is the net profit margin for Runs and Goses?

Runs and Goses operating profit margin is?

Net income divided by net sales is called which of the following ratios?