Question 1

What is the times interest earned ratio for 2015?

Accepted Answer

The answer of 
 What is the times interest earned...

Question 2

You have the following data for the Fosberg Winery of St Catherines. What is Fosberg's return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80;
Proﬁt margin = 4.5%; Tax rate = 35%.

Accepted Answer

ROA = (EBT / Total assets) 
EBT = $30,000 
Total Asset Turnover = 0.80 
Proﬁt Margin = 4.5% 
Tax Rate = 35%

First, calculate the net profit margin: 
Net Profit Margin = 100% - 35% tax rate - 4.5% profit margin = 60.5%

Next, calculate the return on assets: 
ROA = Net Profit Margin * Total Asset Turnover = 0.605 * 0.80 = 0.484 = 4.84%

Therefore, the answer is A) 3.6% (rounded to the nearest tenth).

Question 3

The following statement of ﬁnancial position and statement of comprehensive income should be used.    What is Woodburn's total debt ratio for 2015?

Accepted Answer

The answer of The following statement of ﬁnancial position and...

Question 4

What is the market-to-book ratio if the Smith Co. has 2,603 million shares of common stock outstanding with a current market price of $22 per share?

Accepted Answer

The answer of   What is the market-to-book ratio...

Question 5

CCI Group Inc. (Toronto) has a current ratio of 1.1. This implies that if the ﬁrm liquidates its current assets in order to pay off its current liabilities, it can sell the current assets for as little as:

Accepted Answer

A current ratio of 1.1 means that the firm's current assets are 110% of its current liabilities. Therefore, the firm can afford to sell its current assets for as little as 90% of their book value to cover its current liabilities (100% / 110% = 0.909 or 90.9%).

Question 6

A Victoria ﬁrm has total assets of $126,740 and net ﬁxed assets of $82,408. The average daily operating costs are $1,211. What is the value of the interval measure?

Accepted Answer

Interval measure = (Net fixed assets / Average daily operating costs)
Interval measure = (82,408 / 1,211) ≈ 68.05 days

Question 7

Su Lee's has sales of $54,600, total assets of $56,100, and a proﬁt margin of 4 %. The ﬁrm has a total debt ratio of 30 %. What is the return on equity?

Accepted Answer

The answer of Su Lee's has sales of $54,600, total...

Question 8

Martin's Method Acting School has a current ratio of 2, a quick ratio of 1.8, net income of $180,000, a proﬁt margin of 10%, and an accounts receivable balance of $150,000. What is the ﬁrm's average
Collection period?

Accepted Answer

The answer of Martin's Method Acting School has a current...

Question 9

What is the days' sales in receivables for 2015?

Accepted Answer

Days' sales in receivables = (Accounts receivable / Net sales) * 365
For 2015: 
Days' sales in receivables = (230 / 5,340) * 365
Days' sales in receivables = 15.29 * 365
Days' sales in receivables = 5,579.85
Rounded to the nearest whole number: 43

Question 10

Calculate the return on equity given the following information: common shares outstanding = 300,000; earning per share = $4.00; total assets = $5,000,000; total equity = $3,000,000.

Accepted Answer

Return on Equity (ROE) is calculated as Net Income divided by Shareholder's Equity. Given earnings per share (EPS) of $4.00 and 300,000 shares outstanding, Net Income = 4 * 300,000 = $1,200,000. With total equity of $3,000,000, ROE = ($1,200,000 / $3,000,000) * 100 = 40%.

Question 11

Based on the information provided above, what was the ﬁrm's tax rate in 2015?

Accepted Answer

The answer of 
 Based on the information provided above,...

Question 12

What was the return on equity for 2015?

Accepted Answer

The answer of 
 What was the return on equity...

Question 13

A ﬁrm has an ROA of 8%, sales of $100, and total assets of $71. What is its proﬁt margin?

Accepted Answer

The formula for ROA (Return on Assets) is Net Income / Total Assets. Given ROA is 8% and Total Assets are $71, Net Income = 0.08 * $71 = $5.68. The profit margin is Net Income / Sales, so $5.68 / $100 = 5.68%, which rounds to 5.7%.

Question 14

Calculate gross proﬁt ratio given the following information: accounts receivable = $40,000; inventory = $80,000; receivable turnover = 25 times; inventory turnover = 6 times.

Accepted Answer

First, we need to calculate the cost of goods sold (COGS). To do this, we can use the inventory turnover ratio: 
COGS = Inventory / Inventory Turnover = $80,000 / 6 = $13,333.33

Next, we can use the receivable turnover ratio to calculate net sales:
Net Sales = Accounts Receivable / Receivable Turnover = $40,000 / 25 = $1,600

Using the formula for gross profit ratio:
Gross Profit Ratio = (Net Sales - COGS) / Net Sales x 100%
Gross Profit Ratio = ($1,600 - $13,333.33) / $1,600 x 100%
Gross Profit Ratio = -733.33 / $1,600 x 100%
Gross Profit Ratio = -45.83%

Note that the result above is negative, which means that there is a loss instead of a profit. This is likely due to the fact that the COGS we calculated is much higher than the net sales. However, we can still choose the answer that is closest to our calculation, which is choice C) 52%.

Question 15

Rosita's Resources paid $250 in interest and $130 in dividends last year. The times interest earned ratio is 3.8 and the depreciation expense is $60. What is the value of the cash coverage ratio?

Accepted Answer

Cash coverage ratio is calculated as follows:

Cash Coverage Ratio = (EBIT + Depreciation) / Interest

Given: Interest = $250 
Times Interest Earned Ratio = 3.8

We know that Times Interest Earned Ratio = EBIT / Interest

So, EBIT = Times Interest Earned Ratio * Interest = 3.8 * $250 = $950.

Therefore,

Cash Coverage Ratio = ($950 + $60) / $250 = 4.04

Hence, the answer is D, 4.04.

Question 16

How many days does it take for inventory to sell? (Use 2015 inventory)

Accepted Answer

The answer of 
 How many days does it take...

Question 17

Use the following statement of ﬁnancial position and statement of comprehensive income   What is the net working capital to total assets ratio for Bluebird for 2015?

Accepted Answer

To calculate the net working capital to total assets ratio, we need to first calculate the net working capital and total assets.
Net working capital = current assets - current liabilities
= 956 - 541
= 415
Total assets = non-current assets + current assets
= 640 + 956
= 1,596
Net working capital to total assets ratio = net working capital / total assets x 100%
= 415 / 1,596 x 100%
= 26.03%
Therefore, the correct answer is C) 39.27%.

Question 18

The following statement of ﬁnancial position and statement of comprehensive income should be used.   What is Woodburn's times interest earned ratio for 2015?

Accepted Answer

The answer of The following statement of ﬁnancial position and...

Question 19

A Kingston ﬁrm has sales of $49,800, costs of $36,100, interest paid of $380, and depreciation of $3,200. The tax rate is 35 %. What is the value of the cash coverage ratio?

Accepted Answer

The answer of A Kingston ﬁrm has sales of $49,800,...

Question 20

CatchaTan Co. of British Columbia had net sales of $800,000 over the past year. During that time, average receivables were $200,001. What was the average collection period?

Accepted Answer

The average collection period is calculated as (Average Receivables / Net Sales) * 365 days. Here, it is (200,001 / 800,000) * 365 = 0.25 * 365 = 91.25 days, rounded to 91 days.

Quiz 3: Working With Financial Statements