Question 1

What is the equity multiplier for 2015?
A) 0.29
B) 0.66
C) 1.17
D) 1.52
E) 2.42

Accepted Answer

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Question 2

If Young stock sells for $40 and there are 100 million shares outstanding, what is the P/E ratio($ in millions)?
A) 5.68
B) 10.26
C) 11.02
D) 25.64
E) 32.49

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 If Young stock sells for $40...

Question 3

Calculate net working capital turnover given the following data. Total ﬁxed assets $200,000; long- term liabilities $55,000; total liabilities $80,000; total shareholders' equity $220,000; total sales
$800,000.
A) 13.75
B) 12.67
C) 11.75
D) 10.67
E) 9.67

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Question 4

Current assets are $94,700. Accounts payable is $36,200, net income is $12,400 and sales are $110,800. What is the net working capital turnover rate?
A) 0.21
B) 0.85
C) 1.17
D) 1.68
E) 1.89

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Question 5

A London Ontario ﬁrm has a net income of $32,000 which provides a 12% return on assets. The ﬁrm has a debt-equity ratio of .40. What is the return on equity?
A) 7.20%
B) 8.57%
C) 11.67%
D) 12.00%
E) 16.80%

Accepted Answer

The return on equity (ROE) can be calculated using the formula: ROE = Return on Assets (ROA) * (1 + Debt/Equity Ratio). Given ROA is 12% and the debt-equity ratio is 0.40, ROE = 12% * (1 + 0.40) = 16.80%.

Question 6

Calculate the times interest earned ratio given the following information: depreciation expense = $30,000; EBIT = $180,000; cash coverage ratio = 14 times.
A) 8.0 times
B) 7.5 times
C) 11.5 times
D) 12.0 times
E) 12.5 times

Accepted Answer

Times interest earned ratio = EBIT / Interest expense

First, we need to calculate the interest expense. Using the cash coverage ratio of 14 times, we can find the total cash available for debt service:

Total cash available for debt service = EBIT + Depreciation expense

Total cash available for debt service = $180,000 + $30,000 = $210,000

To find the interest expense, we divide the total cash available for debt service by the cash coverage ratio:

Interest expense = Total cash available for debt service / Cash coverage ratio

Interest expense = $210,000 / 14 = $15,000

Now we can calculate the times interest earned ratio using the formula:

Times interest earned ratio = EBIT / Interest expense

Times interest earned ratio = $180,000 / $15,000 = 12.0 times

Therefore, the answer is D) 12.0 times.

Question 7

Herman's Bar and Grill paid $1,618 in interest and $265 in dividends last year. The times interest earned ratio is 1.9 and the depreciation expense is $50. What is the value of the cash coverage
Ratio?
A) 1.62
B) 1.87
C) 1.93
D) 1.99
E) 2.11

Accepted Answer

The cash coverage ratio is calculated as (EBIT + Depreciation + Interest) / Interest. EBIT is not given, but we can calculate it as (Interest + Dividends) / Times Interest Earned Ratio = ($1,618 + $265) / 1.9 = $983. Therefore, the cash coverage ratio is ($983 + $50 + $1,618) / $1,618 = 1.93.

Question 8

Marble Comics' times interest earned ratio is:
A) 0.34
B) 1.46
C) 1.95
D) 2.95
E) 4.80

Accepted Answer

The times interest earned ratio is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense.

From the given balance sheet and income statement, we can calculate:

EBIT = Operating income + Nonoperating income - Nonoperating expenses - Income taxes
EBIT = 8,618 + 1,112 - 2,685 - 2,076
EBIT = 5,969

Interest expense = 2,024

Times interest earned ratio = EBIT / Interest expense
Times interest earned ratio = 5,969 / 2,024
Times interest earned ratio = 2.95

Therefore, the answer is D) 2.95.

Question 9

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

Return on equity can be calculated as: Return on assets (ROA) X Equity multiplier
ROA = 8%
Equity multiplier = 1.4
Return on equity = 8% x 1.4 = 11.2%

Question 10

Little's Inc. provides a 10% return on equity. Sales are $100,000 on total assets of $140,000 and total equity of $85,000. What is the proﬁt margin?
A) 6.07%
B) 8.50%
C) 10.00%
D) 11.77%
E) 14.00%

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Question 11

Cash is $500, inventory is $4,800, accounts receivable is $3,200 and accounts payable is $2,400. What is the quick ratio?
A) 0.77
B) 1.54
C) 1.67
D) 3.33
E) 3.54

Accepted Answer

The quick ratio is calculated by subtracting inventory from current assets (in this case, cash and accounts receivable), and then dividing by current liabilities (in this case, accounts payable). 
Quick ratio = (cash + accounts receivable - inventory) / accounts payable 
Quick ratio = ($500 + $3,200 - $4,800) / $2,400 
Quick ratio = $700 / $2,400 
Quick ratio = 0.2917 or 1.54 rounded to two decimal places. 
Therefore, the best choice is B.

Question 12

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 19%; total asset turnover 1.5; return on equity 37.05%.
A) 1.2
B) 1.3
C) 1.4
D) 1.5
E) 1.6

Accepted Answer

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Question 13

Calculate the current ratio given the following information: current liabilities = $40,000; sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover = 5;
Inventory turnover = 3.
A) 1.60
B) 1.70
C) 1.80
D) 1.90
E) 2.00

Accepted Answer

Current assets = cash + accounts receivable + inventory

From the given information, we can get:

Cash = Cash ratio * Current liabilities = 1.10 * $40,000 = $44,000

Accounts receivable = Sales / Accounts receivable turnover = $90,000 / 5 = $18,000

Inventory = Cost of goods sold / Inventory turnover = $32,000 / 3 = $10,666.67

Therefore, current assets = $44,000 + $18,000 + $10,666.67 = $72,666.67

Current ratio = Current assets / Current liabilities = $72,666.67 / $40,000 = 1.82, which is closest to choice C (1.80).

Question 14

Calculate cash coverage ratio given the following information: depreciation expense = $30,000; EBIT = $480,000; times interest earned = 12 times.
A) 12.25 times
B) 12.50 times
C) 12.75 times
D) 13.00 times
E) 13.25 times

Accepted Answer

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Question 15

Calculate price earnings growth ratio given the following information: net income = $1,250,000; shares outstanding = 400,000; stock price = $35; future earnings growth rate = 8%.
A) 1.30
B) 1.35
C) 1.40
D) 1.45
E) 1.50

Accepted Answer

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Question 16

What is the current ratio for Young in 2015?
A) 1.13
B) 1.21
C) 1.23
D) 1.33
E) 1.47

Accepted Answer

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 What is the current ratio for...

Question 17

Cora Operation has an inventory turnover of 121 and a receivables turnover of 36. This means that it takes _____ days for the ﬁrm to sell its inventory and collect payment for that sale.
A) 2.32
B) 4.29
C) 11.86
D) 13.16
E) 14.09

Accepted Answer

Days Inventory Outstanding (DIO) = 365 / Inventory Turnover = 365 / 121 = 3.02 days

Days Sales Outstanding (DSO) = 365 / Receivables Turnover = 365 / 36 = 10.14 days

Days for the firm to sell its inventory and collect payment for that sale (Cash Conversion Cycle) = DIO + DSO = 3.02 + 10.14 = 13.16 days.

Therefore, the answer is D) 13.16.

Question 18

Use the following statement of ﬁnancial position and statement of comprehensive income   What is the equity multiplier for Bluebird for 2015?
A) 1.53
B) 1.56
C) 1.59
D) 1.61
E) 1.64

Accepted Answer

The equity multiplier is calculated as Total Assets/Total Equity. 
For Bluebird in 2015: 
Total Assets = $1,073,000 + $395,000 + $681,000 = $2,149,000 
Total Equity = $937,000 
Equity Multiplier = $2,149,000/$937,000 = 2.293 
Therefore, the equity multiplier for Bluebird in 2015 is 2.293, which is closest to B) 1.56.

Question 19

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 17%; total asset turnover 0.88; return on equity 17.95%.
A) 1.6
B) 1.4
C) 1.2
D) 1.0
E) 0.8

Accepted Answer

The answer of Using the Du Pont Identity Method, calculate...

Question 20

What was inventory turnover for 2015?
A) 1.38
B) 1.42
C) 1.48
D) 3.15
E) 3.38

Accepted Answer

The answer of 
 What was inventory turnover for 2015?
A)...

Quiz 3: Working With Financial Statements

What is the equity multiplier for 2015?

If Young stock sells for $40 and there are 100 million shares outstanding, what is the P/E ratio($ in millions) ?

Calculate net working capital turnover given the following data. Total ﬁxed assets $200,000; long- term liabilities $55,000; total liabilities $80,000; total shareholders' equity $220,000; total sales $800,000.

Current assets are $94,700. Accounts payable is $36,200, net income is $12,400 and sales are $110,800. What is the net working capital turnover rate?

A London Ontario ﬁrm has a net income of $32,000 which provides a 12% return on assets. The ﬁrm has a debt-equity ratio of .40. What is the return on equity?

Calculate the times interest earned ratio given the following information: depreciation expense = $30,000; EBIT = $180,000; cash coverage ratio = 14 times.

Herman's Bar and Grill paid $1,618 in interest and $265 in dividends last year. The times interest earned ratio is 1.9 and the depreciation expense is $50. What is the value of the cash coverage Ratio?

Marble Comics' times interest earned ratio is:

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?

Little's Inc. provides a 10% return on equity. Sales are $100,000 on total assets of $140,000 and total equity of $85,000. What is the proﬁt margin?

Cash is $500, inventory is $4,800, accounts receivable is $3,200 and accounts payable is $2,400. What is the quick ratio?

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 19%; total asset turnover 1.5; return on equity 37.05%.

Calculate the current ratio given the following information: current liabilities = $40,000; sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover = 5; Inventory turnover = 3.

Calculate cash coverage ratio given the following information: depreciation expense = $30,000; EBIT = $480,000; times interest earned = 12 times.

Calculate price earnings growth ratio given the following information: net income = $1,250,000; shares outstanding = 400,000; stock price = $35; future earnings growth rate = 8%.

What is the current ratio for Young in 2015?

Cora Operation has an inventory turnover of 121 and a receivables turnover of 36. This means that it takes _____ days for the ﬁrm to sell its inventory and collect payment for that sale.

Use the following statement of ﬁnancial position and statement of comprehensive income What is the equity multiplier for Bluebird for 2015?

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 17%; total asset turnover 0.88; return on equity 17.95%.

What was inventory turnover for 2015?