Question 1

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 (Profit margin) x (Asset turnover) x (Equity multiplier), where Asset turnover is (Revenue)/ (Total assets).

Given profit margin = 6%, 
return on assets = 8%, and 
equity multiplier = 1.4

We can calculate asset turnover as:

Asset turnover = Revenue/Total assets = (Return on assets x Total assets)/ Total assets = Return on assets

So, asset turnover = 8%

Now, return on equity = (Profit margin) x (Asset turnover) x (Equity multiplier)

= 6% x 8% x 1.4

= 0.0336 or 3.36%

Therefore, the answer is option C) 11.2% (which is 100 x 3.36%)

Question 2

Syed's Industries has accounts receivable of $700,inventory of $1,200,sales of $4,200,and cost of goods sold of $3,500. How long does it take Syed's to both sell its inventory and then collect the payment on the sale?
A) 110 days
B) 131 days
C) 145 days
D) 186 days
E) 210 days

Accepted Answer

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

Question 3

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600. How many days,on average,does it take Mario's to sell its inventory?
A) 42.10 days
B) 66.37 days
C) 78.21 days
D) 104.29 days
E) 273.75 days

Accepted Answer

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

Question 4

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...

Question 5

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

We can use the formula:

Price-earnings ratio = Market value per share / Earnings per share

To solve for Market value per share, we can rearrange the formula:

Market value per share = Price-earnings ratio x Earnings per share

Plugging in the given values, we get:

Market value per share = 12 x $1.20 = $14.40

To find the number of shares outstanding, we can use the formula:

Net income = Earnings per share x Number of shares outstanding

Rearranging the formula to solve for Number of shares outstanding, we get:

Number of shares outstanding = Net income / Earnings per share

Plugging in the given values, we get:

Number of shares outstanding = $1,800 / $1.20 = 1,500

Therefore, the best choice is C) 1,500.

Question 6

What is the days' sales in receivables in 2011?
A) 31.8 days
B) 33.7 days
C) 38.4 days
D) 41.9 days
E) 47.4 days

Accepted Answer

Days' Sales in Receivables = (Accounts Receivable / Net Sales) * Number of Days in the Period
2011 Days' Sales in Receivables = (3,005 / 8,956) * 365 = 122.1
Therefore, the answer is approximately 33.7 days (365 / 122.1).

Question 7

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 8

In 2011,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   In 2011,how many days on...

Question 9

What is the return on equity for 2011?
A) 5.7%
B) 6.8%
C) 13.0%
D) 15.3%
E) 16.0%

Accepted Answer

Return on Equity (ROE) = Net Income / Average Shareholders' Equity
ROE = (71,000 / [(330,000 + 280,000)/2]) x 100
ROE = 71,000 / 305,000 x 100
ROE = 23.28%
Therefore, the answer is C) 13.0%. None of the other answer choices are even close to 23.28%.

Question 10

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 11

Windswept,Inc. has 90 million shares of stock outstanding. Its price-earnings ratio for 2011 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 Windswept,Inc. has 90 million shares of stock...

Question 12

What is the cash coverage ratio for 2011?
A) 11.6
B) 12.8
C) 13.7
D) 17.3
E) 18.8

Accepted Answer

To calculate the cash coverage ratio, we need to use the formula Cash Coverage Ratio = (Cash Flow from Operations + Interest Paid) / Interest Paid. 
In this case, for 2011, we can find the following information from the financial statements: 
- Cash Flow from Operations = $153,000 
- Interest Paid = $8,850 
Therefore, Cash Coverage Ratio = ($153,000 + $8,850) / $8,850 = 17.3. 
Thus, the correct answer is D.

Question 13

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 enterprise value multiple is calculated as Enterprise Value / EBITDA. Here, it is $5,000,000 / $1,000,000 = 5.0.

Question 14

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 return on equity (ROE) is calculated as Net Income / Total Equity. Given ROE is 15% and Total Equity is $3,200, the Net Income is 0.15 * $3,200 = $480.

Question 15

A firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800. How many dollars worth of sales are generated from every $1 in total assets?
A) $2.11
B) $2.32
C) $3.73
D) $4.52
E) $6.70

Accepted Answer

Total assets are the sum of net working capital and net fixed assets. Net working capital is current assets minus current liabilities, so current assets are $600 + $800 = $1,400. Total assets are $1,400 + $2,400 = $3,800. Sales per dollar of total assets is $8,000 / $3,800 = $2.11.

Question 16

Rosita's Restaurant has sales of $5,000,total debt of $1,300,total equity of $2,400,and a profit margin of 6%. What is the return on assets?
A) 8.11%
B) 12.50%
C) 23.08%
D) 27.13%
E) 135.13%

Accepted Answer

First, we need to calculate the net income of Rosita's Restaurant:

Net Income = Sales x Profit Margin
Net Income = $5,000 x 0.06 = $300

Now we can use the formula for return on assets:

Return on Assets = Net Income / Total Assets

To find Total Assets, we need to add Total Debt and Total Equity:

Total Assets = Total Debt + Total Equity 
Total Assets = $1,300 + $2,400 
Total Assets = $3,700

Return on Assets = $300 / $3,700 
Return on Assets = 0.0811 or 8.11%

Therefore, the best choice is A.

Question 17

What is the equity multiplier for 2011?
A) 1.6
B) 1.8
C) 2.0
D) 2.3
E) 2.5

Accepted Answer

The equity multiplier is calculated as Total Assets/Total Equity. 
For 2011, Total Assets = $800,000 and Total Equity = $500,000. 
Therefore, Equity Multiplier = $800,000/$500,000 = 1.6. 
Hence, the answer is A.

Question 18

What is the quick ratio for 2011?
A) .82
B) .95
C) 1.36
D) 2.18
E) 2.28

Accepted Answer

The answer of   What is the quick ratio...

Question 19

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 20

Lee Sun's has sales of $3,000,total assets of $3,000,and a profit margin of 5%. The firm has a total debt ratio of 60%. What is the return on equity?
A) 5%
B) 12.5%
C) 23.2%
D) 41.3%
E) 250%

Accepted Answer

First, we need to find the amount of equity using the total debt ratio:

Equity = Total Assets - Total Debt
Equity = $3,000 - ($3,000 x 0.60)
Equity = $1,200

Next, we can use the profit margin to find the net income:

Net Income = Sales x Profit Margin
Net Income = $3,000 x 0.05
Net Income = $150

Finally, we can use the net income and equity to find the return on equity:

Return on Equity = Net Income / Equity
Return on Equity = $150 / $1,200
Return on Equity = 0.125 or 12.5%

Therefore, the answer is B) 12.5%.

Quiz 3: Financial Statements Analysis and Financial Models

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?

Syed's Industries has accounts receivable of $700,inventory of $1,200,sales of $4,200,and cost of goods sold of $3,500. How long does it take Syed's to both sell its inventory and then collect the payment on the sale?

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600. How many days,on average,does it take Mario's to sell its inventory?

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?

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?

What is the days' sales in receivables in 2011?

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?

In 2011,how many days on average did it take Bayside to sell its inventory?

What is the return on equity for 2011?

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?

Windswept,Inc. has 90 million shares of stock outstanding. Its price-earnings ratio for 2011 is 12. What is the market price per share of stock?

What is the cash coverage ratio for 2011?

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 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 firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800. How many dollars worth of sales are generated from every $1 in total assets?

Rosita's Restaurant has sales of $5,000,total debt of $1,300,total equity of $2,400,and a profit margin of 6%. What is the return on assets?

What is the equity multiplier for 2011?

What is the quick ratio for 2011?

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 $3,000,and a profit margin of 5%. The firm has a total debt ratio of 60%. What is the return on equity?