Question 1

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-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

Sales to total asset ratio = Net sales / Total assets

Total assets = Cash + Accounts Receivable + Inventory + Net Fixed Assets
+ Total Liabilities + Common Stock + Retained Earnings
= $242 + $850 + $820 + $3,408 + $1,840 + $1,160 + $1,620 
= $9,140

Net sales = $2,768

Hence, Sales to total asset ratio = $2,768 / $9,140 = 0.52

Therefore, the best choice is C.

Question 2

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

Dividing the average total assets by the average owners' equity gives the equity multiplier ratio, which measures the amount of assets a company holds per dollar of shareholder equity.

Question 3

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-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

Return on total assets = Net Income/Total assets 
= (Net sales - Cost of goods sold - Depreciation - Interest expense - Taxes)/Total assets 
= (2768 - 1210 - 360 - 160 - 312)/ (242 + 850 + 820 + 3408)/2 
= 0.136 or 13.6%

The correct answer is choice B.

Question 4

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 a liquidity ratio, not a profitability and efficiency ratio. It measures the proportion of a company's assets that are tied up in inventory and is used to evaluate the company's ability to turn inventory into cash.

Question 5

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

The answer of Use the following information to determine a...

Question 6

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-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 answer of In its closing financial statements for its...

Question 7

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

The formula given in the question is the formula for calculating gross profit margin.

Question 8

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-What is the current ratio for Runs and Goses?
A)1.46
B)1.33
C)1.23
D)1.21
E)1.13

Accepted Answer

The answer of In its closing financial statements for its...

Question 9

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-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 In its closing financial statements for its...

Question 10

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

The answer of Last year,Nemo's Fish 'n Chips recorded the...

Question 11

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 = (Net Income/Sales) x 100
 = [(Sales - Cost of goods sold - Depreciation expenses - Interest expenses) x (1- Tax rate) / Sales] x 100
 = [(3500 - 2000 - 500 - 700) x (1-0.25) / 3500] x 100
 = 6.43%

NOPAT margin = (NOPAT/Sales) x 100
Where, NOPAT = Net operating profit after taxes = Operating income x (1-Tax rate)
= (Sales - Cost of goods sold - Depreciation expenses - Interest expenses) x (1- Tax rate)
= (3500 - 2000 - 500 - 700) x (1-0.25)
= $525

NOPAT margin = (525/3500) x 100
= 15%
Therefore, the net profit margin is 6.43% and the NOPAT margin is 15%. The closest option is A which is the best choice.

Question 12

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-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 In its closing financial statements for its...

Question 13

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 income divided by net sales is known as net profit margin, which measures the percentage of revenue that remains as profit after all expenses are deducted.

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

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 ratio described is the quick ratio, also known as the acid test ratio. It is a measure of a company's ability to pay off its current liabilities using only quick assets (cash, marketable securities, and accounts receivable), and excludes inventories which may not be liquid enough to cover immediate obligations.

Question 16

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 ratio that measures a venture's ability to generate cash to pay interest is the interest coverage ratio. It calculates how many times a venture's operating income can cover its interest expenses. This ratio is important for lenders and investors to assess a venture's ability to service its debt. The higher the interest coverage ratio, the better the venture's ability to pay its interest payments. Therefore, 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 the interest coverage ratio.

Question 17

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 answer of A firm has the following balance sheet...

Question 18

In its closing financial statements for its first year in business, the Runs and Goses Company, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of$3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of $1,160, retained earnings of$1,620, net sales of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition to retained earnings of $508, and dividends paid of $218.
-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 In its closing financial statements for its...

Question 19

A venture has net sales of $400,000,cost of goods sold of $200,000,operating expenses (selling,general,and administrative)of $100,000,and interest expenses of $50,000.What is the operating profit margin?
A)50.0%
B)75%
C)25%
D)40%

Accepted Answer

Operating profit margin is calculated as (Net Sales - Cost of Goods Sold - Operating Expenses) / Net Sales. 
Therefore, (400,000 - 200,000 - 100,000) / 400,000 = 0.25 or 25%. The correct choice is C.

Question 20

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 monthly...

Quiz 5: Evaluating Operating and Financial Performance

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

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.

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

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.

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?

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

Which of the following is true?

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

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 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 venture has net sales of $400,000,cost of goods sold of $200,000,operating expenses (selling,general,and administrative) of $100,000,and interest expenses of $50,000.What is the operating profit margin?

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.