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Exam 3: Analyzing Financial Statements

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Question 31

Multiple Choice

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Rachets R Us Corp. reported sales for 2013 of $200,000. Rachets R Us listed $25,000 of inventory on its balance sheet. Using a 365-day year, how many days did Rachets R Us's inventory stay on the premises? How many times per year did Rachets R Us's inventory turnover?

A) 0.125 days, 8 times, respectively
B) 0.125 days, 5 times, respectively
C) 45.625 days, 8 times, respectively
D) 45.625 days, 5 times respectively

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Question 32

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You have located the following information on Greenwich Company: debt ratio = 60 percent, capital intensity ratio = 0.75 times, profit margin = 13.5 percent, and dividend payout ratio = 80 percent. What is the sustainable growth rate for Greenwich?

A) 2.70 percent
B) 10.80 percent
C) 25.00 percent
D) 9.89 percent

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Question 33

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Common-size financial statements

Calculate the times interest earned ratio for Paige's Purses, Inc. using the following information: sales = $50,000,000, cost of goods sold = $15,000,000, depreciation expense = $2,000,000, addition to retained earnings = $10,000,000, dividends per share = $1.10, tax rate = 30 percent, and number of shares of common stock outstanding = 10,000,000. Paige's Purses has no preferred stock outstanding.

Which of the following measures the number of days that the firm holds accounts payable before it has to extend cash to buy raw materials?

The term "spreading the financial statements" refers to

Which company has the most risk from an investor's standpoint? Firm A has a PE of 92 times and Firm B has a PE of 16 times. Assume both firms operate in the same industry. Firm A has fewer shares outstanding than Firm B.

Which of these can be used by interested parties to identify changes in corporate performance?

Which of the following refer to ratios that measure the relationship between a firm's liquid (or current) assets and its current liabilities?

A firm has an ROA of 12 percent and an ROE of 52 percent. What is the firm's equity multiplier?

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent. What is the internal growth rate?

Last year Mocha Java, Inc. had an ROA of 10 percent, a profit margin of 5 percent, and sales of $25 million. What is Mocha Java's total assets?

Fancy Paws' year-end price on its common stock is $20. The firm has a profit margin of 12 percent, total assets of $20 million, a total asset turnover ratio of 0.5, no preferred stock, and there are 2 million shares of common stock outstanding. What is the PE ratio for Fancy Paws?

Which ratio measures a firm's ability to pay short-term obligations with its available cash and market securities?

A firm that is efficient in inventory management will have

Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?

Oasis Products, Inc. has current liabilities = $10 million, current ratio = 1.5 times, inventory turnover ratio = 12 times, average collection period = 20 days, and sales = $100 million. What is the value of their cash and marketable securities?

Use the following information to calculate current assets: sales = $100 million, capital intensity ratio = 0.5 times, debt ratio = 30 percent, and fixed asset turnover ratio = 5 times.

Which of the following activities will increase a firm's current ratio?