A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

A) Liquidity

B) Leverage

C) Efficiency

D) Profitability

In the times-interest-earned ratio, dividend payments are included in

A) the numerator.

B) the denominator.

C) both the numerator and the denominator.

D) neither the numerator nor the denominator.

Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and fixed asset turnover ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive

A) accounts receivable.

B) fixed assets.

C) debt.

D) inventory.

Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and acid test ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive

A) accounts receivable.

B) fixed assets.

C) debt.

D) inventory.

A firm is conducting an analysis of trends over time and discovers that its inventory turnover has declined. This may be due to

A) an increase in sales.

B) an increase in cost of goods sold.

C) an increase in inventory purchases.

D) a decrease in inventory purchases.

If the total asset turnover decreases, then the return on equity will

A) decrease.

B) increase.

C) not change.

D) change, but in an indeterminate way.

Kannan Carpets, Inc. has asked you to calculate the company's current ratio for 2001

Kannan Carpets, Inc. has asked you to calculate the company's current ratio for 2001. All you have is a partial balance sheet and some assumptions. Using the information provided, calculate Kannan's current ratio for 2001.

Gross profit margin = 50%

Inventory turnover (COGS/Inv) = 5

2001 sales = $3,000

Assets                                                                     Liabilities & Equity

Cash                                      ?                              Accounts payable             $50

AR                                          $40                         Accruals                               ?

Inventory                             ?                              Long-term debt                  $400

Net fixed assets                  $500                      Equity                                   250

Total assets                         $900                       Total liab. & equity           ?

A) 0.3

B) 0.8

C) 1.6

D) 2.2

Kannan Carpets, Inc. has asked you to calculate the company's quick ratio for 2001. All you have is a partial balance sheet and some assumptions. Using the information provided, calculate Kannan's quick ratio for 2001.

Gross profit margin = 50%

Inventory turnover (COGS/Inv) = 5

2001 sales = $3,000

Assets                                                                     Liabilities & Equity

Cash                                      ?                              Accounts payable             $50

AR                                          $40                         Accruals                               ?

Inventory                             ?                              Long-term debt                  $400

Net fixed assets                  $500                      Equity                                   250

Total assets                         $900                       Total liab. & equity           ?

A) 0.2

B) 0.4

C) 0.6

D) 0.8

Dew Point Dynamite, Inc. generated a 1.23 total asset turnover in its latest fiscal year on assets of $2,112,077. The firm has total liabilities of $950,997. The firm's net profit margin was 10.3%. What is Dew Point's return on equity? Round to the nearest 0.1%.

A) 23.1%

B) 12.6%

C) 5.5%

D) 18.2%

An example of a liquidity ratio is the

A) quick ratio.

B) debt ratio.

C) times-interest-earned.

D) return on assets.

Storm King Associates has a total asset turnover ratio of 1.90 and a return on total assets of 7.20%.

Storm King Associates has a total asset turnover ratio of 1.90 and a return on total assets of 7.20%. What is Storm King's net profit margin?

A) 3.79

B) 13.68

C) 9.10

D) None of the above

A decrease in ________ will increase gross profit margin.

A) cost of goods sold

B) depreciation expense

C) interest expense

D) both A and B

Other things held constant, an increase in ________ will decrease the current ratio. Assume an initial current ratio greater than 1.0.

A) accruals

B) common stock

C) average collection period

D) cash

GAAP, Inc. has total assets of $2,575,000, sales of $5,950,000, total liabilities of $1,855,062, and a net profit margin of 2.9%. What is GAAP's return on equity? Round to the nearest 0.1%.

A) 8.6%

B) 24.0%

C) 16.4%

D) 4.4%

Wireless Communications has a total asset turnover of 2.66, total liabilities of $1,004,162, and sales revenues of $7,025,000. What is Wireless's debt ratio?

A) 38.0%

B) 14.3%

C) 26.7%

D) 81.1%

Which of the following will help an analyst determine how well a firm is able to meet its debt obligations?

A) Total liability turnover

B) Times-interest-earned

C) Return on debt

D) Asset ratio

Heavy Load, Inc. has sales of $3,450,000, total assets of $1,240,000, and total liabilities of $275,000, which consist strictly of notes payable. The firm's operating profit margin is 16.1%, and it pays a 10% rate of interest on its notes payable. How much is the firm's times-interest-earned?

A) 15.6

B) 45.3

C) 20.2

D) 3.0

An increase in ________ will decrease the times-interest-earned ratio.

A) the tax rate

B) gross profit

C) interest expense

D) common stock

In 1996, Snout and Smith, Inc. had a gross profit of $27,000 on sales of $110,000. S & S's operating expenses for 1996 were $13,000

In 1996, Snout and Smith, Inc. had a gross profit of $27,000 on sales of $110,000. S & S's operating expenses for 1996 were $13,000, and its net profit margin was .0585. Snout and Smith had no interest expense in 1996. Using this information, what was S & S's operating profit margin for 1996?

A) 0.245

B) 0.118

C) 0.127

D) 0.157

Sharky's Loan Co. has an annual interest expense of $30,000. If Sharky's times-interest-earned ratio is 2.9, what is Sharky's Earnings Before Taxes (EBT)?

A) $87,000

B) $57,000

C) $117,000

D) $60,000

Skrit Corporation has a net profit margin of 15% and a total asset turnover of 1.7. What is Skrit's return on total assets?

A) 12.3%

B) 25.5%

C) 8.8%

D) 11.1%

Sputter Motors has sales of $3,450,000, total assets of $1,240,000, cost of goods sold of $2,550,000, and an inventory turnover of 6.38. What is the amount of Sputter's inventory?

A) $421,054

B) $638,112

C) $543,000

D) $399,687

Which of the following is the best indicator of management's effectiveness at managing the firm's balance sheet?

A) Debt ratio

B) Total asset turnover

C) Times-interest-earned

D) Operating profit margin

Which of the following is the best indicator of management's effectiveness at generating profits relative to the firm's assets?

A) Quick ratio

B) Fixed assets turnover

C) Return on assets

D) Accounts receivable turnover

Ortny Industries has an accounts receivable turnover ratio of 4.3. If Ortny has an accounts receivable balance of $90,000

Ortny Industries has an accounts receivable turnover ratio of 4.3. If Ortny has an accounts receivable balance of $90,000, what is Ortny's average daily credit sales?

A) $387,000

B) $1,548

C) $1,060

D) $3,521 

A decrease in the return on equity ratio could be caused by an increase in

A) tax rate.

B) cost of goods sold.

C) total assets.

D) both B and C.

Spinnit, Limited has a debt ratio of .57, current liabilities of $14,000, and total assets of $70,000. What is the level of Spinnit, Limited's total liabilities?

A) $25,900

B) $24,600

C) $39,900

D) $53,900

Snort and Smiley Incorporated has a debt ratio of .42, noncurrent liabilities of $20,000, and total assets of $70,000. What is Snort and Smiley's level of current liabilities?

A) $8,400

B) $9,400

C) $12,340

D) $10,600

Lorna Dome, Inc. has an annual interest expense of $30,000. Lorna Dome's times-interest-earned ratio is 4.2. What is Lorna Dome's operating income?

A) $96,000

B) $57,000

C) $126,000

D) $57,600

Millers Metalworks, Inc. has a total asset turnover of 2.5 and a net profit margin of 3.5%. The total debt ratio for the firm is 50%

Millers Metalworks, Inc. has a total asset turnover of 2.5 and a net profit margin of 3.5%. The total debt ratio for the firm is 50%. Calculate Millers's return on equity.

A) 17.5%

B) 19.5%

C) 21.5%

D) 23.5%

Smart and Smiley Incorporated has an average collection period of 74 days. What is the accounts receivable turnover ratio for Smart and Smiley?

A) 4.93

B) 2.47

C) 2.66

D) 1.68

Billing's Pit Corporation has an accounts receivable turnover ratio of 3.4. What is Billing's Pit Corporation's average collection period?

A) 107 days

B) 102 days

C) 73 days

D) 55 days

Which of the following statements is true?

A) As a general rule, management would want to reduce the firm's average collection period.

B) As a general rule, management would want to reduce the firm's accounts receivable turnover ratio.

C) As a general rule, management would want to increase the firm's average collection period.

D) As a general rule, a firm is not financially affected by the amount of time required to collect its accounts receivable.

Snype, Inc. has an accounts receivable turnover ratio of 7.3. Stork Company has an accounts receivable turnover ratio of 5.0. Which of the following statements is correct?

A) Snype's average collection period is less than Stork's.

B) Stork's average collection period is less than Snype's.

C) Snype has a lower accounts receivable account on average than does Stork Company.

D) Stork Company has (on average) a lower accounts receivable account than does Snype.

Water Works, Inc. has a current ratio of 1.33, current liabilities of $540,000, and inventory of $400,000.

Water Works, Inc. has a current ratio of 1.33, current liabilities of $540,000, and inventory of $400,000. What is Water Works, Inc.'s quick ratio?

A) 1.11

B) 0.86

C) 1.90

D) 0.59

 If a company's average collection period is higher than the industry average, then the company might be

A) enforcing credit conditions upon its customers which are too stringent.

B) allowing its customers too much time to pay their bills.

C) too tough in collecting its accounts.

D) too liquid.

Why is the quick ratio a more refined measure of liquidity than the current ratio?

A) It measures how quickly cash and other liquid assets flow through the company.

B) Inventories are omitted from the numerator of the ratio because they are generally the least liquid of the firm's current assets.

C) It is a quicker calculation to make.

D) Cash is the most liquid current asset.

Smith Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Smith's quick or acid test ratio?

A) 1.69

B) 0.54

C) 0.74

D) 1.35

Kingsbury Associates has current assets as follows:

       Cash                                       $3,000

       Accounts receivable          $4,500

       Inventories                           $8,000

If Kingsbury has a current ratio of 3.2, what is its quick ratio?

A) 2.07

B) 1.55

C) 0.48

D) 0.96

Which of the following ratios indicates how rapidly the firm's credit accounts are being collected?

A) Debt ratio

B) Gross profit margin

C) Accounts receivable turnover ratio

D) Fixed asset turnover