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5. RGB, Inc. has a gross profit of $45,000 on sales of $150,000. The balance sheet
shows average total assets of $75,000 with an average inventory balance of
$15,000. RGBs total asset turnover and inventory turnover are closest to:
Asset turnover Inventory turnover
a. 7.00 times
2.00 times
b. 2.00 times
7.00 times
c. 0.50 times
0.33 times
d. 10.00 times
0.60 times
6. Earnings before interest and taxes (EBIT) is also known as:
a.
gross profit.
b.
net profit.
c.
earnings before income taxes.
d.
operating profit.
7.
What are the average receivables collection period, the average payables payment period, and
the average inventory processing period respectively?
a
b
c
d
8.
Average
Receivables
Average Payables
Collection Period
Payment Period
37
37
31
37
30
45
30
30
Average
Inventory
Processing
Period
52
46
28
46
The main difference between the current ratio and the quick ratio is that the quick ratio excludes:
a
cost of goods sold.
b
sales.
c
assets.
d
inventory.
9.- What is a companys equity if their return on equity (ROE) is 12 percent, and their net income is 10 million?
a.
83,333,333.00
1,200,000.00
12,000,000.00
120,000,000.00
10.- If a firm has a profit margin of 0.05, an asset turnover of 1.465, and an equity multiplier of 1.66, what is the
firm's ROE?
a
5.66%.
3.18%.
12.16%.
5.87%.
11.
15%
$10,000,000
$1,200,000
$15,000,000
$11,000,000
$800,000
35%
Which of the following is the closest estimate of the firms sustainable growth rate?
a.
b.
c.
d.
10%.
8%.
9%.
11%.
12. If a firm has an asset turnover ratio of 2.1 and increases sales by 10 percent, what will its new
turnover ratio be?
a.
b.
c.
d.
2.31.
3.12.
3.21.
1.23.
13.
What is the average receivables collection period, the average inventory processing period, and the
average payables payment period respectively? (assume 360 days in a year)
a.
b.
c.
d.
Inventory
Processing
Period
Payables
Payment
Period
30 days
45 days
33 days
36 days
30 days
36 days
45 days
45 days
60 days
30 days
20 days
30 days
14. If a firm has an asset turnover ratio of 2.1 and increases sales by 10 percent, what
will its new turnover ratio be?
a. 2.31
.
b. 3.12
.
c. 3.21
.
d. .23.
15. Cash that normally would have been used to pay the firm's accounts payable is
used instead to pay off some of the firm's long-term debt. This will cause the firm's:
a. quick ratio to fall
b. current ratio to rise.
c. payables turnover to rise.
d. cash conversion cycle to lengthen.
16. What is a company's payables payment period if COGS are $200,000 and the
average balance of accounts payable (AP) is $10,000?
a. 18.25 days.
b. 15.26 days.
c. 10.75 days.
d. 11.33 days.
17.- Calculate the current year ratios and give the interpretation of results
Sample Income Statement
Year
Sales
Cost of goods sold
Gross profit
Operating expenses
Operating profit
Interest expense
Earnings before taxes
Taxes
Net Income
Common dividends
Current
Year
$4,000
3,000
$1,000
650
$350
$50
$300
100
$200
60
Last year
2.1
1.1
18.9
10.7
2.3
14.5
27.4%
5.8%
21.1%
24.1%
99.4%
5.9
Industry
1.5
0.9
18
12
2.4
11.8
29.3%
6.5%
22.4%
19.8%
35.7%
9.2
Year
Assets
Cash and marketable securities
Receivables
Inventories
Total current assets
Gross property, plant, and equipment
Accumulated depreciation
Net property, plant, and equipment
Total assets
Liabilities
Payables
Short-term debt
Current portion of long-term debt
Current liabilities
Long-term debt
Deferred taxes
Common stock
Additional paid in capital
Retained earnings
Common shareholders equity
Total liabilities and equity
Current
Year
Previous year
$105
205
310
620
1800
360
1,440
$2,060
$95
195
290
580
1700
340
1360
$ 1 ,940
110
160
55
325
610
105
300
400
320
1,020
$2,060
$90
140
45
$275
$690
95
300
400
1 80
880
$ 1 ,940