Chapter 03 Quiz B
Use the following financial statements to answer this quiz.
Balance Sheet Income Statement
Cash $ 800 Accounts payable $ 3,300 Sales $47,600
Accounts receivable 2,100 Long-term debt 16,500 Cost of goods sold 38,300
Inventory 5,700 Common stock 10,000 Depreciation 3,900
Net fixed assets 36,600 Retained earnings 15,400 Taxes 800
Total assets $45,200 Total liab. & equity $45,200 Net income $ 4,600
Select the best answer. All answers are rounded.
________ 1. What is the value of the current ratio?
a. 0.43 b. 0.88 c. 2.28 d. 2.61
________ 2. What is the number of days sales in accounts receivable?
a. 15.8 b. 16.1 c. 20.0 d. 22.7
________ 3. What is the total asset turnover rate?
a. 0.85 b. 1.05 c. 1.30 d. 5.53
________ 4. What is the profit margin?
a. 9.66% b. 11.34% c. 12.01% d. 17.86%
________ 5. What is the return on assets?
a. 8.67% b. 10.18% c. 12.57% d. 18.81%
________ 6. What is the debt-equity ratio?
a. 0.44 b. 0.65 c. 0.78 d. 1.27
________ 7. If the accounts payable had a balance of $3,400 last year, then accounts payable is ____ of cash.
a. a source b. a use c. neither a source nor a use
________ 8. If the inventory account had a balance of $5,900 last year, then inventory is _____ of cash.
a. a source b. a use c. neither a source nor a use
________ 9. What is the P/E ratio if there are 5,000 shares of stock outstanding with a market price of $15.18?
a. 9.04 b. 10.87 c. 13.97 d. 16.50
________ 10. What is the common size ratio for inventory?
a. 11.97% b. 12.61% c. 13.33% d. 14.88%
CURRENT ASSETS
52. A firm has $300 in inventory, $600 in fixed assets, $200 in accounts receivables, $100 in accounts payable, and $50 in cash. What is the amount of the current assets?
a. $500
b. $550
c. $600
d. $1,150
e. $1,200
TOTAL LIABILITIES
53. A firm has net working capital of $350. Long-term debt is $600, total assets are $950 and fixed assets are $400. What is the amount of the total liabilities?
a. $200
b. $400
c. $600
d. $800
e. $1,200
SHAREHOLDERS’ EQUITY
54. A firm has common stock of $100, paid-in surplus of $300, total liabilities of $400, current assets of $400, and fixed assets of $600. What is the amount of the shareholders’ equity?
a. $200
b. $400
c. $600
d. $800
e. $1,000
BOOK VALUE
58. Martha’s Enterprises spent $2,400 to purchase equipment three years ago. This equipment is currently valued at $1,800 on today’s balance sheet but could actually be sold for $2,000. Net working capital is $200 and long-term debt is $800. What is the book value of shareholders’ equity?
a. $200
b. $800
c. $1,200
d. $1,400
e. The answer cannot be determined from the information provided.
MARKET VALUE
59. Recently, the owner of Martha’s Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1.2 million that is currently appraised at $1.4 million. The equipment originally cost $700,000 and is currently valued at $400,000. The inventory is valued on the balance sheet at $350,000 but has market value of only one-half of that amount. The owner expects to collect 95 percent of the $200,000 in accounts receivable. The firm has $10,000 in cash and owes a total of $1.4 million. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?
a. $575,000
b. $775,000
c. $950,000
d. $1,150,000
e. $1,175,000
NET INCOME
60. Ivan’s, Inc. paid $500 in dividends and $600 in interest this past year. Common stock increased by $200 and retained earnings decreased by $100. What is the net income for the year?
a. $400
b. $500
c. $600
d. $800
e. $1,000
EARNINGS BEFORE INTEREST AND TAXES
64. Tim’s Playhouse paid $155 in dividends and $220 in interest expense. The addition to retained earnings is $325 and net new equity is $50. The tax rate is 25 percent. Sales are $1,600 and depreciation is $160. What are the earnings before interest and taxes?
a. $480
b. $640
c. $860
d. $1,020
e. $1,440
OPERATING CASH FLOW
65. Your firm has net income of $198 on total sales of $1,200. Costs are $715 and depreciation is $145. The tax rate is 34 percent. The firm does not have interest expenses. What is the operating cash flow?
a. $93
b. $241
c. $340
d. $383
e. $485
NET CAPITAL SPENDING
66. Teddy’s Pillows has beginning net fixed assets of $480 and ending net fixed assets of $530. Assets valued at $300 were sold during the year. Depreciation was $40. What is the amount of net capital spending?
a. $10
b. $50
c. $90
d. $260
e. $390
CHANGE IN NET WORKING CAPITAL
67. At the beginning of the year, a firm has current assets of $380 and current liabilities of $210. At the end of the year, the current assets are $410 and the current liabilities are $250. What is the change in net working capital?
a. -$30
b. -$10
c. $0
d. $10
e. $30
CASH FLOW TO CREDITORS
68. At the beginning of the year, long-term debt of a firm is $280 and total debt is $340. At the end of the year, long-term debt is $260 and total debt is $350. The interest paid is $30. What is the amount of the cash flow to creditors?
a. -$50
b. -$20
c. $20
d. $30
e. $50
CASH FLOW TO CREDITORS
69. Pete’s Boats has beginning long-term debt of $180 and ending long-term debt of $210. The beginning and ending total debt balances are $340 and $360, respectively. The interest paid is $20. What is the amount of the cash flow to creditors?
a. -$10
b. $0
c. $10
d. $40
e. $50
CASH FLOW TO STOCKHOLDERS
70. Peggy Grey’s Cookies has net income of $360. The firm pays out 40 percent of the net income to its shareholders as dividends. During the year, the company sold $80 worth of common stock. What is the cash flow to stockholders?
a. $64
b. $136
c. $144
d. $224
e. $296
The following information should be used for questions #81 through #88:
Knickerdoodles, Inc.
2004 2005
Sales $ 740 $ 785
COGS 430 460
Interest 33 35
Dividends 16 17
Depreciation 250 210
Cash 70 75
Accounts receivables 563 502
Current liabilities 390 405
Inventory 662 640
Long-term debt 340 410
Net fixed assets 1,680 1,413
Common stock 700 235
Tax rate 35% 35%
NET WORKING CAPITAL
81. What is the net working capital for 2005?
a. $345
b. $405
c. $805
d. $812
e. $1,005
CHANGE IN NET WORKING CAPITAL
82. What is the change in net working capital from 2004 to 2005?
a. -$93
b. -$7
c. $7
d. $85
e. $97
NET CAPITAL SPENDING
83. What is net capital spending for 2005?
a. -$250
b. -$57
c. $0
d. $57
e. $477
OPERATING CASH FLOW
84. What is the operating cash flow for 2005?
a. $143
b. $297
c. $325
d. $353
e. $367
CASH FLOW FROM ASSETS
85. What is the cash flow from assets for 2005?
a. $50
b. $247
c. $297
d. $447
e. $517
NET NEW BORROWING
86. What is net new borrowing for 2005?
a. -$70
b. -$35
c. $35
d. $70
e. $105
CASH FLOW TO CREDITORS
87. What is the cash flow to creditors for 2005?
a. -$170
b. -$35
c. $135
d. $170
e. $205
CASH FLOW TO STOCKHOLDERS
88. What is the cash flow to stockholders for 2005?
a. $408
b. $417
c. $452
d. $482
e. $503
The following information should be used for questions #89 through #91:
2005
Cost of goods sold $3,210
Interest 215
Dividends 160
Depreciation 375
Change in retained earnings 360
Tax rate 35%
TAXABLE INCOME
89. What is the taxable income for 2005?
a. $360
b. $520
c. $640
d. $780
e. $800
OPERATING CASH FLOW
90. What is the operating cash flow for 2005?
a. $520
b. $800
c. $1,015
d. $1,110
e. $1,390
SALES
91. What are the sales for 2005?
a. $4,225
b. $4,385
c. $4,600
d. $4,815
e. $5,000
SOURCES AND USES OF CASH
75. Last year Ty’s Grocery had inventory of $237,500 and fixed assets of $51,400. This
year, Ty’s has inventory of $231,900 and fixed assets of $48,700. Depreciation for this
year is $6,300. Which one of the following statements is true given this information?
a. Both inventory and fixed assets are uses of cash in the amounts of $5,600 and $3,600,
respectively.
b. Both inventory and fixed assets are uses of cash in the amounts of $5,600 and $2,700, respectively.
c. Inventory is a source of cash in the amount of $5,600 and fixed assets is a use of cash
in the amount of $2,700.
d. Inventory is a source of cash in the amount of $5,600 and fixed assets is a use of cash in the amount of $3,600.
e. Both inventory and fixed assets are sources of cash in the amounts of $5,600 and
$3,600 respectively.
SOURCES AND USES OF CASH
76. During the year, Doug’s Bakery decreased their accounts receivable by $50, increased
their inventory by $100, and decreased their accounts payable by $50. For these three accounts, the firm has a net:
a. $200 use of cash.
b. $100 use of cash.
c. $0 use of cash.
d. $100 source of cash.
e. $200 source of cash.
SOURCES AND USES OF CASH
77. A firm generates net income of $530. The depreciation expense is $60 and dividends
paid are $80. Accounts payable decrease by $40, accounts receivable decrease by $30,
inventory increases by $20, and net fixed assets decrease by $40. What is the net cash
from operating activity?
a. $480
b. $530
c. $560
d. $580
e. $600
COMMON-SIZE STATEMENTS
78. A firm has sales of $1,200, net income of $200, net fixed assets of $500, and current
assets of $300. The firm has $100 in inventory. What is the common-size statement
value of inventory?
a. 8.3 percent
b. 12.5 percent
c. 20.0 percent
d. 33.3 percent
e. 50.0 percent
DU PONT IDENTITY
97. Frederico’s has a profit margin of 6 percent, a return on assets of 8 percent, and an
equity multiplier of 1.4. What is the return on equity?
a. 6.7 percent
b. 8.4 percent
c. 11.2 percent
d. 14.6 percent
e. 19.6 percent
The following balance sheet and income statement should be used for questions #100 through #110:
Windswept, Inc.
2005 Income Statement
($ in millions)
Net sales $8,450
Less: Cost of goods sold 7,240
Less: Depreciation 400
Earnings before interest and taxes 810
Less: Interest paid 70
Taxable Income $ 740
Less: Taxes 259
Net income $ 481
Windswept, Inc.
2004 and 2005 Balance Sheets
($ in millions)
2004 2005 2004 2005
Cash $ 120 $ 140 Accounts payable $1,110 $1,120
Accounts rec. 930 780 Long-term debt 840 1,210
Inventory 1,480 1,520 Common stock 3,200 3,000
Total $2,530 $2,440 Retained earnings 530 710
Net fixed assets 3,150 3,600
Total assets $5,680 $6,040 Total liabilities & equity $5,680 $6,040
LIQUIDITY RATIOS
100. What is the quick ratio for 2005?
a. .82
b. .95
c. 1.36
d. 2.18
e. 2.28
ASSET MANAGEMENT RATIOS
101. What is the days’ sales in receivables? (use 2005 values)
a. 31.8 days
b. 33.7 days
c. 38.4 days
d. 41.9 days
e. 47.4 days
ASSET MANAGEMENT RATIOS
102. What is the fixed asset turnover? (use 2005 values)
a. 1.4
b. 1.7
c. 2.1
d. 2.3
e. 2.6
FINANCIAL LEVERAGE RATIOS
103. What is the equity multiplier for 2005?
a. 1.6
b. 1.8
c. 2.0
d. 2.3
e. 2.5
FINANCIAL LEVERAGE RATIOS
104. What is the cash coverage ratio for 2005?
a. 11.6
b. 12.8
c. 13.7
d. 17.3
e. 18.8
PROFITABILITY RATIOS
105. What is the return on equity for 2005?
a. 5.7 percent
b. 6.8 percent
c. 13.0 percent
d. 15.3 percent
e. 16.0 percent
PROFITABILITY RATIOS
106. Windswept, Inc. has 90 million shares of stock outstanding. Their price-earnings ratio for 2005 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
STATEMENT OF CASH FLOWS
107. What amount should be included in the financing section of the 2005 statement of cash flows for dividends paid?
a. $180 million
b. $301 million
c. $481 million
d. $530 million
e. $710 million
STATEMENT OF CASH FLOWS
108. What is the amount of the net cash from investment activity for 2005?
a. -$50 million
b. $250 million
c. $450 million
d. $700 million
e. $850 million
STATEMENT OF CASH FLOWS
109. What is the net change in cash during 2005?
a. -$40 million
b. -$20 million
c. $0
d. $20 million
e. $40 million
STATEMENT OF CASH FLOWS
110. How will accounts payable appear on the 2005 statement of cash flows?
a. increase of $10 million in cash from an operating activity
b. decrease of $10 million in cash from an operating activity
c. increase of $10 million in cash from an investment activity
d. decrease of $10 million in cash from a financing activity
e. increase of $10 million in cash from a financing activity