Module 3

Module 3: Sample Problems – To Help Practice & Prepare for Midterm and Final Exams

Practice Problem with Financial Ratios

SHOW YOUR WORK FOR CALCULATION PROBLEMS

Given the following information, calculate: (a) current ratio, (b) quick/acid-test ratio, (c) Total debt or leverage ratio, (d) Return on Assets, (e) Net Margin, (f) Return on Equity, (g) Asset Turnover, (h) Earnings Retention Ratio

SUMMARY BALANCE SHEET

ASSETS                                        LIABILITIES & SH EQUITY

Cash & Equivalents $2,000     Accounts Payable $6,000

Accounts Receivable 7,000     Notes Payable         4,000

Inventory                  5,000        Current Liabilities $10,000

Current Assets      $14,000

     Prepaid Expense $2,000            Long-term Debt   $9,000

     P, P & E (net)     $20,000            SH Equity           $17,000

     Total Assets        $36,000       Total Liab & SH Eq $36,000

SUMMARY OPERATING PERFORMANCE

     Sales               $50,000

     Net Income         5,400

     Dividends Paid    1,350