Laken Industries has negative cash flows.
YOU WERE SURE AND CORRECTLaken
Industries generates enough cash flow to service its debt.
Laken Industries will soon have difficulty
servicing its debt.
Which ratio indicates how much profit the firm is generating for
the owners?
ROE
ROA
TIE
FIN 300 CH 4 Dynamic Study
Laken Industries has a times interest earned (TIE) ratio of 18.3X.
What does this ratio indicated about Laken Industry’s financial
health?
Financial managers use ratio analysis to;
determine whether to buy or sell company stock.
estimate creditworthiness.
identify areas of strength or weakness.
XYZ Industries has a current ratio of .85 which means that the
firm;
has too much money invested in liquid assets.
does not have sufficient liquidity to cover liabilities
coming due.
is in good shape financially.
Firm XYZ’s recent financial reports indicated operating profits of
$45.7 million, net income of $27.6 million, and interest expense of
$5.9 million. Given this information, what is the firm’s times
interest earned ratio?
4.68 times
7.75 times
1.85 times
Current assets minus inventories over current liabilities is called
the:
current ratio
average collection period
acid-test ratio
asset turnover ratio
The set of rules and guidelines used by accountants to prepare
consistent financial statements is known as;
PREP.
GAAP.
SEC.
A balance sheet where the assets and liabilities are expressed as
a percentage of the firm’s total assets is known as a;
pro forma balance sheet.
common-size balance sheet.
fractional balance sheet.
Firm X has total current liabilities of $5.2 million and long-term
debt of $45 million. Given the firm’s total assets are $111.4
million, what is Firm X’s debt ratio?
13.58%
45.06%
40.39%
How many days sales in inventory does Firm XYZ have if the
annual cost of goods sold was $56 million and inventory was $6.9
million?
45 days( Firm XYZ’s daily cost of goods sold is
$56,000,000/365 = $153,425. So, days in inventory are
$6,900,000/$153,425 = 44.97 or approximately 45 days.)
17 days
51 days
DuPont analysis relates ROE to:
profitability, equity and debt
profitability, equity and leverage
profitability, asset efficiency and leverage
The quick ratio is similar to the current ratio except that the
numerator in the quick ratio subtracts out the least liquid current
asset account which is;
inventory.
marketable securities.
accounts receivable.
Which of these businesses should have the highest inventory
turnover ratio?
Mike’s Autos
YOU WERE SURE AND CORRECTJill’s Fruit
Market
Kara’s Jewelry
The firm’s total liabilities divided by total assets is known as the;
financial leverage ratio.
debt ratio.
debt-equity ratio.
A larger number of days in receivables indicates the firm is
to collect and the receivables are likely to be of
quality.
Faster; poorer
Slower; poorer
Slower; better
A return on assets (ROA) will always result in a
return on equity (ROE).
YOU WERE SURE AND CORRECTLower; lower
Lower; higher
Higher; lower
Which of these ratios is an asset management ratio?
Acid-test ratio
Return on assets
Total asset turnover
Firm XYZ has an average collection period of 71 days. Should
management be concerned about this ratio given the firm’s credit
terms require that all credit accounts to be paid in full within 60
days?
ANSWER
correct
There is not enough information to tell.
No, it appears the firm is doing a good job collecting
receivables.
I AM SUREYes, the firm’s collections are not as
fast as they should be.
The value placed by investors on $1 of earnings is known as the;
earnings value.
book value.
I AM SUREP/E ratio.
Company Y’s current stock price is $51.50 per share and the
company’s most recent earnings were $2.32 a share. What is
Company Y’s P/E ratio?
$22.20
22.2%
$2.32
22.2 times
The market-to-book ratio is the ratio of:
market value of equity to the accounting value of debt
market value of debt to the accounting value of debt
I AM SUREmarket value of equity to the accounting
value of equity
market value of equity to the appraised value of
equity
What is Company Z’s profit margin if sales were $45 million and
net income was $2.7 million?
ANSWER
correct
I AM SURE6%
2.7%
$2.7 million
A firm with 18.25 days sales in inventory has an inventory
turnover of;
18.25 times.
20 times.
10 times.
What is Company XYZ’s operating profit margin if sales were $65
million and EBIT was $12.1 million?
18.6%
61.2%
12.1%
