finance questions-15

14.   Asset Turnover. In each case, choose the firm that you expect to have the higher asset turnover ratio. (Hint: think about the likely nature of each firm’s business model.  For example, would the firm require a lot or a little capital? Would it strive for high sales or high profit margins?) (LO4-3

a.  Economics Consulting Group or Home Depot

b.  Catalog Shopping Network or Guccic.  

c. Electric Utility Co. or Standard Supermarkets 

 16. A firm has a long-term debt–equity ratio of .4. Shareholders’ equity is $1 million. Current assets are $200,000, and the current ratio is 2. The only current liabilities are notes pay-able. What is the total debt ratio? (LO4-3) 

19. Current Ratio. Would the following events increase or decrease a firm’s current ratio? (LO4-3)

a.  Inventory is sold.

b.  The firm takes out a bank loan to pay its suppliers

.c.  The firm arranges a line of credit with a bank that allows it to borrow at any time to pay its suppliers.

d.  A customer pays its overdue bills.

e.  The firm uses cash to buy additional inventory

20. Financial Ratios. True or false? (LO4-3)

a.  A company’s debt-equity ratio is always less than 1.

b.  The quick ratio is always less than the current ratio.

c.  For a profitable company, the return on equity is always less than the return on assets.