Felton Farm Supplies, Inc. has an ROA (return on assets) of 12 percent, total assets of $300,000 and a net

a. net sales, cost of goods sold, retained earnings b. net sales, inventories, notes payable c. net sales, depreciation expense, advertising expense d. cash, depreciation expense, taxes e. cash, accounts receivable, inventories

6. Which of the following would directly affect (either increase or decrease) net cash flow from operating activities (assuming all else remains constant)? Note: there more be more than one answer for this questions

– record the letter of all that apply (this is an all or nothing answer).

a. An increase in dividends paid. b. A decrease in accounts receivable. c. A decrease in notes payable (i.e., bank loans). d. An increase in inventory. e. An increase in accounts payable. f. An increase in retained earnings. g. A decrease in cash. h. An increase in accruals. i. A decrease in gross plant and equipment.

7. If a firm increases its total assets but its debt ratio, net profit margin and net sales (i.e., revenue) remain the same as they were before total assets decreased, the firm’s:

a. ROE would not change. b. ROE could either increase or decrease depending on the interaction between the equity multiplier and

the days payable ratio.

c. ROE would increase. d. ROE would decrease. e. There is insufficient information to determine the effect on ROE.

8. Which of the following steps is most likely to decrease a company’s cash conversion cycle (assume that none of the following actions has any impact on sales or COGS)? Note: there more be more than one answer for

this questions – record the letter of all that apply (this is an all or nothing answer).

a. Change its receivables policy from net 35 to net 40 (note that this action will increase the firm’s average collection period from 35 days to 40 days).

b. Change its payables policy to pay bills in 40 days instead of in 30 days. c. Decrease the inventory conversion period from 50 days to 40 days. d. Reduce the firm’s notes payable (i.e., bank loan) balance by 20%. e. None of the actions listed above will decrease the firm’s cash conversion cycle.

9. Which of the following actions would decrease the current ratio (assuming an initial current ratio of 0.8, and current liabilities equal to $1,000,000)?

a. Borrow $100,000 in short term debt and deposit this money (i.e., $100,000) into the firm’s cash account. b. Borrow $200,000 in long-term debt to buy $200,000 worth of additional inventory. c. Borrow $50,000 of short-term debt and use the proceeds to pay all operating expenses sooner, thus

lowering accruals (i.e., accrued expenses) by $50,000.

d. Sell $250,000 of fixed assets to pay off an equal amount of long-term debt. e. None of the above – that is, none of the actions listed about will decrease the current ratio.

10. RedCap Manufacturing, Inc. is planning to borrow money by taking out a short term loan (i.e., increase notes payable) and depositing this money directly into the firm’s checking account (i.e., increase cash). RedCap

believes that this event will have no affect on either sales or costs, and therefore no affect on net income.

All else constant, this new policy should cause the firm’s quick ratio (assuming an initial quick ratio of 1.5)

to:

a. Decrease b. Increase c. No Change d. Not enough information is provided to answer this question.

11. BlueHat, Inc. is planning to use excess cash that the company has in its checking account (i.e., reduce cash) to pay off a long term loan balance. (i.e., decrease long-term debt). BlueHat believes that this event will have

no affect on either sales or costs, and therefore no affect on net income.

All else constant, this new policy should cause the firm’s debt ratio (assuming an initial debt ratio of 45%)

to:

a. Decrease b. Increase c. No Change d. Not enough information is provided to answer this question.

12. GreenChapeau, Inc. is planning to increase its short-term loans (i.e., increase notes payable) to pay for an increase in the firm’s basic inventory level (i.e., increase inventory). GreenChapeau believes that this event

will have no affect on either sales or costs, and therefore no affect on net income.

All else constant, this new policy should cause the firm’s current ratio (assuming a current ratio of 1.5) to:

a. Decrease b. Increase c. No Change d. Not enough information is provided to answer this question.

All of the following questions are open-ended problems. You must compute an answer for every problem.

For percentage answers, calculate your answer as a percent rounded to 2 decimal places. For example, you

would record ROA = .1263974 as 12.64% (note that on D2L you will enter 12.64 without the percent sign).

For dollar answers, round to the nearest dollar. For example, you would record $12,345.83943 as $12,346

(note that on D2L you will enter 12346 without a comma and without the dollar sign).

13. Felton Farm Supplies, Inc. has an ROA (return on assets) of 12 percent, total assets of $300,000 and a net profit margin of 4.5 percent. What are Felton Farm Supplies annual sales?

14. Krisle and Kringle's debt-to-total assets ratio is 0.445 (i.e., debt ratio = 44.5%). What is the company’s debt- to-equity ratio? (Enter answer as a ratio rounded to 2 decimal places – that is, do not convert to a percent; for

example, enter 80/35 = 2.2857 as 2.29).

15. Philips, Inc has a debt ratio of 15% and ROE = 13%. What is Phillips’ ROA? (Enter answer as a percent).

16. A firm has an ROA of 17% and a debt/equity ratio of 0.65. The firm's ROE is _________. (Enter answer as a percent).

17. Assume that XYZ, Inc. has:

 Debt ratio = 60%

 Net profit margin = 12.5%

 Return on assets (ROA) = 15%

Find XYZ’s Total Asset Turnover ratio. (Enter answer as a ratio – that is, do not convert to a percent).

18. Assume that your firm has ROA of 17.5%, ROE of 38% and Total Asset Turnover ratio of 2.75. Calculate the debt ratio for the firm. (Enter answer as a percent).

USE THE DATA IN THE TABLE BELOW TO ANSWER QUESTIONS 19 – 24

(Assume all account figures are in dollars)

19. This company’s gross profit margin (as a percent rounded to 1 decimal place) in 2014 was ________.

20. Assume that this is a retail company. If the company purchased products that it sold in 2015 for $5.00 per unit, how many units did the company purchase in 2015?

21. ROE for 2015 is _____%.

22. Cash flow from operating activities in 2015 is $ _______.

23. Cash flow from investing activities in 2015 is $ _________.

24. Cash flow from financing activities in 2015 is $ _________.

USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING 3 QUESTIONS

2014 2015

Accounts payable 440 380

Accounts receivable, net 1,810 2,040

Accruals 95 120

Cash 120 90

Common stock 2,120 2,380

Cost of goods sold 6,610 6,420

Depreciation expense 1,560 1,630

Interest expense 140 170

Inventory (end of year) 5,720 5,530

Long-term debt 3,890 4,150

Net fixed assets 7,530 8,050

Net sales 10,750 11,650

Notes payable 800 740

Operating expenses (excluding depreciation) 1,680 1,780

Retained earnings 7,835 7,940

Taxes 260 380

25. Calculate the Cash flows from operating activities for 2011.

26. Calculate the Cash flows from investing activities for 2011.

27. Calculate the Cash flows from financing activities for 2011.

2010 2011

Cash 1,500 1,820

Account receivable 3,740 3,980

Inventory 10,120 8,470

Total current assets 15,360 14,270

Gross fixed assets 56,100 63,840

(Accumulated depreciation) (9,590) (11,000)

Net fixed assets 46,510 52,840

Total assets 61,870 67,110

Notes payable 1,000 1,000

Accounts payable 2,260 4,150

Accruals 1,570 1,640

Current portion of LT debt 470 1,730

Total current liabilities 5,300 8,520

Lont-term debt 37,750 34,790

Common stock 1,000 1,500

Paid in capital 4,800 9,460

Retained earnings 13,020 12,840

Total liabilities and equity 61,870 67,110

Additional Data from 2011 Income Statement:

Sales in 2011 238,000

Net income in 2011 9,940

Mellon Company

Balance Sheet

For the Years Ending December 31, 2010 and 2011

(All figures in dollars)

USE THE FOLLOWING INFORMATION TO CONSTRUCT A BALANCE SHEET

TO ANSWER QUESTIONS 28 through 30

Assume that the only accounts on the balance sheet are those listed below. Fill in this chart with the data provided

and then answer questions 28, 29 and 30.

Cash ____________ Notes payable ____________

Accounts receivable ____________ Accounts payable ____________

Inventory ____________ Long-term debt ____________

Gross fixed assets ____________ Equity ____________

(Accumulated depreciation) ____________ Total liab & equity ____________

Net fixed assets ____________

Total assets ____________

28. Cash = ____________.

29. Long-term debt = ____________.

30. Total assets =____________.

Sales 2,000,000$

Gross profit margin 20%

Inventory turnover ratio (Cost of goods sold/Inventory) 25

Net profit margin 4%

Average collection period 45

Return on equity 25%

Accumulated depreciation 75,000$

Return on assets 12.5%

Accounts payable days 18

Notes payable 18,000$

Gross fixed assets 400,000$

Percent of sales on credit (remainder are cash sales) 80%

NOTE: Assume a 360 day year for all ratios, etc.

USE THE FOLLOWING INFORMATION TO FILL IN THE BALANCE SHEET BELOW

TO ANSWER QUESTIONS 31 through 34

Note: Of total sales, 60 percent are on credit and the remainder are cash sales. Assume a 360-day year. All

data in the table above, unless otherwise stated, is for the year 2015.

Hodun, Inc.

Balance Sheet for the Year Ending December 31, 2015

Cash __________ Notes payable __________

Accounts receivable __________ Accounts payable __________

Inventory __________ Accruals __________

Net fixed assets __________ Long-term debt __________

Total assets __________ Common stock ($2 par value) __________

Capital surplus __________

Retained earnings __________

Total liab. & equity __________

31. Cash = ____________.

32. Long-term debt = ____________.

33. Total assets =____________.

34. Capital surplus = __________.

Number of shares outstanding 15,000 Average collection period (days) 60

Sales 200,000$ Accounts payable days 90

Gross profit margin 20% Retained earnings (2010) 23,700$

Inventory turnover ratio 4 Dividend payout ratio 80%

Notes payable 8,000$ Accruals 4,000$

Net profit margin 15% Current ratio 1.5

Return on assets 8% Debt ratio 40%

USE THE FOLLOWING DATA TO ANSWER QUESTIONS 35 – 40

35. Net fixed assets in 2014 were $__________.

36. COGS on the 2013 common-sized income statement was 24%. Therefore, COGS in 2013 was

37. The debt ratio for 2014 was ____%.

38. Cash flow from operations in 2014 was $________.

39. Cash flow from investing in 2014 was $__________.

40. Total dividends paid in 2014 was $_______.

2013 2014

Sales 500,000 560,000

COGS ???? 149,350

Gross profit 380,000 410,650

Oper. exp 225,000 250,100

Depreciation 15,000 15,000

Operating profit 140,000 145,550

Interest exp. 5,000 5,000

EBT 135,000 140,550

Taxes 50,000 56,000

Net Income 85,000 84,550

2013 2014

Cash 450,000 478,500

Accounts rec 275,000 250,000

Inventories 280,000 325,000

Current Assets 1,005,000 1,053,500

Net fixed assets 1,125,000 ???

Total Assets 2,130,000 2,293,500

Notes payable 150,000 125,000

Accounts payable 90,000 115,000

Accruals 15,000 25,000

Current Liabilities 255,000 265,000

Long-term debt 1,000,000 1,050,000

Common stock @ ($0.25 par) 25,000 28,500

Additional paid in capital 500,000 570,000

Retained earnings 350,000 380,000

Total Liabilities & Equity 2,130,000 2,293,500

Annual Balance Sheets

Annual Income Statements