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Exam 3: Analyzing Financial Statements

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Question 1

Multiple Choice

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Internal Growth Rate Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent.What is the internal growth rate?

A) 1.00 percent
B) 2.25 percent
C) 5.26 percent
D) 100.00 percent

Correct Answer

verified

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Question 2

Multiple Choice

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Which of the following refer to ratios that measure the relationship between a firm's liquid (or current) assets and its current liabilities?

A) Cross-section
B) Internal growth
C) Liquidity
D) Market value

Correct Answer

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C

Question 3

Multiple Choice

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Which of the following ratios measure how efficiently a firm uses its assets,as well as how efficiently the firm manages its accounts payable?

Profitability and Asset Management Ratios You are thinking of investing in Wave Runnerz,Inc.You have only the following information on the firm at year-end 2013: net income = $10 million,total debt = $65 million,and debt ratio = 35 percent.What is Wave Runnerz's ROE for 2013?

DuPont Analysis You are considering investing in Totally Tire Services.You have been able to locate the following information on the firm: total assets = $50 million,accounts receivable = $10 million,ACP = 15 days,net income = $4.5 million,and debt-to-equity ratio = 0.75 times.What is the ROE for the firm?

You are considering a stock investment in one of two firms (A and B) ,both of which operate in the same industry.A finances its $20 million in assets with $18 million in debt and $2 million in equity.B finances its $20 million in assets with $2 million in debt and $18 million in equity.Calculate the equity multiplier for the two firms.

Market Value Ratios Fancy Paws' year-end price on its common stock is $20.The firm has a profit margin of 12 percent,total assets of $20 million,a total asset turnover ratio of 0.5,no preferred stock,and there are 2 million shares of common stock outstanding.What is the PE ratio for Fancy Paws?

Debt Management Ratios Tierre's Ts,Inc.reported a debt to equity ratio of 3 times at the end of 2013.If the firm's total assets at year-end are $15 million,how much of their assets is financed with equity?

A firm's year-end price on its common stock is $55.The firm has a profit margin of 6 percent,total assets of $75 million,a total asset turnover ratio of 0.9,no preferred stock,and 2.5 million shares of common stock outstanding.Calculate the PE ratio for the firm.

Asset Management and Debt Management Ratios Use the following information to calculate current assets: sales = $100 million,capital intensity ratio = 0.5 times,debt ratio = 30 percent,and fixed asset turnover ratio = 5 times.

Which ratio measures the percentage of total assets financed by debt?

Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm's debt?

Which of the following measures the operating return on the firm's assets,irrespective of financial leverage and taxes?

Which ratio measures a firm's ability to pay short-term obligations with its available cash and market securities?

Liquidity Ratios You have the following information on Olivia's Bridle Shop: total liabilities and equity = $65 million,current liabilities = $10 million,inventory = $15 million,and quick ratio = 3 times.Using this information,what is the balance for fixed assets on Olivia's balance sheet?

Which of the following statements is correct?

Which ratio assesses how efficiently a firm uses its fixed assets?

A firm reported an ROE of 19 percent.The firm's debt ratio was 45 percent,sales were $12 million,and the capital intensity ratio was 1.1 times.Calculate the net income for the firm.

A firm has an ROA of 12 percent and an ROE of 52 percent.What is the firm's equity multiplier?

All of the following are users of financial ratios EXCEPT: