FIN 3403 CH. 3EXAM REVIEW QUESTIONS
WITH VERIFIED SOLUTIONS
Alder Inc. has net income of $403,000, operating earnings of $640,000, sales of $1.23
million, and total assets of $1.48 million. What is the return on assets?
27.23%
Whenever___________information is available, it should be used instead of accounting
data.
market
Which of the following items are among the items used to compute the current ratio?
-Cash
-Accounts Payable
A(n)______________in net profit margin will increase ROE.
increase
Omega Co. has annual sales of $250,000, costs of goods sold of $168,000, and assets of
$322,000. Accounts receivable are $86,200. What is the receivables turnover?
2.90
________ ________ are the prime source of information about a firm's financial health.
Financial statements
Better Life Inc. had net income of $375,000 on sales of $3.5 million and assets of $4.1
million this year. What is the profit margin?
10.71%
Which of the following equations defines the total asset turnover ratio?
Sales / Total Assets
Which two of the following groups are most interested in liquidity ratios?
-Bankers
-Suppliers
Alpha Manufacturing has interest expense of $12 million, total assets of $184 million, sales
of $176 million, long-term debt of $16.4 million, and net income of $15 million. How will
interest expense be recorded in the common-size income statement?
6.82%
, Which two of the following are most likely to create problems when comparing financial
statements for multiple firms?
-Differing accounting methods
-Differing fiscal years
One of the most important uses of financial statement information within the firm is:
Performance evaluation
The price-earnings (PE) ratio is a __________ ratio.
market value
Which of the following are traditional financial ratio categories?
-Market value ratios
-Asset management ratios
-Profitability ratios
Which of the following represents the receivables turnover ratio?
Sales/Accounts receivable
If Marley Company has a stock price of $12 per share, 100,000 shares outstanding,
$432,000 in liabilities and $100,000 in cash, what is its enterprise value?
$1,532,000
The profit margin is equal to net income divided by _________.
sales
A times interest earned (TIE) ratio of 3.5 times means a firm has ________ that is (are) 3.5
times greater than the firm's interest expense.
earnings before interest and taxes
Assume current assets = $48; fixed assets = $125, current liabilities = $42, and equity =
$100. What is the total debt ratio?
.42
Return on assets is 15%, equity multiplier is 1.4, what is the return on equity?
21.00%
Return of equity (ROE) is a measure of __________.
profitability
WITH VERIFIED SOLUTIONS
Alder Inc. has net income of $403,000, operating earnings of $640,000, sales of $1.23
million, and total assets of $1.48 million. What is the return on assets?
27.23%
Whenever___________information is available, it should be used instead of accounting
data.
market
Which of the following items are among the items used to compute the current ratio?
-Cash
-Accounts Payable
A(n)______________in net profit margin will increase ROE.
increase
Omega Co. has annual sales of $250,000, costs of goods sold of $168,000, and assets of
$322,000. Accounts receivable are $86,200. What is the receivables turnover?
2.90
________ ________ are the prime source of information about a firm's financial health.
Financial statements
Better Life Inc. had net income of $375,000 on sales of $3.5 million and assets of $4.1
million this year. What is the profit margin?
10.71%
Which of the following equations defines the total asset turnover ratio?
Sales / Total Assets
Which two of the following groups are most interested in liquidity ratios?
-Bankers
-Suppliers
Alpha Manufacturing has interest expense of $12 million, total assets of $184 million, sales
of $176 million, long-term debt of $16.4 million, and net income of $15 million. How will
interest expense be recorded in the common-size income statement?
6.82%
, Which two of the following are most likely to create problems when comparing financial
statements for multiple firms?
-Differing accounting methods
-Differing fiscal years
One of the most important uses of financial statement information within the firm is:
Performance evaluation
The price-earnings (PE) ratio is a __________ ratio.
market value
Which of the following are traditional financial ratio categories?
-Market value ratios
-Asset management ratios
-Profitability ratios
Which of the following represents the receivables turnover ratio?
Sales/Accounts receivable
If Marley Company has a stock price of $12 per share, 100,000 shares outstanding,
$432,000 in liabilities and $100,000 in cash, what is its enterprise value?
$1,532,000
The profit margin is equal to net income divided by _________.
sales
A times interest earned (TIE) ratio of 3.5 times means a firm has ________ that is (are) 3.5
times greater than the firm's interest expense.
earnings before interest and taxes
Assume current assets = $48; fixed assets = $125, current liabilities = $42, and equity =
$100. What is the total debt ratio?
.42
Return on assets is 15%, equity multiplier is 1.4, what is the return on equity?
21.00%
Return of equity (ROE) is a measure of __________.
profitability
