Chap 3 Prac Quiz

# Chap 3 Prac Quiz - Homework Manager FIN 301 Section 1...

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Question 1: Score 1/1 Your response Correct response Calculating Liquidity Ratios SDJ, Inc., has net working capital of \$1,000, current liabilities of \$4,000, and inventory of \$1,500. (Round answers to 2 decimal places.) The current ratio is 1.25 (50%) times. The quick ratio is 0.88 (50%) times. Calculating Liquidity Ratios SDJ, Inc., has net working capital of \$1,000, current liabilities of \$4,000, and inventory of \$1,500. (Roun to 2 decimal places.) The current ratio is 1.25 times. The quick ratio is 0.88 times. Feedback: To find the current assets, we must use the net working capital equation. Doing so, we find: NWC = Current assets Current liabilities \$1,000 = Current assets \$4,000 Current assets = \$5,000 Now, use this number to calculate the current ratio and the quick ratio. The current ratio is: Current ratio = Current assets / Current liabilities Current ratio = \$5,000 / \$4,000 Current ratio = 1.25 times And the quick ratio is: Quick ratio = (Current assets Inventory) / Current liabilities Quick ratio = (\$5,000 1,500) / \$4,000 Quick ratio = 0.88 times Question 2: Score 1/1 Your response Correct response Calculating Profitability Ratios Tinker's Bells has sales of \$26 million, total assets of \$35 million, and total debt of \$10 million. If the profit margin is 11 percent, the net income is \$ 2860000 (33%) (Enter your answer in dollars, not millions of dollars. Omit the "\$" sign in your response.) , ROA is 8.17 (33%) percent, and ROE is 11.44 (33%) percent. (Round ROA and ROE to 2 decimal places, without the percent sign.) Calculating Profitability Ratios Tinker's Bells has sales of \$26 million, total assets of \$35 million, and total debt of \$10 million. If the profit margin is 11 percent, the net income is \$ 2860000 (Enter your answer in dollars, not millions of dollars Omit the "\$" sign in your response.) , ROA is 8.17 percent, and ROE is 11.44 percent. (Round ROA a ROE to 2 decimal places, without the percent sign.) Feedback: To find the return on assets and return on equity, we need net income. We can calculate the net income using the profit margin. Doing so, we find the net income is: Profit margin = Net income / Sales 0.11 = Net income / \$26,000,000 Net income = \$2,860,000 Now we can calculate the return on assets as: ROA = Net income / Total assets ROA = \$2,860,000 / \$35,000,000 ROA = 0.08171 or 8.17% We do not have the equity for the company, but we know that equity must be equal to total assets minus total debt, so the ROE is: ROE = Net income / (Total assets – Total debt) ROE = \$2,860,000 / (\$35,000,000 – 10,000,000) ROE = 0.1144 or 11.44% Question 3: Score 1/1 Your response Correct response Calculating the Average Collection Period Pujols Lumber Yard has a current accounts receivable balance of \$360,000. Credit sales for the year just ended were \$2,988,000. (Round your answers to 2 decimal places.) The receivables turnover is 8.3 (33%) times. Days' sale in receivables is 43.98 (33%) days. It took 44 (33%) days on average for credit customers to pay off their accounts during the past year. Calculating the Average Collection Period Pujols Lumber Yard has a current accounts receivable balance of \$360,000. Credit sales for the year just ended were \$2,988,000.

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