Chapter 4 quiz

Chapter 4 quiz - Ch 4 Quiz Why is ratio analysis useful It...

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Ch 4 Quiz Why is ratio analysis useful? It is a way of standardizing numbers and can facilitate comparisons between firms. Which of the following statements is correct? If a firm’s expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will raise the firm’s expected return on common equity (ROE). Which of the following is correct? Ratios can be artificially manipulated with “window dressing” techniques. Riley & Associates has a DSO of 28 days, and its annual sales are \$5,100,000. What is its accounts receivable balance? Assume it uses a 365-day year. \$391,233 Concrete Constructors has a return on assets (ROA) of 7 percent, a 2 percent profit margin, and a return on equity (ROE) of 9 percent. What is its equity multiplier? 1.29 You are given the following information about a company: Shareholders’ equity (from balance sheet) \$1,588,000 Price / earnings ratio 6.7 Common shares outstanding 66,000 Market / book ratio 1.9 Calculate the price of a share of the company’s common stock. \$45.72 Assume you are given the following relationships for the Warner Corporation: Sales / Total assets 2.1 × Return on assets (ROA) 5.10% Return on equity (ROE) 8.60%

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Calculate Warner’s profit margin. 2.43% Sheffield's Furniture has \$1,097,000 in current assets and \$470,000 in current liabilities. Its initial inventory level is \$540,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.1? \$100,000
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Chapter 4 quiz - Ch 4 Quiz Why is ratio analysis useful It...

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