Refer to the financial statements of Quick Tool The firms asset turnover ratio

Refer to the financial statements of quick tool the

This preview shows page 26 - 29 out of 36 pages.

70. Refer to the financial statements of Quick Tool. The firm's asset turnover ratio for 2005 is __________. A) 1.86 B) 0.63 C) 0.86 D) 1.63 E) none of the above Answer: C Difficulty: Moderate Rationale: $2,500,000/[($3,040,000 + $2,770,000)) 2] = 0.86. 71. Refer to the financial statements of Quick Tool. The firm's return on sales ratio for 2005 is __________ percent. 72. Refer to the financial statements of Quick Tool. The firm's return on equity ratio for 2005 is __________. 73. Refer to the financial statements of Quick Tool. The firm's P/E ratio for 2005 is __________.
Chapter 19 Financial Statement Analysis 488 74. Refer to the financial statements of Quick Tool. The firm's market to book value for 2005 is __________. A) 0.24 B) 0.95 C) 0.71 D) 1.12 E) none of the above Answer: C Difficulty: Moderate Rationale: $36/[$1,520,000/30,000] = 0.71. 75. ______ is a measure of what the firm would have earned if it didn't have any obligations to creditors or tax authorities. 76. Proceeds from a company's sale of stock to the public are included in ________.
Chapter 19 Financial Statement Analysis 489 77. Which of the financial statements recognizes only transactions in which cash changes hands? 78. Suppose that Charlie's Cycles, Inc. has a ROA of 7% and pays a 6% coupon on its debt. Charlie's has a capital structure that is 70% equity and 30% debt. Relative to a firm that is 100% equity-financed, Charlie's Net Profit will be ________ and its ROE will be ________. A) lower, lower B) higher, higher C) higher, lower D) lower, higher E) It is impossible to predict. Answer: D Difficulty: Difficult Rationale: Charlie's Net Profit will be lower because it has to pay interest expense. But as long as Charlie's ROA exceeds the cost of its debt, leverage will have a positive impact on its ROE.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture