Finance Chapter 4 2 What The Debt Ratio For Firm

59.

What is the debt ratio for a firm with a debt-equity ratio of 0.5?

60.

Which one of the following will increase a firm’s times interest earned ratio?

61.

Which one of the following would be most detrimental to a firm’s current ratio if that ratio is currently 2?

62.

A retail store with zero net working capital has:

63.

A deficiency of the standard measures of liquidity is that the measures:

64.

A firm has average daily expenses of $2.13 million and average accounts payable of $112.7 million. On average, how many

days does it take the firm to pay its bills?

65.

If a company has a healthy current ratio but a significantly lower quick ratio, then you can assume that:

66.

Last year’s asset turnover ratio was 2.0. Sales have increased by 25% and total assets have increased by 10% since that time.

What is the current asset turnover ratio?

67.

What is the inventory turnover ratio for ABC Corp. if cost of goods sold equals $5,000, current ratio equals 3, quick ratio

equals 1.5, and the firm has $1,800 in current assets?

68.

Assume BDS acquired its main supplier, ABC. As a result of the acquisition, BDS finds that its profit margin increased but

its ROA remained constant. A decrease in which one of these ratios is most apt to be the reason why the ROA did not

increase with the increase in the profit margin?

69.

A firm’s operating profit margin is 20% with an EBIT of $1.5 million and sales of $5 million. If it has no debt, how much did

the firm pay in taxes?

70.

What is primarily responsible for the potential distortion among the ROA of different firms when net income is used in the

numerator of ROA?

71.

Which one of the following changes will provide an increase in a firm’s ROE?

72.

An increase in which one of the following will have no effect on the cash coverage ratio?

73.

What is the book value per share for a firm with 2 million shares outstanding at a price of $50, a market-to-book ratio of

0.75, and a dividend-payout ratio of 50%?

74.

What is the residual income for a firm that is entirely equity-financed with $1 million in capital, $300,000 in net income, and

a 20% cost of capital?

75.

By how much must a firm reduce its assets in order to improve ROA from 10% to 12% if the firm‘s operating profit margin

is 5% on sales of $4 million? Assume that the reduction in assets has no effect on sales or profit margin

76.

What is the ROE for a firm with a times interest earned ratio of 2, a tax liability of $1 million, and interest expense of $1.5

million if equity equals $1.5 million?

77.

Which of the following choices would be guaranteed to increase a firm‘s ROE if the ROA is currently 10% and the leverage

ratio equals 1?

78.

XYZ Corp. has an operating profit margin of 7%, a debt burden of .8, and has financed two-thirds of its assets through

equity. What asset turnover ratio is necessary to achieve an ROE of 18%?

0.18 = (1 / 0.67) × asset turnover × 0.07 × 0.8

79.

The use of financial leverage will be detrimental to a firm’s ROE if the:

80.

Efficiency ratios:

81.

A total debt ratio of 0.35:

82.

A company has total assets of $1,000, current liabilities of $130, and total liabilities of $350. If debt is the only long-term

liability, what is the long-term debt ratio?

83.

If the cash coverage ratio exceeds the times interest earned ratio, then the firm has:

84.

Instead of increasing its long-term debt by borrowing money from a bank to purchase new stereo equipment, Jay’s Jams Inc.

decides to lease the equipment on a long-term basis. How will the long-term debt ratio differ if the lease option is selected

over the bank-debt option?

85.

Which of these assets is generally considered to be the most liquid?

86.

High levels of liquidity may indicate:

87.

The current ratio is a good proxy for a firm’s:

88.

If a company uses cash to pay off some of its accounts payables, what effect will this have on its liquidity ratios, given that

the ratios exceeded 1 before the payoff?

89.

TSI Inc. has liquid assets of $1,000, enough to finance its operations for 67 days. TSI’s average daily expenditures from

operations are:

90.

An asset turnover ratio of 1.75 can be interpreted as:

91.

Which of these indicates that a firm is efficient?

92.

Calculate the average collection period for Dots Inc. if its accounts receivables were $550 at the beginning of a year in which

the firm generated $3,000 of sales?

93.

Which one of these ratios is commonly referred to as the acid–test ratio?

94.

Balsco’s balance sheet shows total assets of $238,000 and total liabilities of $107,000. The firm has 55,000 shares of stock

outstanding that sell for $11 a share. What is amount of market value added?

95.

What will be Gamma Inc.’s return on equity if total asset turnover is 0.85, operating profit margin is 0.15, two-thirds of its

assets are financed through equity, and debt burden is 0.6?

96.

Which of the following is not a problem with EVA?

97.

In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000.

The firm has a single issue of debt outstanding with a face value of $1million, market value of $.92 million, and a coupon

rate of 8%. What is the firm’s times interest earned ratio?

Chapter 04 Test Bank – Static Summary