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74. What is the residual income for a firm with $1 million in total 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?
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%?
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 .35:
82. A company has total assets of $1,000, current liabilities of $130, and total liabilities of
$350. 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 are most apt to 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 enough liquid assets to finance its operations for 67 days and cash,
marketable securities, and receivables totaling $1,000. 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. How much will Gamma Inc.'s equityholders earn given a total asset turnover of .85, an
operating profit margin of .15, and a debt-equity ratio of .25?
96. Which one of these firms has recently had a negative market value added?
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?
98. Apex Corp. has current liabilities of $2 million, a current ratio of 3, a quick ratio of 2, and a
cash ratio of .75. Given this information, answer the following about the firm's liquidity:
a. What is the value of inventory?
b. What is the value of receivables?
c. What will happen to each of the three ratios if $1 million in current liabilities is refunded with
long-term debt?
