University of North Georgia, Dahlonega

FINC 3440

Exam 4

1)If a company’s debt/equity ratio equals 1.50, what is its equity multiplier? A)   2.12

B)            2.44

C)            2.36

D)            2.50

E)            2.25

2. What does the price/earnings ratio measure?
   1. Liquidity
   2. Asset utilization
   3. Capital structure
   4. Profitability
   5. Market value

3. A company’s assets consist of $200,000 of cash, $400,000 of accounts receivable, $600,000 of inventory, and $1,500,000 of plant and equipment. Its liabilities consist of $100,000 of accounts payable,

$150,000 of accruals, and $800,000 of long-term debt.

The company’s annual sales are $5,000,000, its earnings before interest and taxes are $700,000, and its net income is $300,000. What are the company’s days of sales outstanding?

A)            33.6

B)            29.2

C)            36.6

D)            42.8

E)             39.1

4. A company’s assets consist of $15,775 of cash, $45,865 of accounts receivable, $87,234 of inventory, and $89,556 of plant and equipment. Its liabilities consist of $23,667 of accounts payable, $12,667 of accruals, and $66,191 of long-term debt.

The company’s annual sales are $357,445, it paid $8,605 of interest, its earnings before taxes are

$37,863, and its net income is $24,611. What is the company’s total asset turnover?

A)            3.5

B)            2.1

C)            3.0

D)            1.5

E)            4.4

5. A company’s assets consist of $64,783 of cash, $106,743 of accounts receivable, $264,476 of inventory, and $845,982 of plant and equipment. Its liabilities consist of $58,432 of accounts payable,

$23,876 of accruals, and $648,423 of long-term debt.

The company’s annual sales are $1,578,993, its earnings before interest and taxes are $157,899, it paid

$58,358 of interest, and its tax rate is 30%. What is the company’s times interest earned?

A)            3.8

B)            2.3

C)            3.6

D)            2.7

E)            4.1

6. A company’s assets consist of $64,783 of cash, $106,743 of accounts receivable, $264,476 of inventory, and $845,982 of plant and equipment. Its liabilities consist of $58,432 of accounts payable,

$23,876 of accruals, and $648,423 of long-term debt.

The company’s annual sales are $1,578,993, its earnings before interest and taxes are $157,899, it paid

$58,358 of interest, and its tax rate is 30%. What is the company’s return on assets?

A)            5.8%

B)            5.4%

C)            6.1%

D)            7.1%

E)            8.9%

7. A company’s assets consist of $60,000 of cash, $375,000 of accounts receivable, $450,000 of inventory, and $900,000 of plant and equipment. Its liabilities consist of $240,000 of accounts payable,

$95,000 of accruals, and $450,000 of long-term debt.

The company’s annual sales are $2,975,000, its earnings before interest and taxes are $460,000, it paid

$55,000 of interest, and its tax rate is 37%. What is the company’s debt/equity ratio?

A)            0.45

B)            1.12

C)            0.79

D)            0.91

E)             0.68

8. A company’s assets consist of $150,000 of cash, $350,000 of accounts receivable, $500,000 of inventory, and $1,700,000 of plant and equipment. Its liabilities consist of $250,000 of accounts payable,

$100,000 of accruals, and $1,000,000 of long-term debt.

The company’s annual sales are $4,000,000, it paid $150,000 of interest, its earnings before taxes are

$350,000, and its net income is $200,000. In its industry, the average profit margin is 5.00%, the average total asset turnover is 1.67, and the average equity multiplier is 2.00. Using DuPont analysis, determine if the company’s return on equity is above or below the industry average and what factor causes the difference?

1. 1. Above, profit margin
   2. Below, profit margin
   3. Below, total asset turnover
   4. Above, total asset turnover
   5. Below, equity multiplier

9. What is a company’s times interest earned, if the company has $500 million in assets, its tax rate is 35%, its basic earning power ratio is 12%, and its return on assets is 6%?

A)            7.3

B)            3.3

C)            5.2

D)            6.1

E)            4.3