University of North Georgia, Dahlonega

FINC 3440

Exam 5

1)If a company’s debt ratio equals 35%, what is its equity multiplier? A)  1.54

B)         1.84

C)         1.26

D)         1.52

E)         1.45

2. What does the operating margin measure?
   1. Market value
   2. Asset utilization
   3. Liquidity
   4. Capital structure
   5. Profitability

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 is the company’s fixed asset turnover?

A)         4.2

B)         3.0

C)         3.3

D)         3.6

E)         3.9

4. 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 is the company’s total asset turnover?

A)         1.7

B)         2.5

C)         2.3

D)         2.1

E)         1.9

5. 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 $700,000 of long-term debt.

The company’s annual sales are $4,000,000, its earnings before interest and taxes are $600,000, its earnings before taxes are 530,000, and its net income is $400,000. What is the company’s times interest earned?

A)         8.0

B)         8.2

C)         8.8

D)         8.6

E)         8.4

6. A company’s assets consist of $123,456 of cash, $237,543 of accounts receivable, $348,876 of inventory, and $1,456,987 of plant and equipment. Its liabilities consist of $187,694 of accounts payable,

$56,895 of accruals, and $622,156 of long-term debt.

The company’s annual sales are $3,678,775, its earnings before interest and taxes are $551,816, its earnings before taxes are $489,601, and its net income is $293,760. What is the company’s return on assets?

A)           12.6%

B)            11.5%

C)            17.1%

D)           13.6%

E)            14.1%

7. 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 is the company’s debt/equity ratio?

A)           44.8%

B)            54.2%

C)            58.6%

D)           63.6%

E)            67.4%

8. A company’s annual sales are $5,000,000, it paid $200,000 of interest, its earnings before taxes are

$450,000, and its net income is $300,000. In its industry, the average profit margin is 4.92%, the average total asset turnover is 1.72, and the average equity multiplier is 2.23.

The company’s assets consist of $200,000 of cash, $300,000 of accounts receivable, $400,000 of inventory, and $2,000,000 of plant and equipment. Its liabilities consist of $300,000 of accounts payable,

$100,000 of accruals, and $1,200,000 of long-term debt. 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. Below, profit margin
   2. Above, profit margin
   3. Below, total asset turnover
   4. Above, total asset turnover
   5. Below, equity multiplier

9. A company’s annual revenues are $2 million, its tax rate is 30%, and its profit margin is 5%. It has

$500,000 of debt outstanding on which it pays interest of 10% per year. What is the company’s times interest earned?

A)         2.7

B)         3.0

C)         3.3

D)         3.6

E)         3.9