Financial Ratios Quiz

FINANCIAL RATIOS
1. Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000 and preferred
dividends of $5,000. What was the firm’s net profit after taxes?
a) $66,000
b) $49,000
c) $44,000
d) $83,000
2. Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent, and it paid preferred stock
dividends of $50,000. There were 100,000 shares outstanding and no interest expense. What were Candy
Corporation’s earnings per share?
a) $3.91
b) $4.52
c) $7.42
d) $7.59
3. The primary concern of creditors when assessing the strength of a firm is the firm’s
a) profitability.
b) leverage.
c) short-term liquidity.
d) share price.
4. Present and prospective shareholders are mainly concerned with a firm’s
a) risk and return.
b) profitability.
c) leverage.
d) liquidity.
Table 1.
Cole Eagan Enterprises

Statement of Financial Position
December 31, 20x5
Cash $4,500 Accounts Payable $10,000

Accounts Receivable Notes Payable
Inventory Accruals 1,000
Total Current Assets Total Current Liabilities
Net Fixed Assets Long-Term Debt
Total Assets Stockholders’ Equity
Total Liabilities & Stockholders’ Equity
Information (20x5 values)

a. Sales totalled $110,000
b. The gross profit margin was 25 percent.
c. Inventory turnover was 3.0.
d. There are 360 days in the year.
e. The average collection period was 65 days.
f. The current ratio was 2.40.
g. The total asset turnover was 1.13.
h. The debt ratio was 53.8 percent.
5. Inventory for CEE in 2005 was _________. (See Table 1)

a) $36,667
b) $32,448
c) $27,500
d) $ 9,167
6. Notes payable for CEE in 2005 was _________. (See Table 1)
a) $113,466
b) $ 52,372
c) $ 41,372
d) $ 10,608
7. Accounts receivable for CEE in 2005 was _________. (See Table 1)
a) $14,056
b) $19,861
c) $14,895
d) $18,333
8. Net fixed assets for CEE in 2005 were _________. (See Table 1)
a) $45,484
b) $48,975
c) $54,511
d) $69,341
9. Total assets for CEE in 2005 were _________. (See Table 1)
a) $ 45,895
b) $124,300
c) $ 58,603
d) $ 97,345
10. Long-term debt for CEE in 2005 was _________. (See Table 1)
a) $30,737
b) $52,372
c) $10,608
d) $41,372
Table 2.
Dana Dairy Products Key Ratios
Industry Average Actual 2004 Actual 2005
Current Ratio 1.3 1.0
Quick Ratio 0.8 0.75
Average collection Period 23 days 30 days
Inventory Turnover 21.7 19
Debt Ratio 64.7% 50%
Times Interest Earned 4.8 5.5
Gross Profit Margin 13.6% 12.0%
Net Profit Margin 1.0% 0.5%
Return on total assets 2.9% 2.0%
Return on Equity 8.2% 4.0%
Dana Dairy Products

Income Statement
For the Year Ended December 31, 2005
Sales Revenue $ 100,000

Less: Cost of Goods Sold 87,000
Gross Profits $ 13,000
Less: Operating Expenses 11,000
Operating Profits $ 2,000
Less: Interest Expense 500
Net Profits Before Taxes $ 1,500
Less: Taxes (40%) 600
Net Profits After Taxes $ 900
Dana Dairy Products

Balance Sheet
December 31, 2005
Assets
Cash $ 1,000
Accounts Receivable 8,900
Inventories 4,350
Total Current Assets $ 14,250
Gross Fixed Assets $ 35,000
Less: Accumulated Depreciation 13,250
Net Fixed Assets 21,750
Total Assets $ 36,000
Liabilities & Stockholders’ Equity

Accounts Payable $ 9,000
Accruals 6,675
Total Current Liabilities $ 15,675
Long-term Debt 4,125
Total Liabilities $ 19,800
Common Stock 1,000
Retained Earnings 15,200
Total Stockholders’ Equity $ 16,200
Total Liabilities & Stockholders’ Equity $ 36,000
11. The current ratio for Dana Dairy Products in 2005 was _________. (See Table 2)
a) 1.58
b) 0.63
c) 1.10
d) 0.91
12. Since 2004, the liquidity of Dana Dairy Products _________. (See Table 2)
a) has deteriorated
b) remained the same
c) has improved
d) cannot be determined
13. The net working capital for Dana Dairy Products in 2005 was _________. (See Table 2)
a) $10,325
b) $ 1,425
c) –$ 1,425
d) $14,250
14. The inventory turnover for Dana Dairy Products in 2005 was _________. (See Table 2)
a) 43
b) 5
c) 20
d) 25
15. The inventory management at Dana Dairy Products _________ since 2004. (See Table 2)
a) has deteriorated
b) remained the same
c) has improved slightly
d) cannot be determined
16. The average collection period for Dana Dairy Products in 2005 was (See Table 2)
a) 32.5 days.
b) 11.8 days.
c) 25.3 days.
d) 35.9 days.
17. The debt ratio for Dana Dairy Products in 2005 was (See Table 2)
a) 50 percent.
b) 11 percent.
c) 55 percent.
d) 44 percent.
18. The gross profit margin and net profit margin for Dana Dairy Products in 2005 were (See Table 2)
a) 13 percent and 0.9 percent, respectively.
b) 13 percent and 1.5 percent, respectively.
c) 2 percent and 0.9 percent, respectively.
d) 2 percent and 1.5 percent, respectively.
19. The return on total assets for Dana Dairy Products for 2005 was (See Table 2)
a) 0.9 percent.
b) 5.5 percent.
c) 25 percent.
d) 2.5 percent.
20. The return on equity for Dana Dairy Products for 2005 was (See Table 2)
a) 0.6 percent.
b) 5.6 percent.
c) 0.9 percent.
d) 50 percent.
21. Using the modified DuPont formula allows the analyst to break Dana Dairy Products return on equity into 3
components: the net profit margin, the total asset turnover, and a measure of leverage (the financial leverage
multiplier). Which of the following mathematical expressions represents the modified DuPont formula relative to
Dana Dairy Products’ 2005 performance? (See Table 2)
a) 5.6(ROE)  2.5(ROA)  2.24(Financial leverage multiplier)
b) 5.6(ROE)  3.3(ROA)  1.70(Financial leverage multiplier)
c) 4.0(ROE)  2.0(ROA)  2.00(Financial leverage multiplier)
d) 2.5(ROE)  5.6(ROA)  0.44(Financial leverage multiplier)
22. A firm has total interest charges of 10,000 per year, sales of 1 million, a tax rate of 40%, and a net profit margin
of 6%. What is the firm’s times-interest-earned ratio?
a) 16 times
b) 10 times
c) 7 times
d) 11 times
e) 20 times
23. The Meryl’s Corporation common stock currently is selling at 100 per share, which represents a P/E ratio of 10. If
the firm has 100 shares of common stock outstanding, a return on equity of 20 percent, and a debt ratio of 60%,
what is its return on total assets (ROA)?
a) 8%
b) 10%
c) 12%
d) 16.7%
e) 20%
24. Lombardi Trucking Company has the following data:
Assets 10,000 Profit Margin 3%
Debt ratio 60% Interest rate 10%
Tax rate 40% Total asset turnover 2
What is Lombardi’s Times Interest Earned Ratio?
a) 0.95
b) 1.75
c) 2.10
d) 2.67
e) 3.45
25. Retailers’ Inc. and Computer Corp. each have assets of 10,000 and return on common equity equal to 15%.
Retailers’ has twice as much debt as twice as many sales relative to Computer Corp. Retailers’ net income equals
to 750, and its total asset turnover is equal to 3. What is Computer Corp.’s profit margin?
a) 2.50%
b) 5%
c) 7.5%
d) 10%
e) 12.5%

Financial Ratios Quiz

Uploaded by

Copyright:

Available Formats

Financial Ratios Quiz

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Financial Ratios Quiz

Uploaded by

Copyright:

Available Formats

What is the net profit after taxes for firm ABC?

What were Candy Corporation's earnings per share?

FINANCIAL RATIOS

Cole Eagan Enterprises

Cash $4,500 Accounts Payable $10,000

Information (20x5 values)

5. Inventory for CEE in 2005 was _________. (See Table 1)

Dana Dairy Products

Sales Revenue $ 100,000

Dana Dairy Products

Liabilities & Stockholders’ Equity

You might also like