Reference no: EM131508256

Assignment

Question 1

Based on the information in Table 1, the acid-test ratio is

1.17.
1.33.
1.39.
2.15.

Question 2

HighLev Incorporated borrows heavily and uses the leverage to boost its return on equity to 30% this year, nearly 10% higher than the industry average. However, HighLev's stock price decreases relative to its industry counterparts. How is this possible?

Markets are inefficient and fail to recognize the benefits of leverage.
The increased debt resulted in interest payments that made HighLev's operating income drop even though return on equity increased.
Shareholders are not interested in return on equity.
the high levels of debt increased the riskiness of HighLev relative to its competitors.

Question 3

Based on the information in Table 1, the return on equity is

19.33%.
18.47%.
16.66%.
15.65%.

Question 4

Which of the following represents an attempt to measure the net results of the firm's operations (revenues versus expenses) over a given time period?

balance sheet
statement of cash flows
income statement
sources and uses of funds statement

Question 5

The current ratio of a firm would equal its quick ratio whenever

the firm has no inventory.
the firm's inventory is equal to its other current assets.
the firm's inventory is equal to its current liabilities.
the firm's current ratio is equal to one.

Question 6

A firm's financing costs include

depreciation expense.
interest exposure.
costs of goods sold.
both depreciation expense and interest exposure

Question 7

TSW Inc. had the following data for last year: Net income = $800; Net operating profit after taxes (NOPAT) = $700; Total assets = $3,000; and Total operating capital = $2,000. Information for the just-completed year is as follows: Net income = $1,000; Net operating profit after taxes (NOPAT) = $925; Total assets = $2,600; and Total operating capital = $2,500. How much free cash flow did the firm generate during the just-completed year?

$383
$425
$468
$514
$566

Question 8

Based on the information in Table 1, and assuming the company's stock price is $50 per share, the P/E ratio is

Table 1

Drummond Company Balance Sheet
Assets:
Cash and marketable securities		$400,000
Accounts receivable		1,415,000
Inventories		1,847,500
Prepaid expenses		24,000
Total current assets		3,686,500
Fixed assets	2,800,000
Less: accum. depr.	(1,087,500)
Net fixed assets		1,712,500
Total assets		$5,399,000
Liabilities:
Accounts payable		$600,000
Notes payable		875,000
Accrued taxes		92,000
Total current liabilities		$1,567,000
Long-term debt		900,000
Common Stock (100,000 shares)		700,000
Retained Earnings		2,232,000
Total liabilities and owner's equity		$5,399,000
Net sales (all credit)		$6,375,000
Less: Cost of goods sold		(4,375,000)
Selling and administrative expense		(1,000,000)
Depreciation expense		(135,000)
Interest expense		(100,000)
Earnings before taxes		$765,000
Income taxes		(306,000)
Net income		$459,000

10.89.
14.33.
24.44.
27.50.

Question 9

Based on the information in Table 1, the DSO is

70 days.
81 days.
89 days.
127 days.

Question 10

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

The company purchases a new piece of equipment.
The company repurchases common stock.
The company pays a dividend.
The company issues new common stock.
The company gives customers more time to pay their bills.