21A 23-24 PoF Quiz 3

Debt management ratios indicate the degree to which a company's managers seek to enhance returns on owners' capital by utilizing financial leverage.

• True

• False

If a company were to sell inventory on credit, it is likely that its current ratio would remain relatively stable, but its quick ratio would see an improvement.

• True

• False

Which of the following would typically signal an ENHANCEMENT in a company’s financial position, assuming other factors remain constant?

• 1. The TIE declines.

• 1. The DSO increases.

• 1. The quick ratio increases.

• 1. The current ratio declines.

• 1. The total assets turnover decreases.

Firms S and K both possess a current ratio of 0.75, identical sales figures, and equivalent current liabilities. However, Firm S boasts a superior inventory turnover ratio compared to K. Therefore, it can be inferred that S's quick ratio must be lower than K's.

• True

• False

1. Sinergi Company’s current ratio is 2.0.  Considered alone, which of the following actions would LOWER the current ratio?

• 1. Borrow using short-term notes payable and use the proceeds to reduce accruals.

• 1. Borrow using short-term notes payable and use the proceeds to reduce long-term debt.

• 1. Use cash to reduce accruals.

• 1. Use cash to reduce short-term notes payable.

• 1. Use cash to reduce accounts payable.

1. Emily's Bill has current liabilities of $45 million. Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets. Emily's current ratio = 1.5 times. Calculate the value of inventory listed on the firm's balance sheet.

•  $13.375 m

• $20.375 m

• $30.375 m

• $33.75 m

1. Ajax Corp's sales last year were $460,000, its operating costs were $362,500, and its interest charges were $12,500.  What was the firm's times-interest-earned (TIE) ratio?
   

• 1. 7.80

• 1. 7.70

• 1. 8.19

• 1. 7.72

• 1. 9.75

OZ's Neon Signs, Inc. reported a debt-to-equity ratio of 1.9 times at the end of 2021. If the firm's total assets at year-end are $100 million, calculate how much of their assets is financed with equity. 

• 1. $34.48m

• 1. $35.48m

• 1. $53.48m

• 1. $100 m

1. In 2021, Solomon reported sales of $6,783 million, gross profits of $2,647 million, EBIT of $949 million, and net income of $681 million.  The company's cost of goods sold that year equaled ________.

• 10%

• $4,136 million

• $4,277 million

• 14%

1. Haritthh Inc's latest net income was $1,210,000, and it had 225,000 shares outstanding.  The company wants to pay out 45% of its income.  Calculate the dividend per share should be declared.

• 1. $2.49

• 1. $2.06

• 1. $2.11

• 1. $2.52

• 1. $2.42