Module 9

Question 1

A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:

Answer 1

$.53 in total equity.

Question 2

The current ratio is measured as:

Answer 2

current assets divided by current liabilities.

Question 3

The inventory turnover ratio is measured as:

Answer 3

cost of goods sold divided by inventory.

Question 4

The sustainable rate of growth for a firm can be increased by:

Answer 4

increasing the total asset turnover.

Question 5

The sustainable growth rate will be equivalent to the internal growth rate when, and only when:

Answer 5

a firm has no debt.

Question 6

DL Motors has sales of $22,400, net income of $3,600, net fixed assets of $18,700, inventory of $2,800, and total current assets of $6,300. What is the common-size statement value of inventory?

Answer 6

11.20 percent

Question 7

Cado Industries has total debt of $6,800 and a debt-equity ratio of .36. What is the value of the total assets?

Answer 7

$25,689

Question 8

Flo’s Restaurant has sales of $418,000, total equity of $224,400, a tax rate of 23 percent, a debt-equity ratio of .37, and a profit margin of 5.1 percent. What is the return on assets?

Answer 8

6.93 percent

Question 9

Southern Foods has net income of $39,900, net sales of $318,600, total assets of $663,000, common stock of $106,800 with a par value of $1 per share, and retained earnings of $224,400. The stock has a market value of $5.45 per share. What is the price-earnings ratio?

Answer 9

14.59