Quiz_2_-_Ch._3

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School

University of Fredericton *

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5015

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Finance

Date

Jan 9, 2024

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docx

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5

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Started on Wednesday, 14 December 2022, 9:25 PM State Finished Completed on Wednesday, 14 December 2022, 9:55 PM Time taken 30 mins 1 sec Grade 7.00 out of 10.00 ( 70 %) Question 1 Correct Mark 1.00 out of 1.00 Question text 01. Ratio analysis can be useful for Select one: a. historical trend analysis within a firm. b. comparison of ratios within a single industry. c. measuring the effects of financing. d. All of the other answers are correct Feedback The correct answer is: All of the other answers are correct Question 2 Correct Mark 1.00 out of 1.00 Question text 02. In examining the liquidity ratios, the primary emphasis is the firm's Select one: a. ability to effectively employ its resources. b. overall debt position. c. ability to pay short-term obligations on time. d. ability to earn an adequate return. Feedback The correct answer is: ability to pay short-term obligations on time. Question 3 Correct Mark 1.00 out of 1.00 Question text
03. Total asset turnover indicates the firm's Select one: a. liquidity. b. debt position. c. ability to use its assets to generate sales. d. profitability. Feedback The correct answer is: ability to use its assets to generate sales. Question 4 Incorrect Mark 0.00 out of 1.00 Question text 04. ABC Co. has an average collection period of 60 days. Total credit sales for the year were $3,285,000. What is the balance in accounts receivable at year-end? Select one: a. $54,750 b. $109,500 c. $540,000 d. $747,500 Feedback The correct answer is: $540,000 Average Collection period = accounts receivables / Average daily credit sales Accounts receivables = Average Collection period * Average daily credit sales Accounts receivables = 60 * 3,285,000/365 = 540,000 Question 5 Incorrect Mark 0.00 out of 1.00 Question text 05. If lease payments are reduced. Select one: a. times interest earned goes up. b. fixed charge coverage goes up. c. fixed charge coverage stays the same. d. fixed charge coverage goes down.
Feedback The correct answer is: fixed charge coverage goes up. A lease is a substitute for debt. If you reduce an expense, fixed charge coverage goes up. Question 6 Correct Mark 1.00 out of 1.00 Question text 06. A quick ratio much smaller than the current ratio reflects Select one: a. a small portion of current assets is in inventory. b. a large portion of current assets is in inventory. c. that the firm will have a high inventory turnover. d. that the firm will have a high return on assets. Feedback The correct answer is: a large portion of current assets is in inventory. Question 7 Incorrect Mark 0.00 out of 1.00 Question text 07. A firm has a debt to equity ratio of 50%, debt of $300,000, and net income of $90,000. The return on equity is Select one: a. 60%. b. 15%. c. 30%. d. not enough information Feedback The correct answer is: 15% debt to equity = Total Liabilities / Stockholder's equity x 100 Stockholder's equity = Total Liabilities / debt to equity x100 Stockholder's equity = 300,000/ 0.5 = 600,000 Return on Equity (ROE) = Net Income/ Shareholder’s Equity X 100% = 90,000/600,000x 100
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= 15% Question 8 Correct Mark 1.00 out of 1.00 Question text 08. Which of the following is not considered to be a profitability ratio? Select one: a. profit margin b. times interest earned c. return on equity d. return on assets [investment] Feedback The correct answer is: times interest earned Question 9 Correct Mark 1.00 out of 1.00 Question text 09. If the company's accounts receivable turnover is decreasing, the average collection period Select one: a. is going up. b. is going down. c. could be moving in either direction. d. is going down slightly. Feedback The correct answer is: is going up. Question 10 Correct Mark 1.00 out of 1.00 Question text 10. Jones and Co. reported average receivables of $550,000 in its most recent annual report. If total credit sales were $3,000,000 what was Jones and Co.'s average collection period? Select one: a. 66 days
b. 29 days c. 82 days d. 21 days Feedback The correct answer is: 66 days 3,000,000/365 = 8,219.18 550,000/ 8,219.18 = 66.92 *you can also use 360 days instead of 365 and the result would be 66 days.