Quiz 1: Total marks-60

1. Based only on the following information for Bennington Corp., did cash go up or down?
By how much? (10)
Decrease in inventory
Decrease in accounts payable
Increase in notes payable
Increase in accounts receivable

$430
180
600
250

A) Cash decreased by $600

B) Cash decreased by $1,460
C) Cash increased by $600
D) Cash increased by $1,100
E) Cash increased by $960
Decrease in inventory: Increase in cash
Decrease in accounts payable: Decrease in cash
Increase in notes payable: Increase in cash
Increase in accounts receivables: Decrease in cash
2. If Roten Rooters, Inc., has an equity multiplier of 1.45, total asset turnover of 1.36, and a
profit margin of 9.50 percent. What is its ROE using the DuPont identity? (5)
A)
B)
C)
D)
E)

17.98%
-5.81%
16.86%
20.61%
18.73%

ROE=1.45*1.36*9.5=18.73%
3. The Anberlin Co. had $255,000 in 2011 taxable income. Calculate the companys 2011
income taxes? Use the corporate tax rate table. What is the average tax rate? What is the
marginal tax rate? (15)
0.15*50000=7500
0.25*25000=6250
0.34*25000=8500
0.39*155,000=60450
Total taxes= $82,700

Average tax rate= 82700/255000=32.4%

Marginal tax rate=39%

4. Mention two advantages and one disadvantage of corporations over partnerships? (15)
Please see power point for chapter 1.

5.

Using the information from above balance sheet and income statement (all numbers in millions),
calculate for year 2009, the
(15)
a) Quick ratio:
Quick ratio=(CA-inv)/CL=(2256-301)/1995=0.98

b) Profit margin:
Profit margin=Net income/Revenues=689/5000=13.78%

c) Times interest earned:

TIE= EBIT/interest expense=1138/7=162.57 times

d) Receivables Turnover:
Receivables turnover= Revenues/Accounts receivables=5000/956= 5.23 times

e) Total asset turnover:

TAT= Sales/Total assets= 5000/5394= 0.93

Taxable income
0-50,000
50,001-75,000
75,001-100,000
100,001-335,000
335,001-10,000,000
10,000,001-15,000,000
15,000,001-18,333,333
18,333,334+

Tax rate
15%
25%
34%
39%
34%
35%
38%
35%