1. Culver Inc. has earnings after interest but before taxes of $300.

The
company’s before-tax times interest earned ratio is 7.00. Calculate
the company’s interest charges.

a. $42.86
b. $50.00
c. $40.00
d. $60.00
e. $57.93

2. Alumbat Corporation has $800,000 of debt outstanding, and it pays an

interest rate of 10 percent annually on its bank loan. Alumbat’s
annual sales are $3,200,000, its average tax rate is 40 percent, and
its net profit margin on sales is 6 percent. If the company does not
maintain a TIE ratio of at least 4 times, its bank will refuse to
renew its loan, and bankruptcy will result. What is Alumbat’s
current TIE ratio?

a. 2.4
b. 3.4
c. 3.6
d. 4.0
e. 5.0
3. Stallworth Industries recently reported the following balance sheet:

Assets:
Cash $ 300,000
Accounts receivable 700,000
Inventories 500,000
Current assets $1,500,000
Net fixed assets 3,500,000
Total assets $5,000,000

Liabilities and Equity:

Current liabilities $1,000,000
Long-term debt 2,000,000
Common equity 2,000,000
Total liabilities and equity $5,000,000

The company’s current inventory turnover ratio is 4. The company

wishes to maintain its current level of sales, but lower its
inventory so that its inventory turnover ratio equals the industry
average, which is 6. Half of the cash freed up by the inventory
decrease would be used to purchase additional fixed assets, while the
remainder would be used to reduce current liabilities. What would be
the company’s quick ratio, if it were able to reduce inventory as
planned?

a. 1.091
b. 1.273
c. 1.342
d. 1.454
e. 1.761
4 . Liquidity ratio: Bathez Corp. has receivables of $334,227, inventory of $451,000,
cash of $73,913, and accounts payables of $469,553. What is the firm's current
ratio?
A) 1.83
B) 0.73
C) 1.67
D) None of the above

5. Liquidity ratio: Zidane Enterprises has a current ratio of 1.92, current liabilities of
$272,934, and inventory of 197,333. What is the firm's quick ratio?
A) 0.72
B) 1.20
C) 1.92
D) None of the above

6. Market-value ratio: RTR Corp. has reported a net income of $812,425 for the year.
The company's share price is $13.45, and the company has 312,490 shares
outstanding. Compute the firm's price-earnings ratio.
A) 4.87 times
B) 8.12 times
C) 5.17 times
D) None of the above

7. Market-value ratios: Perez Electronics Corp. has reported that its net income for
2006 is $1,276,351. The firm has 420,000 shares outstanding and a P-E ratio of
11.2 times. What is the firm's share price?
A) $34.05
B) $3.68
C) $11.20
D) $36.80
8. Profitability ratios: Tigger Corp. has reported the financial results for year-end 2006.
Based on the information given, calculate the firm's gross profit margin and operating
profit margin.

Net sales = $4,156,700 Net income = $778,321

Cost of goods sold = $2,715,334 EBIT = $1,356,098
A) 34.7%; 32.6%
B) 32.6%; 18.72%
C) 34.7%; 18.72%
D) None of the above