Final exam review

1. Liquidity ratio: Lionel, Inc., has current assets of $623,122, including

inventory of $241,990, and current liabilities of 378,454. What is the quick
ratio?
2. 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?
3. 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?
4. Liquidity ratio: Ronaldinho Trading Co. is required by its bank to maintain a
current ratio of at least 1.75, and its current ratio now is 2.1. The firm plans to
acquire additional inventory to meet an unexpected surge in the demand for its
products and will pay for the inventory with short-term debt. How much
inventory can the firm purchase without violating its debt agreement if their
total current assets equal $3.5 million?
5. Efficiency ratio: If Viera, Inc., has an accounts receivable turnover of 3.9
times and net sales of $3,436,812, what is its level of receivables?
6. Efficiency ratio: Jason Traders has sales of $833,587, a gross profit margin of
32.4 percent, and inventory of $178,435. What is the company’s inventory
turnover ratio?
7. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What
is the firm’s days’ sales in inventory?
8. Efficiency ratio: Deutsche Bearings has total sales of $9,745,923, inventories
of $2,237,435, cash and equivalents of $755,071, and days’ sales outstanding
of 49 days. If the firm’s management wanted its DSO to be 35 days, by how
much will the accounts receivable have to change?
9. Coverage ratio: Trident Corp. has debt of $3.35 million with an interest rate
of 6.875 percent. The company has an EBIT of $2,766,009. What is its times
interest earned?
10. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-
to-equity ratio?

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Final exam review

11. Coverage ratios: Fahr Company had depreciation expenses of $630,715,

interest expenses of $112,078, and an EBIT of $1,542,833 for the year ended
June 30, 2006. What are the times interest earned and cash coverage ratios for
this company?
12. Leverage ratio: Dreisen Traders has total debt of $1,233,837 and total assets
of $2,178,990. What are the firm’s equity multiplier and debt-to-equity ratio?
13. 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.
14. Profitability ratio: Juventus Corp has total assets of $4,744,288, total debt of
$2,912,000, and net sales of $7,212,465. Their net profit margin for the year is
18 percent. What is Juventus’s ROA?
15. DuPont equation: GenTech Pharma has reported the following information:
Sales/Total assets = 2.89; ROA = 10.74%; ROE = 20.36%
What are the firm’s profit margin and equity multiplier?
16. 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