1. Sheffield's Furniture has $1,546,500 in current assets and $665,000 in current liabilities. Its initial inventory level is $480,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.1?

	a.	$136,364
	b.	$157,143
	c.	$71,429
	d.	$150,000
	e.	$300,000

2. The Bellagio Corporation recently reported net income of $3,000,000. It has 600,000 shares of common stock, which currently trades at $40 a share. Bellagio continues to expand and expects that 1 year from now its net income will be $4,500,000. Over the next year it also anticipates issuing an additional 240,000 shares of stock, so that 1 year from now it will have 840,000 shares of common stock. Assuming its price/earnings ratio remains at its current level, what will be its stock price 1 year from now?

	a.	$42.86
	b.	$40.00
	c.	$28.57
	d.	$60.00
	e.	$37.33

3. Consider the following financial data for Aldos Computer Stores:

Balance Sheet as of December 31, 2012

Cash	$	104,000		Accounts payable	$	35,500
Receivables		146,000		Short-term bank note		85,000
Inventories		194,000		Accrued wages and taxes		40,500
Total current assets	$	444,000		Total short-term liab.	$	161,000
				Long-term debt		230,500
Net fixed assets		255,000		Common equity		307,500
Total assets	$	699,000		Total liabilities & equity	$	699,000

Statement of Earnings for the Year Ended December 31, 2012

Sales	$	804,000
Cost of merchandise sold		510,500
Gross profit	$	293,500
Operating expenses		157,000
Earnings before interest and taxes (EBIT)	$	136,500
Interest expense		38,000
Earnings before taxes (EBT)	$	98,500
Federal and state income taxes (45 percent)		44,325
Net profit	$	54,175

Calculate Aldos total asset turnover.

	a.	4.14
	b.	27.93
	c.	7.75
	d.	3.07
	e.	1.15

4.

Consider the following financial data for Toms Pool Supply:

Balance Sheet as of December 31, 2012

Cash & equivalents	$	103,500		Accounts payable	$	123,000
Accounts receivable		223,500		Short-term bank note		136,500
Inventories		292,000		Accruals		91,500
Total current assets	$	619,000		Total current liabilities	$	351,000
				Long-term debt		249,000
Net fixed assets		513,000		Common equity		532,000
Total assets	$	1,132,000		Total liabilities & equity	$	1,132,000

Profit & Loss Statement for the Year Ended December 31, 2012

Net sales	$	842,000
Cost of goods sold		529,000
Gross profit	$	313,000
Operating expenses		181,500
Earnings before interest and taxes (EBIT)	$	131,500
Interest expense		50,000
Earnings before taxes (EBT)	$	81,500
Federal and state income taxes (30 percent)		24,450
Net earnings	$	57,050

Calculate Toms return on assets (ROA).

	a.	5.04%
	b.	9.22%
	c.	6.78%
	d.	18.23%
	e.	10.72%

5. Consider the following financial data for Toms Music Stores:

Statement of Financial Position as of December 31, 2012

Cash	$	71,500		Accounts payable	$	91,000
Accounts receivable		235,500		Notes payable		125,500
Inventories		289,000		Accruals		68,500
Total current assets	$	596,000		Total current liabilities	$	285,000
				Long-term debt		368,000
Net fixed assets		590,500		Common equity		533,500
Total assets	$	1,186,500		Total liabilities & equity	$	1,186,500

Income Statement for the Year Ended December 31, 2012

Net sales	$	788,000
Cost of merchandise sold		505,500
Gross profit	$	282,500
Operating expenses		150,500
Earnings before interest and taxes (EBIT)	$	132,000
Interest expense		69,000
Earnings before taxes (EBT)	$	63,000
Federal and state income taxes (40 percent)		25,200
Net profit	$	37,800

Calculate Toms days sales outstanding.

	a.	0.3 days
	b.	81.8 days
	c.	53.5 days
	d.	133.9 days
	e.	109.1 days

1 points

6.All other things being equal, which of the following would increase the current ratio?

	a.	Cash is acquired through the issuance of additional common stock.
	b.	Current operating expenses are paid.
	c.	A fully depreciated asset is retired.
	d.	The estimated taxes payable are increased.
	e.	Equipment is purchased with short-term notes.

1 points

QUESTION 14

1. Consider the following financial data for Fleishmann Enterprises:

   Balance Sheet as of December 31, 2019
   Cash & equivalents	$	162,500		Accounts payable	$	69,500
   Receivables		208,500		Notes payable		259,500
   Inventories		213,500		Accruals		58,000
   Total current assets	$	584,500		Total current liabilities	$	387,000
   				Long-term debt		160,500
   Net fixed assets		770,500		Common equity		807,500
   Total assets	$	1,355,000		Total liab. & equity	$	1,355,000
   Income Statement for 2019				Industry Average Ratios
   Sales revenue	$	1,152,000		Current ratio		1.8
   Cost of sales		841,000		Quick ratio		1.3
   Gross profit	$	311,000		Days sales outstanding		76 days
   Operating expenses		157,500		Inventory turnover		2.9
   EBIT	$	153,500		Total asset turnover		0.5
   Interest expense		41,000		Net profit margin		15.4%
   Pre-tax earnings	$	112,500		Return on assets		7.7%
   Income taxes (30%)		33,750		Return on equity		12.2%
   Net income	$	78,750		Debt-to-capital ratio		26%

   Compared to its peers, Fleishmann...

   	a.	has a lower inventory turnover ratio.
   	b.	has a higher debt-to-capital ratio.
   	c.	keeps a relatively high percentage of its sales as profit.
   	d.	is in a stronger short-term liquidity position.
   	e.	has a higher return on equity.