Activity 2 Select the best answer for each question. Which ratio is best used for measuring how well management did in managing the funds provided by shareholders? e. Profit Margin f. Debt to Equity g. Return on Equity h. Inventory Turnover If sales are $ 600,000 and assets are $ 400,000, then asset turnover is: e. .67 f. 1.50 g. 2.00 h. 3.50 An extremely high current ratio implies: e. Management is not investing idle assets productively. f. Current assets have been depleted and the company is insolvent. g. Total assets are earning a very low rate of return. h. Current liabilities are higher than current assets If we have cash of $ 1,500, accounts receivables of $ 25,500 and current liabilities of $ 30,000, our quick or acid test ratio would be: e. 1.88 f. 1.33 1. 2. 3. 4. h. .90 The number of times we convert receivables into cash during the year is measured b Capital Turnover f. Asset Turnover g. Accounts Receivable Turnover h. Return on Assets 5. y: e. 6. If our cost of sales are $ 120,000 and our average inventory balance is $ 90,000, then our inventory turnover rate is: e. .50 f. .75 8. 1.00 h. 1.33 We can estimate our Operating Cycle by taking the sum of: e. Receivable Turnover + inventory Turnover f. Days in Receivables + Days in Inventory 7. h. Days in Sales+ Days in Assets If Operating Income (Earnings Before Interest Taxes) is $ 63,000 and Net Sales are s 900,000, then Operating Income to Sales ise. 18% f. 12% 8. g. 7% h. 4% 9. If the price of the stock is $45.00 and the Earnings per Share is $9.00, then the P/E Ratio is: e. h. 15 10. Net Income for 1996 was $400,000 and Net Income for 1997 was $420,000. The percentage change in Net Income ise. 1% 3% 5% 10% g. h