Chapter 4 Assignments

1. Strack Houseware Supplies Inc. has $866 million in total assets. The other side of its balance sheet consists of $95.26 million in current liabilities, $251.14 million in long-term debt, and $519.60 million in common equity. The company has 16,100,000 shares of common stock outstanding, and its stock price is $59 per share. What is Strack's market-to-book ratio?

a. 9.63

b. 8.81

c. 1.67

d. 1.83

e. 1.37

2. The Wilson Corporation has the following relationships: Sales/Total assets = 3;Return on assets (ROA) = 15%; Return on equity (ROE) = 17%. What is Wilson's profit margin?

a. 7.16%

b. 5.67%

c. 5.00%

d. 8.89%

e. 4.66%

3. Last year YYY Company had a 5.00% net profit margin based on $21,000,000 in sales and $14,000,000 of total assets. During the coming year, the president has set a goal of attaining a 8% return on total assets. If YYY finances 56% of its assets by borrowing, what will its return on common equity be next year if the return on assets goal is achieved?

a. 19.95%

b. 14.29%

c. 16.02%

d. 18.18%

e. 12.82%

4. U KNO, Inc. uses only debt and common equity funds to finance its assets. This past year the firm's return on total assets was 19%. The firm financed 30% percent of its assets using debt. What was the firm's return on common equity?

a. 24.36%

b. 63.33%

c. 47.26%

d. 69.50%

e. 27.14%