Practice Question 28

Maximizing ROE is an appropriate goal for a firm's management since it considers cash flows as part of the analysis.

True

False

Practice Question 37

ReelTime Video has reported a total asset turnover of 2.3 times and an ROA of 17% and ROE of 25%. What is the firm's net profit margin?

10.9%

39.1%

7.4%

9.2%

Practice Question 39

Benchmarking is a technique for making meaningful comparisons of financial performance among different companies.

True

False

Practice Question 41

One of the main advantages of financial statement analysis is that it is based on sound financial theory.

True

Fasle

Problem 4.1

Explain why the quick ratio or acid-test ratio is a better measure of a firm's liquidity than the current ratio.

Thecurrent ratioquick ratio

excludes inventory in accounting of the short-term assets, and therefore includes only the most liquid of the current assets. It is therefore a better or more conservative measure of liquidity than thecurrent ratioquick ratio

.

Problem 4.3

If Newton Manufacturers has an accounts receivable turnover of 4.8 times and net sales of $7,812,379, what would its receivables be?(Round answer to nearest dollar, e.g. 5,675.)

Accounts receivables$

Problem 4.5

Sorenson Inc. has sales of $3,112,489, a gross profit margin of 23.1 percent, and inventory of $833,145. What are the company's inventory turnover ratio and days' sales in inventory?(Use 365 days for calculation. Round inventory turnover ratio to 3 decimal places, e.g. 12.555 and days in inventory to 1 decimal places, e.g. 12.5.)

Sorenson's inventory turnover ratio is

times and its days' sales in inventory is

days.

Problem 4.7

Norton Company has a debt-to-equity ratio of 1.65, ROA of 11.3 percent, and total equity of $1,322,796. What are the company's equity multiplier, debt ratio, and ROE?(Roundanswersto 2 decimal places, e.g. 12.55 or 12.55%.)

The company's equity multiplier is

, its debt ratio is

, and its ROE is

%.

Problem 4.9

Lemmon Enterprises has a total asset turnover of 2.1 and a net profit margin of 7.5%. If its equity multiplier is 1.9, what is the ROE for Lemmon Enterprises?(Round answer to 2 decimal places, e.g.12.25%.)

ROE

%

Problem 4.13

Chisel Corporation has 3 million shares outstanding at a price per share of $3.25. If the debt-to-equity ratio is 1.7 and total book value of debt equals $12,400,000, what is the market-to-book ratio for Chisel Corporation?(Round answer to 2 decimal places, e.g.12.25.)

Market-to-book ratio

Problem 4.13

Chisel Corporation has 3 million shares outstanding at a price per share of $3.25. If the debt-to-equity ratio is 1.7 and total book value of debt equals $12,400,000, what is the market-to-book ratio for Chisel Corporation?(Round answer to 2 decimal places, e.g.12.25.)

Market-to-book ratio

Problem 4.17

Norwood Corp. currently has accounts receivable of $1,223,675 on net sales of $6,216,900. If Norwood Corp.'s management wants to reduce the DSO to an industry average of 56.3 days and its net sales are expected to decline by about 12 percent, what would be the new level of receivables?(Use 365 days for calculation. Round answer to nearest dollar, e.g. 5,675.)

The new level of receivables$

Problem 4.19

Conseco, Inc., has a debt ratio of 0.56. What are the company's debt-to-equity ratio and equity multiplier?(Round your answers to 2 decimal places, e.g.12.25.)

The company's debt-to-equity ratio is

and the equity multiplier is

.

Problem 4.21

Procter & Gamble reported the following information for its fiscal year end: On net sales of $51.407 billion, the company earned net income after taxes of $6.481 billion. It had a cost of goods sold of $25.076 billion and EBIT of $9.827 billion. What are the company's gross profit margin, operating profit margin, and net profit margin?(Round answers to 1 decimal place, e.g.12.5%.)

Gross profit margin

%Operating profit margin

%Net profit margin

%

Problem 4.23

Xtreme Sports Innovations has disclosed the following information:

EBIT=$25,664,300Net income=$13,054,000Net sales=$83,125,336Total debt=$20,885,753Total assets=$71,244,863

Compute the following ratios for this firm using the DuPont identity: debt-to-equity ratio, EBIT ROA, ROA, and ROE.(Round answers to 2 decimal places, e.g.12.55 or 12.55%.)

Debt-to-equity ratio

EBIT ROA

%ROA

%ROE

%

Problem 4.25

Cisco Systems had net income of $4.401 billion and, at year end, 6.735 billion shares outstanding. In addition, the company's EBITDA was $6.834 billion and its share price was $22.36. Compute the firm's price earnings ratio and the price-EBITDA ratio.(Round answers to 2 decimal places, e.g. 12.55.)

Cisco's

Problem 4.27

Grossman Enterprises has an equity multiplier of 2.6 times, total assets of $2,312,000, an ROE of 14.8 percent, and a total asset turnover ratio of 2.8 times. Calculate the firm's sales and ROA.(Round sales to nearest dollar, e.g. 5,675 and ROA answer to 2 decimal places, e.g. 15.25%.)

Grossman's sales are $

and its ROA is

%.

Problem 4.29

For the year ended June 30, 2013, Northern Clothing Company has total assets of $87,631,181, ROA of 11.67 percent, ROE of 21.19 percent, and a net profit margin of 11.59 percent. What are the company's net income and net sales? Calculate the firm's debt-to-equity ratio.(Round net income and net sales to the nearest dollar, e.g. 25 and Round debt-to-equity to 1 decimal place, e.g. 15.2%.)

The company's net income is $

, net sales are $

, and the firm's debt-to-equity ratio is

%