Question 1

Rangoon Corp's sales last year were $700,000, and its year-end total assets were $450,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.8. The new CFO believes the firm has excess assets that can be sold so as to bring the TATO to the industry average without affecting sales. By how much must the assets be reduced to bring the TATO to the industry average?

Select one:

a. $140,000

b. $200,000

c. $230,000

d. $120,000

e. $210,000

Question 2

Company A and Company B have the same total assets, Return on Assets (ROA), and profit margin. However, Company A has higher debt ratio and interest expense than Company B. Which of the following statements is most correct?

Select one:

a. Company A has a lower net income than Company B.

b. Company A has a higher ROE than Company B.

c. Company A has a lower total assets turnover than Company B.

d. Company A has a lower operating income (EBIT) than Company B.

e. Company A has a lower equity multiplier (EM) than Company B.

Question 3

Use the following information to answer the next question.

Debt ratio = 0.6	Sales = $11 million
Total Asset Turnover ratio = 2.5	Interest expenses = $0.8 million
Tax rate = 40%	EBIT = $3.0 million

What are the Net income and the ROE?

Select one:

a. 1.32 million, 81%

b. 0.98 million, 61%

c. 1.65 million, 30%

d. 1.32 million, 75%

e. 0.53 million, 75%

Question 4

Use the following information to answer the next question.

Total Asset = $40 million	Depreciation = $1.0 million.
Basic earning power (BEP) ratio is 20%	Lease payments = 0.6 million
Times-interest-earned (TIE) ratio is 6.55	Principal payments = 4 million

What is the companys EBIT? The companys interest expense?

Select one:

a. $7.5 million; $0.75 million

b. $3.33 million; $0.83 million

c. $8.0 million; $0.62 million

d. $8.0 million; $1.22 million

e. $1.35 million; $0.37 million

Question 5

Which of the following would indicate an improvement in a companys financial position, holding other things constant?

Select one:

a. The debt ratio increases.

b. The ROA decreases.

c. The DSO decreases.

d. The MV/BV ratio increases.

e. The inventory and total assets turnover ratios both decline.

Question 6

You have $4,000 to invest for the next 45 years. You are offered an investment plan that will pay you 5% per year for the next 10 years and 12% per year for the last 35 years. How much will you have at the end of the 45 years?

Select one:

a. $ 655,950

b. $ 211,198

c. $ 344,020

d. $ 209,092

e. $ 255,458

Question 7

Your father has $500,000 invested at 8%, and he now wants to retire. He wants to withdraw $50,000 at the end of each year, starting at the end of this year. How many years will it take to exhaust his funds, i.e., run the account down to zero?have $4,000 to invest for the next 45 years. You are offered an investment plan that will pay you 5% per year for the next 10 years and 12% per year for the last 35 years. How much will you have at the end of the 45 years?

Select one:

a. 20.27 years

b. 20.91 years

c. 26.72 years

d. 15.74 years

e. 18.49 years