QUESTION 7

In addition to the three debt ratios, what should the analyst look at when assessing risk in a firm?

		Activity, profitability and market ratios.
		The times interest earned, cash interest coverage, fixed charge coverage, cash flow adequacy and an assessment of off-balance sheet financing arrangements.
		The times interest earned ratio and the three profitability ratios.
		The three debt ratios are the only ratios needed for assessing risk.

3 points

QUESTION 8

What are analysts trying to evaluate when analyzing a cash flow adequacy ratio?

		Cash flow adequacy ratios are used to evaluate how well a company can generate profits to cover all operating, investing and financing activities.
		Cash flow adequacy ratios are used to evaluate how well a company can cover payments to suppliers and other operating activities of the firm.
		Cash flow adequacy ratios are used to evaluate how well a company can cover annual payments of items such as debt, capital expenditures, and dividends from operating cash flow.
		Cash flow adequacy ratios are used to evaluate how well a company can cover interest expense, lease payments and other fixed charges with cash from operations.

3 points

QUESTION 9

Use the following selected financial data to calculate the net profit margin for IHG Company. You may use Appendix A of the textbook to locate the formulas, pgs. 269-271.

Net sales$600,000 Cost of goods sold 450,000 Operating expenses 90,000 Net income 20,000 Total assets 220,000 Total liabilities 132,000

		22.2%
		10.0%
		3.3%
		25.0%

3 points

QUESTION 10

Use the following selected financial data to calculate the return on equity for UTS Company. You may use Appendix A of the textbook to locate the formulas, pgs. 269-271. Net sales$700,000 Cost of goods sold 550,000 Operating expenses 80,000 Net income 30,000 Total assets 460,000 Total liabilities 310,000

		6.5%
		21.4%
		20.0%
		4.3%

3 points

QUESTION 11

Use the following selected financial data to calculate the debt ratio for CBA Company. You may use Appendix A of the textbook to locate the formulas, pgs. 269-271. Net sales$600,000 Cost of goods sold 450,000 Operating expenses 90,000 Net income 20,000 Total assets 220,000 Total liabilities 132,000

		16.7%
		22.0%
		60.0%
		36.7%

3 points

QUESTION 12

Use the following selected financial data to calculate the total asset turnover for CBA Company. You may use Appendix A of the textbook to locate the formulas, pgs. 269-271. Net sales$600,000 Cost of goods sold 450,000 Operating expenses 90,000 Net income 20,000 Total assets 220,000 Total liabilities 132,000

		0.4
		1.7
		2.7
		3.7

3 points

QUESTION 13

Use the following selected financial data to calculate the current ratio for AB Company. You may use Appendix A of the textbook to locate the formulas, pgs. 269-271. Net sales$500,000 Current assets 130,000 Current liabilities 90,000 Net income 20,000 Total assets 220,000 Total liabilities 170,000

		1.3
		1.7
		1.4
		1.1