Chapter 3 Working with Financial Statements

Shareholders' equity = $5,900 + 21,200 − 8,400
Shareholders' equity = $18,700

The amount of retained earnings is not provided, so you must use total
assets minus total liabilities to derive the correct answer.
142) B
Net capital spending = $21,878 − 23,616 + 1,356 + 2,419
Net capital spending = $2,037
143) B
Net capital spending = $145,000 − 68,400
Net capital spending = $76,600


Student name:
1) A firm has sales of $1,050, net income of $209, net fixed assets of $510, and current
assets of $266. The firm has $84 in inventory. What is the common-size balance sheet value of
inventory?
1)


A) 40.19%
B) 10.82%
C) 31.58%
D) 8.00%
E) 16.47%



Question Details
AACSB : Analytical Thinking
Topic : Standardized financial statements
Learning Objective : 03-01 Standardize financial statements for comparison purposes.
Section : 3.2 Standardized Financial Statements
Bloom's : Understand
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible

,2) A firm has total debt of $1,460 and a debt-equity ratio of .31. What is the value of the
total assets?
2)


A) $1,912.60
B) $4,526.00
C) $4,709.68
D) $6,169.68
E) $3,100.00



Question Details
AACSB : Analytical Thinking
Bloom's : Understand
Difficulty : 1 Basic
Topic : Long-term solvency ratios
Learning Objective : 03-02 Compute and, more importantly, interpret some common ratios.
Section : 3.3 Ratio Analysis
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible




3) A firm has sales of $4,840, costs of $2,640, interest paid of $179, and depreciation of
$493. The tax rate is 21 percent. What is the cash coverage ratio?
3)


A) 12.29 times
B) 9.54 times
C) 16.44 times
D) 6.74 times
E) 9.50 times

,Question Details
AACSB : Analytical Thinking
Bloom's : Understand
Difficulty : 1 Basic
Topic : Long-term solvency ratios
Learning Objective : 03-02 Compute and, more importantly, interpret some common ratios.
Section : 3.3 Ratio Analysis
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible




4) Mario's Home Systems has sales of $2,890, costs of goods sold of $2,230, inventory of
$518, and accounts receivable of $437. How many days, on average, does it take Mario's to sell
its inventory?
4)


A) 65.42 days
B) 71.53 days
C) 83.62 days
D) 84.78 days
E) 55.19 days



Question Details
AACSB : Analytical Thinking
Bloom's : Understand
Difficulty : 1 Basic
Topic : Asset management ratios
Learning Objective : 03-02 Compute and, more importantly, interpret some common ratios.
Section : 3.3 Ratio Analysis
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible




5) A firm has net working capital of $550, net fixed assets of $2,296, sales of $6,600, and
current liabilities of $860. How many dollars worth of sales are generated from every $1 in total
assets?
5)

, A) $1.78
B) $1.56
C) $2.09
D) $2.87
E) $2.32



Question Details
AACSB : Analytical Thinking
Bloom's : Understand
Difficulty : 1 Basic
Topic : Asset management ratios
Learning Objective : 03-02 Compute and, more importantly, interpret some common ratios.
Section : 3.3 Ratio Analysis
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible




6) Lee Sun's has sales of $4,200, total assets of $3,900, and a profit margin of 5 percent. The
firm has a total debt ratio of 41 percent. What is the return on equity?
6)


A) 10.96 %
B) 5.38 %
C) 9.13 %
D) 5.12 %
E) 5.00 %



Question Details
AACSB : Analytical Thinking
Bloom's : Understand
Difficulty : 1 Basic
Topic : Profitability ratios
Learning Objective : 03-02 Compute and, more importantly, interpret some common ratios.
Section : 3.3 Ratio Analysis
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible