Fin 480 test practice Exam Questions and
Answers Graded A+
A firm has sales of $1,310, net income of $241, net fixed assets of $501, and
current assets of $301. The firm has $97 in inventory. What is the common-size
statement value of inventory?
12.1 percent - Correct answer-12.1 percent
Common-size inventory = $97/($501 + $301) = 12.1 percent
What is the quick ratio for 2009? - Correct answer-.80
Quick ratio for 2009 = ($2,450 - $1,530)/$1,150 = 0.8
What is the debt-equity ratio for 2009? - Correct answer-.38
Debt-equity ratio = ($1,240 + $500)/($3,356 + $1,224) = 0.38
Reliable Cars has sales of $3,830, total assets of $3,150, and a profit margin of 5
percent. The firm has a total debt ratio of 41 percent. What is the return on equity?
- Correct answer-10.30 percent
Return on equity = (0.05 x $3,830)/[$3,150 x (1 - .41)] = 10.3 percent
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,What is the return on equity for 2009? - Correct answer-15 percent
Return on equity = $547/($2,930 + $766) = 15 percent
The Purple Martin has annual sales of $4,500, total debt of $1,240, total equity of
$2,400, and a profit margin of 6 percent. What is the return on assets? - Correct
answer-7.42 percent
Return on assets = (0.06 x $4,500)/($1,240 + $2,400) = 7.42 percent
Jessica's Boutique has cash of $54, accounts receivable of $64, accounts payable of
$200, and inventory of $160. What is the value of the quick ratio? - Correct
answer-.59
Quick ratio = ($54 + $64)/$200 = 0.59
A firm has net working capital of $452, net fixed assets of $2,209, sales of $6,000,
and current liabilities of $800. How many dollars worth of sales are generated from
every $1 in total assets? - Correct answer-$1.73
Total asset turnover = $6,000/($452 + $2,209 + $800) = 1.73
The higher the inventory turnover, the: - Correct answer-less time inventory items
remain on the shelf.
A capital intensity ratio of 1.03 means a firm has $1.03 in: - Correct answer-total
assets for every $1 in sales.
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, Which one of the following is a liquidity ratio? - Correct answer-quick ratio
Which one of the following statements is correct if a firm has a receivables
turnover of 10? - Correct answer-The firm collects on its sales in an average of
36.5 days.
From a cash flow position, which one of the following ratios best measures a firm's
ability to pay the interest on its debts? - Correct answer-cash coverage ratio
The profitability index: - Correct answer-is useful as a decision tool when
investment funds are limited and all available funds are allocated.
How should a profitability index of zero be interpreted? - Correct answer-The
project's cash flows subsequent to the initial cash flow have a present value of zero.
Project A is opening a bakery at 10 Center Street. Project B is opening a specialty
coffee shop at the same address. Both projects have unconventional cash flows,
that is, both projects have positive and negative cash flows that occur following the
initial investment. When trying to decide which project to accept, given sufficient
funding to accept either, you should rely most heavily on the _____ method of
analysis. - Correct answer-net present value
You are considering a project with the following data: Internal rate of return 8.7%
Profitability ratio .98 Net present value −$393 Payback period 2.44 years Required
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Answers Graded A+
A firm has sales of $1,310, net income of $241, net fixed assets of $501, and
current assets of $301. The firm has $97 in inventory. What is the common-size
statement value of inventory?
12.1 percent - Correct answer-12.1 percent
Common-size inventory = $97/($501 + $301) = 12.1 percent
What is the quick ratio for 2009? - Correct answer-.80
Quick ratio for 2009 = ($2,450 - $1,530)/$1,150 = 0.8
What is the debt-equity ratio for 2009? - Correct answer-.38
Debt-equity ratio = ($1,240 + $500)/($3,356 + $1,224) = 0.38
Reliable Cars has sales of $3,830, total assets of $3,150, and a profit margin of 5
percent. The firm has a total debt ratio of 41 percent. What is the return on equity?
- Correct answer-10.30 percent
Return on equity = (0.05 x $3,830)/[$3,150 x (1 - .41)] = 10.3 percent
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,What is the return on equity for 2009? - Correct answer-15 percent
Return on equity = $547/($2,930 + $766) = 15 percent
The Purple Martin has annual sales of $4,500, total debt of $1,240, total equity of
$2,400, and a profit margin of 6 percent. What is the return on assets? - Correct
answer-7.42 percent
Return on assets = (0.06 x $4,500)/($1,240 + $2,400) = 7.42 percent
Jessica's Boutique has cash of $54, accounts receivable of $64, accounts payable of
$200, and inventory of $160. What is the value of the quick ratio? - Correct
answer-.59
Quick ratio = ($54 + $64)/$200 = 0.59
A firm has net working capital of $452, net fixed assets of $2,209, sales of $6,000,
and current liabilities of $800. How many dollars worth of sales are generated from
every $1 in total assets? - Correct answer-$1.73
Total asset turnover = $6,000/($452 + $2,209 + $800) = 1.73
The higher the inventory turnover, the: - Correct answer-less time inventory items
remain on the shelf.
A capital intensity ratio of 1.03 means a firm has $1.03 in: - Correct answer-total
assets for every $1 in sales.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, Which one of the following is a liquidity ratio? - Correct answer-quick ratio
Which one of the following statements is correct if a firm has a receivables
turnover of 10? - Correct answer-The firm collects on its sales in an average of
36.5 days.
From a cash flow position, which one of the following ratios best measures a firm's
ability to pay the interest on its debts? - Correct answer-cash coverage ratio
The profitability index: - Correct answer-is useful as a decision tool when
investment funds are limited and all available funds are allocated.
How should a profitability index of zero be interpreted? - Correct answer-The
project's cash flows subsequent to the initial cash flow have a present value of zero.
Project A is opening a bakery at 10 Center Street. Project B is opening a specialty
coffee shop at the same address. Both projects have unconventional cash flows,
that is, both projects have positive and negative cash flows that occur following the
initial investment. When trying to decide which project to accept, given sufficient
funding to accept either, you should rely most heavily on the _____ method of
analysis. - Correct answer-net present value
You are considering a project with the following data: Internal rate of return 8.7%
Profitability ratio .98 Net present value −$393 Payback period 2.44 years Required
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