Question 1 AN INCREASE IN WHICH OF THE FOLLOWING WILL INCREASE THE QUICK RATIO?

Question

Question 1

AN INCREASE IN WHICH OF THE FOLLOWING WILL INCREASE THE QUICK RATIO?

I.     CASH

II.    ACCOUNTS RECEIVABLE

III.   ACCRUALS

IV.   INVENTORIES

V.    ACCOUNTS PAYABLE

A.I, II
B. I, II AND V
C. I, II AND IV
D. I, II AND III

Question 2 THE FIN 301 CORPORATION HAS AN INVENTORY TURNOVER RATIO OF 8 AND SALES OF $5,000,000.  ITS CURRENT ASSETS TOTAL $2,000,000 AND ITS CURRENT LIABILITIES TOTAL $1,000,000.  THE FIRM'S QUICK RATIO MUST BE _______.

A. 1.425
B. 3.255
C. 2.750
D. 1.375

Question 3

THE FIN 301 CORPORATION CURRENTLY HAS $2,000,000 IN ACCOUNTS RECEIVABLE AND ITS DAYS SALES OUTSTANDING (DS0) IS 42 DAYS.  THE FIRM WANTS TO REDUCE ITS DSO TO 30 DAYS BY PRESSURING MORE OF ITS CUSTOMERS TO PAY ITS BILLS ON TIME.  IF THIS POLICY IS ADOPTED, THE COMPANY'S AVERAGE SALES WILL FALL BY 10%.  WHAT WILL BE THE LEVEL OF ACCOUNTS RECEIVABLE AFTER THE CHANGE?  ASSUME A 365 DAY YEAR.  (REMEBER TO PICK CLOSEST ANSWER TO YOUR OWN).

A. $1,625,002.41
B. $1,285,714.29
C. $1,593,294.19
D. $1,301,297.39

.

Question 4
THE FIN 301 HAS A CURRENT RATIO OF 2.20. THE FIRM'S DEBT TO ASSETS RATIO IS .45 AND ITS TOTAL ASSETS EQUAL $10,000,000.  IF THE FIRM'S LONG-TERM DEBT IS $3,000,000, THEN WHAT MUST ITS CURRENT ASSETS BE?

A. $3,300,000
B. $4,500,000
C. $1,500,000
D. $2,200,000

Question 5
AN CHANGE IN INVENTORIES WILL AFFECT WHICH OF THE FOLLOWING RATIOS?

I.      CURRENT RATIO

II.     DAYS SALES OUTSTANDING

III.    FIXED ASSETS TURNOVER RATIO

IV.    TOTAL ASSETS TURNOVER RATIO

V.      DEBT TO ASSETS RATIO

A. I AND III
B. I, II AND IV
C. I, IV AND V
D. II, III, AND V

Question 6
A CHANGE IN EQUITY AFFECTS WHICH OF THE FOLLOWING RATIOS?

I.     DEBT TO ASSETS

II.    ROA

III.   ROE

IV.   P/E RATIO

V.    TOTAL ASSET TURNOVER

A. III ONLY
B. I AND III
C. II AND IV
D. II AND V

Question 7
AS A FIRM'S DEBT RATIO RISES, ITS ______ ALSO RISES (ASSUME A POSITIVE NET INCOME).

I.    TOTAL ASSET TURNOVER

II.   ROE

III.  BEP

IV. EQUITY MULTIPLIER

V.   INVENTORY TURNOVER

A. III ONLY
B. III AND V
C. II AND IV
D. I, III AND V

Question 8
THE FIN 301 CORPORATION HAS A GROSS PROFIT MARGIN OF 45% AND GROSS PROFIT OF $2,500,000.  THE FIRM'S SALES MUST BE _________ AND ITS COST OF GOODS SOLD MUST BE ________.

A. $5,555,555.56;  3,055,555.56
B. $4,853,232.23; $2,355,585.44
C. $6,333,333.33; $3,555,555.56
D. $7,250,000; $4,750,000

Question 9
A CHANGE IN ACCRUALS WILL AFFECT WHICH OF THE FOLLOWING RATIOS? (REMBER TO PICK THE BEST ANSWER)

I.     CURRENT RATIO

II.    QUICK RATIO

III.   BEP

IV.   TOTAL ASSET TURNOVER

V.     DEBT TO ASSETS RATIO

VI.    ROE

A. I, II, V AND VI
B. II, IV AND V
C. I, II AND V
D. I, II, III, V AND VI

Question 10
THE FIN 301 CORPORATION HAS A DEBT TO ASSETS RATIO OF .35 AND AN ROA OF 5%.  THE FIRM'S ROE MUST BE ______.

A. 7.24%
B. 6.95%
C. 8.32%
D. 7.69%

Question 11
WHICH OF THE FOLLOWING COULD CAUSE A FIRM'S ROE TO RISE? (REMEMBER TO SELECT THE BEST ANSWER).

I.      DECREASE IN COST OF GOODS SOLD

II.     DECREASE IN GROSS PROFIT

III.    INCREASE IN EBIT

IV.    INCREASE IN ROA

V.     DECREASE IN THE EQUITY MULTIPLIER (ASSUME A POSITIVE NET INCOME)

A. I, III AND IV
B. I, II AND V
C. V ONLY
D. IV AND V

Question 12
THE PRESENT VALUE OF A FUTURE AMOUNT JUST FELL. WHAT MUST HAVE CAUSED THIS
A. THE DISCOUNT RATE JUST FELL.
B. THE DISCOUNT RATE JUST ROSE.
C. N (THE NUMBER OF TIME PERIODS) JUST FELL.
D. THE FUTURE VALUE ROSE.

Explanation / Answer

1)A.I, II

2)D. 1.375

3)B. $1,285,714.29

4)A. $3,300,000

5)C. I, IV AND V

6)A. III ONLY

7)C. II AND IV

8)A. $5,555,555.56; 3,055,555.56

9)C. I, II AND V

10)D. 7.69%

11)A. I, III AND IV

12)B. THE DISCOUNT RATE JUST ROSE.

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