1. If Wilkinson, Inc., has an equity multiplier of 1.61, total asset turnover of

Question

1. If Wilkinson, Inc., has an equity multiplier of 1.61, total asset turnover of 2.3, and a profit margin of 4.1 percent, what is its ROE?

a. 16.28%

b.15.18%

9.43%

6.72%

2. Panda Inc.’s net income for the most recent year was $16,585. The tax rate was 35 percent. The firm paid $3,946 in total interest expense and deducted $2,625 in depreciation expense. What was the company’s cash coverage ratio for the year?

10.23

9.54

8.13

8.25

3. Prince Albert Canning PLC had a net loss of £47,131 on sales of £199,652. In dollars, sales were $317,073. What was the net loss in dollars?

a.$69,124.78

$74,850.08

$71,341.24

$31,750.67

a. 16.28%

b.15.18%

9.43%

6.72%

Explanation / Answer

ROE = Profit Margin x Total Asset Turnover x Equity Multiplier
=> 4.1% x 2.3% x 1.61 = 15.1823%

So, Option B is correct.

Cash Coverage Ratio = (EBIT + Non-Cash Expense) / Interest Expense

EBT = ($16,585 / 65) * 100 = $25,515.38
EBIT = EBT + Interest Expenses => $25,515.38 + $3,946 = $29,461.38
Non-Cash expense = Depreciation = $2,625

Cash Coverage Ratio = ($29,461.38 + $2,625) / $3,946 = 8.13137

So, Option C is correct.

Net loss as a percentage of sales = -£47,131/£199,652 = -0.236066 or -23.6066%

Net loss in dollars = $317,073 x -0.236066 = -$74,850.08

So, Option b is correct.

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