Question

Question 15 (1 point) The following data pertain to Keahi Inc.: Net Revenue $245,000 Net Income $22,050 Total Assets $188,462 Total Liabilities $70,673 Stockholders’ Equity $117,789 Calculate the Return on assets (ROA), return on sales (ROS), total asset turnover (TA), and the financial leverage (LEV) for Keahi. Question 15 options: 1) ROA: 62.5%; ROS: 10.0%; TA: 8.5; LEV: : 1.6; 2) ROA: 10.0%; ROS: 10.0%; TA: 2.5; LEV: : 2.5; 3) ROA: 18.7%; ROS: 9.0%; TA: 1.6; LEV: : 1.3; 4) ROA: 11.7%; ROS: 9.0%; TA: 1.3; LEV: : 1.6;

Question 16 (1 point) DataWeb reported the following in the most recent year of operations: Earnings per Share $5.60 Dividends per Share $1.68 Stock price $84.00 Compute the Price-earnings ratio (P/E), dividend yield (DY) and dividend payout ratio (PAYO). Question 16 options: 1) Price-earnings ratio: 15; Dividend Yield: 2%; Dividend payout ratio: 30% 2) Price-earnings ratio: 15; Dividend Yield: 30%; Dividend payout ratio: 2% 3) Price-earnings ratio: 50; Dividend Yield: 30%; Dividend payout ratio: 2% 4) Price-earnings ratio: 50; Dividend Yield: 2%; Dividend payout ratio: 30%

Question 17 (1 point) A firm has an asset turnover 1.50. This means that that firm has $1.0 dollars in assets for every: Question 17 options: 1) $0.667 in total sales 2) $0.333 in total sales 3) $1.50 in total sales 4) $1.00 in total sales.

Question 18 (1 point) Compute BikeNet’s quick ratio (Quick) and times-interest-earned (TIE) ratio: Question 18 options: 1) Quick: 1.47, TIE: 3.03 2) Quick: 3.59, TIE: 3.29 3) Quick: 5.13, TIE: 3.03 4) Quick: 8.33, TIE: 2.29

Question 19 (1 point) Compute BikeNet’s current ratio (C/R) and financial leverage (LEV) ratio: Question 19 options: 1) C/R: 5.58, LEV: 1.30 2) C/R: 5.58, LEV: 1.12 3) C/R: 3.59, LEV: 1.30 4) C/R: 4.34, LEV: 1.00 Question 20 (1 point) Compute BikeNet’s Asset turnover (A/T), Receivable turnover (R/T), and Inventory turnover (I/T):

Question 20 options: 1) A/T: 1.41, R/T: 3.44, I/T: 3.36 2) A/T: 0.87, R/T: 2.93, I/T: 3.36 3) A/T: 0.87, R/T: 3.44, I/T: 3.36 4) A/T: 0.87, R/T: 3.44, I/T: 3.95 Answer: C Asset turnover = Net sales / TA = $723,000 / $833,000 = 0.87 Receivables turnover = Net sales / AR = $723,000 / $210,000 = 3.44 Inventory turnover = CGS / Inventory = $614,550 / $183,000 = 3.36 Topic: Financial Ratios TA 3 Level of Difficulty: EASY

Question 21 (1 point) Compute BikeNet’s return on assets (ROA), return on sales (ROS) and return on equity (ROE): Question 21 options: 1) ROA: 15.2%, ROS: 10.4%, ROE: 11.8% 2) ROA: 9.1%, ROS: 13.2%, ROE: 11.8% 3) ROA: 9.1%, ROS: 10.4%, ROE: 10.2% 4) ROA: 9.1%, ROS: 10.4%, ROE: 11.8% Answer: D Return on assets (ROA) = Net income / Total assets = $75,450 / $833,000 = 9.1% Return on sales (ROS) = Net income / Net sales = $75,450 / $723,000 = 10.4% Return on equity (ROE) = (Net income – Preferred dividends) / Stockholders’ equity = ($75,450 - $0) / $641,000 = 11.8% Problems Topic: Common Size TA 2 Level of Difficulty: EASY

Question 22 (1 point) Elemental Labs reported the following end of year statements: Net Income Revenue 165,000 Cost of goods sold 132,500 Selling, general & administrative 13,200 Earnings before interest & taxes 19,300 Interest expense 7,200 Earnings before taxes (EBT) 12,100 Taxes (40%) 4,840 Net Income 7,260 Balance Sheet Assets Liabilities Cash $7,950 Current liabilities $33,900 Accounts Receivable 34,500 Long term debt 26,300 Inventory 24,800 Total Liabilities $60,200 Fixed Assets 30,000 Stockholders’ Equity Common stock 8,350 ______ Retained earnings 28,700 Total Assets $97,250 Total Liabilities & Equity $97,250 Question 22 options: 1) Calculate the indicated ratios for Elemental. No notes payable are held by the company. Elemental Industry Current ratio 1.3 Inventory turnover ratio 5.2 Total asset turnover 3.3 Return on assets 4.1% 2) Show the decomposition of return on equity for Elemental and the Industry. Elemental Industry ROS x AT x LEV = 3) How does Elemental compare to the industry? Answer: a. Elemental Industry Current ratio 2.0 1.3 Inventory turnover ratio 5.3 5.2 Total asset turnover 1.7 3.3 Return on assets 7.5% 4.1% Return on sales

Question 23 (1 point) The following data pertain to the DeLancey Corporation: Net Income Revenue 786,100 Expenses 710,200 Net Income 75,900 Balance Sheet Total Liabilities 120,000 Total Stockholders’ Equity 195,000 Total Assets $315,000 Total Liabilities & Equity $315,000 Question 23 options: 1) Show the decomposition of the return on equity. 2) Compute the return on assets. 3) Comment on the company's use of debt and performance relative to the industry. Industry Return on Sales (ROS) 7.0% Asset Turn (AT) 0.80 LEV 3.00 Answer: a. and b. Delancey Industry Return on Sales= Net income/Sales 9.7% x 7.0% x

Question 24 (1 point) Consider the information below for Colgate-Palmolive, Company and its industry. USD in millions Colgate-Palmolive 2012 2013 2014 2015 Revenue 16,734 17,085 17,420 17,277 Net income 2,431 2,472 2,241 2,180 Total Assets 12,724 13,394 13,876 13,459 Shareholders’ Equity 6,953 7,163 7,303 7,917 Industry 2012 2013 2014 2015 Return on Sales (ROS) 10.58% Asset Turnover (AT) 0.74 Financial Leverage (LEV) 2.28 Return on Equity (ROE) 17.85% Return on Assets (ROA) 7.83% Question 24 options: 1) Calculate the return on assets and the return on equity for each year. 2) Discuss the changes in ret urns from year to year using the decomposition of ROE. 3) Comment on Colgate-Palmolives’ ROE in 2015 relative to the industry. Answer: a. Industry 2012 2013 2014 2015 Return on Sales (ROS) 14.5% 14.5% 12.9% 10.58% Asset Turnover (AT) 1.32 1.28

Answer 1