Bus 320 Quiz 1 White Version 1 Essay

1828 WordsJan 18, 20158 Pages
Bus 320: Quiz 1 Solutions White Version True/False Questions: Circle the correct response. (2 points each) 1. T F If a sole proprietorship fails, the owner may lose whatever was invested in the business, but the owner's personal assets are not at risk. 2. T F A company that has an increase in its return on assets, but no noticeable change in asset turnover, has most likely experienced an increase in financial leverage. 3. T F If a firm is not operating at full capacity, assuming assets grow with sales will likely overstate the firms funding needs. 4. T F A firm with many growth opportunities would likely have a book value less than its market value. 5. T F Joel (the owner) at Dave’s Cosmic Subs decides to get a…show more content…
The addition to retained earnings was $12 million during the year, while book value of equity per share at year-end was $40. If year-end total debt was $120 million, and no new common stock was issued during the year, what was the company's year-end total debt ratio? ARE per share = 8 – 2 = 6 a. 0.47 b. 0.54 Shares = 12/6 = 2 million shares c. 0.57 TDR = = 0.5660 d. 0.60 ( ) e. 0.72 I meant “book value of equity” to be common equity (not f. 0.75 including ARE), but it could mean total equity, in which case this g. 0.87 is also ok TDR = ( ) = 0.60 25. Highland Bakery maintains an inventory of flour worth $644. It has sales of $164,000 and a total bill for flour over the course of the year of $16,744. How old on average is the flour in the bread it sells its customers? a. b. c. d. e. f. g. 14 16 18 20 22 24 26 days days days days days days days Inv Turn = 16,744/644 = 26 DSI = 365/26 = 14.04 3 Bus 320: Quiz 1 Solutions White Version 26. • • • (20 points) The managers of Icona Inc. have made the following predictions for 2014. Sales will grow at a rate of 32% during 2014 Operating costs and cash balances will also grow with sales. They would like to manage their inventory more efficiently by reducing day’s sales in inventory to 180 (use a 360-day year for your calculation) • A purchase of $28,800 in new fixed assets are required to accomodate the growth in sales. • Accounts payable and
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