Chapter 03 Student Name _________________________ Student ID ____________

Use the following financial statements to answer this quiz.

Balance Sheet Income Statement

Cash $ 800 Accounts payable $ 3,300 Sales $47,600
Accounts receivable 2,100 Long-term debt 16,500 Cost of goods sold 38,300
Inventory 5,700 Common stock 10,000 Depreciation 3,900
Net fixed assets 36,600 Retained earnings 15,400 Taxes 800
Total assets $45,200 Total liab. & equity $45,200 Net income $ 4,600

Select the best answer. All answers are rounded.

________ 1. What is the value of the current ratio?

a. 0.43 b. 0.88 c. 2.28 d. 2.61

________ 2. What is the number of days sales in accounts receivable?

a. 15.8 b. 16.1 c. 20.0 d. 22.7

________ 3. What is the total asset turnover rate?

a. 0.85 b. 1.05 c. 1.30 d. 5.53

________ 4. What is the profit margin?

a. 9.66% b. 11.34% c. 12.01% d. 17.86%

________ 5. What is the return on assets?

a. 8.67% b. 10.18% c. 12.57% d. 18.81%

________ 6. What is the debt-equity ratio?

a. 0.44 b. 0.65 c. 0.78 d. 1.27

________ 7. If the accounts payable had a balance of $3,400 last year, then accounts payable is ____ of cash.
a. a source b. a use c. neither a source nor a use

________ 8. If the inventory account had a balance of $5,900 last year, then inventory is _____ of cash.
a. a source b. a use c. neither a source nor a use

________ 9. What is the P/E ratio if there are 5,000 shares of stock outstanding with a market price of $15.18?
a. 9.04 b. 10.87 c. 13.97 d. 16.50

________ 10. What is the common size ratio for inventory?

a. 11.97% b. 12.61% c. 13.33% d. 14.88%
Chapter 03 Answers

Note: All answers are rounded.

1. d Current ratio = ($800 + $2,100 + $5,700) $3,300 = 2.61
2. b Accounts receivable turnover = $47,600 $2,100 = 22.67; Days sales in receivables = 365 22.67 = 16.1
3. b Total asset turnover rate = $47,600 $45,200 = 1.05
4. a Profit margin = $4,600 $47,600 = .09664 = 9.66%
5. b Return on assets = $4,600 $45,200 = .10177 10.18%
6. c Debt-equity ratio = ($3,300 + $16,500) ($10,000 + $15,400) =.7795 .78
7. b Accounts payables decreased which is a use of cash.
8. a Inventory decreased which is a source of cash.
9. d Earnings per share = $4,600 5,000 = $0.92; P/E ratio = $15.18 $0.92 = 16.50
10. b Common size ratio for inventory = $5,700 $45,200 = .12611 = 12.61%