1. Assume a firm has an average inventory of $25,000, sales of $250,000, gross profit of $100,000, and net income of $25,000. The preferred formulation for an inventory turnover results in an inventory turn of :
a. 1 time
b. 10 times
c. 4 times
d. 6 times
2. Wizard Inc. had earnings after tax (EAT) of $280,000 last year. Its expenses included depreciation of $55,000 interest of $40,000. It sold new stock for which it received $20,000. The company also purchased a new commercial fishing boat for $40,000. What is Wizard Inc.'s net cash flow for last year?
a. $395,000
b. $355,000
c. $315,000
d. $280,000
3. How much cash does Matrix Plumbing Co. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000? Matrix's credit sales are $98,000 and its average collection period is 40 days. (Assume 365 days per year)
a. $3,660
b. $14,440
c. $10,740
d. None
4. Determine the cost of sales for a firm with the following financial ratios and data: Current ratio = 3.0; Quick ratio = 2.0; Current liabilities $1,000,000; Inventory turnover = 6 times.
a. $2,000,000
b. $6,000,000
c. $3,000,000
d. $1,000,000
5. A firm had year-end retained earnings of $64,100,000. It forecasts net income for the coming year to be $9,400,000. If it plans to pay out 40% of its net income as dividends, what is the estimated balance in retained earnings at the end of the coming year?
a. $53,500,000
b. $61,140,000
c. $67,860,000
d. $73,500,000
e. $69,740,000
6. Smith Corp. projects a return on sales of 6%, a total asset turnover of 2.0, a debt ratio of 50%, and a dividend payout ratio of 30%. What is Smith Corp.'s sustainable growth rate?
a. 1.8%
b. 4.2%
c. 7.2%
d. 12.0%
e. 16.8%
7. E&J Public Relations had the following results for this year: Sales of $20,000; assets of $10,000: Current liabilities of $200; return on sales of 10%. If they are projecting a growth in sales of 20% and a dividend payout of 50%, calculate their external financial required. (Assume that assets, current liabilities, and income grow at the same rate as sales).
a. 520
b. 760
c. 1,140
d. 1,380
8. MFJ, Inc stock is selling for $80 today. You are expecting a dividend of $3 next year and you plan to sell the stock for $95 one year from now. Calculate the one-year return on MFJ stock.
a. 3.75%
b. 9.50%
c. 18.75%
d. 22.50%
9. The price of a share of stock today is $25.00. If the return on the share is estimated at 18% and the stock generally pays a dividend of $1 per year, what is its projected selling price in one year?
a. $22.30
b. $30.00
c. $28.50
d. $29.50