Calculate the ROE using the DuPont Model (strategic profit model)
for a company with the following data:,
Profit margin = 15%
Total Asset Turnover = 2.0
Inventory Turnover = 1.2
Equity Multiplier = 0.8
Current Ratio = 1.7
A) 24%
B) 18%
C) 36%
D) 51%
E) 6%
Which of the following is TRUE regarding Company 123 given the
following information?
Current Assets = $250
Fixed Assets = $130
Current Liabilities = $160
Long Term Debt = $120
Revenue = $530
Net Income = $70
A) Debt to Equity Ratio = 0.78
B) Current Ratio = 1.65
C) Shareholders’ Equity = $200
D) Return on Equity = 70%
E) Asset Turnover = 1.25
Given the following information, which is ratio is correct?
Revenue: $6,000
Operating Profit (EBIT): $1,200
Interest Expense: $350
Net Profit: $500
Total Assets: $8,000
A) Total Asset Turnover = 0.75
B) Net Profit Margin = 6.25%
C) Times Interest Earned = 1.43x
D) Common Size Interest Expense = 4.4%
E) Return on Assets = 15%
Given the following information, which is true?
Company 1 – Current Ratio: 0.8x, Times Interest Earned: 1.3x,
Inventory Turnover: 4.0x
Company 2 – Current Ratio: 2.3x, Times Interest Earned: 5.4x,
Inventory Turnover: 3.1x
Company 3 – Current Ratio: 1.6x, Times Interest Earned: 3.2x,
Inventory Turnover: 5.5x
A) Company 2 is unable to make interest payments on its debt
B) Company 1 is more efficient at managing inventory than Company 2
C) Lenders would view Company 3 as higher risk of default than
Company 1
D) Company 2 is the least liquid firm
E) Company 1 is the most liquid firm
Based on the following, which is true?
Company 1 – Return on Assets: 12.0%, Net Profit Margin: 5.5%, Debt /
Equity: 0.5x
Company 2 – Return on Assets: 9.2%, Net Profit Margin: 6.7%, Debt /
Equity: 3.0x
Company 3 – Return on Assets: 16.2%, Net Profit Margin: 12.1%, Debt
/ Equity: 1.3x
A) Company 2 is more efficient at generating sales from assets than
Company 1
B) Company 2 is the most leveraged firm
C) Company 2 is the least leveraged firm
D) Company 1 is the worst at generating profits from its assets
E) Company 3 is the worst at generating profits from its sales
25.
Based on the following, which is true?
Company 1 – A/R Days: 40, Inventory Days: 10, Payable Days: 30
Company 2 – A/R Days: 5, Inventory Days: 30, Payable Days: 10
A) Company 2 has a negative cash conversion cycle, meaning it pays
its receives payment from customers before paying suppliers
B) Company 2 has a longer operating cycle and cash conversion cycle
C) Both companies’have the same cash conversion cycle
D) Company 1 has a longer operating but a shorter cycle cash
conversion cycle
E) Both companies receive payment from customers before paying
suppliers
28.
Which of the following types of companies would you expect to have
the highest debt/capital ratio?
A) Consulting Firm
B) Social Media Company
C) Software Company
D) Public Utility
E) Pharmaceutical Company
30.
Given the following information, calculate WoolridgeCo’s Operating Cycle.
Revenue: $8,000,000
COGS: $4,000,000
EBIT: $3,000,000
Net Income: $2,000,000
Avg. Inventory: $1,000,000
Avg. Receivables: $800,000
Avg. Payables: $800,000
A) 18 days
B) -36 days
C) 128 days
D) 55 days
E) 36 days
