Question

1. Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0. a. Cash purchase of inventory b. Cash payment of an account receivable C Cash payment of an account payable d. Cash sale of inventory at a loss 2. The Equity Multiplier is equal to: @ One plus the debt-equity ratio b. One plus the total asset turnover C. Total debt divided by total equity d. Total equity divided by total assets 3. A 0.50 (50%) debt-equity ratio would suggest that a firm has: a. 50% of its assets financed with debt b. 33-1/3% of it assets financed with debt c. an Equity Multiplier of 1.667 d. 66-23% of its assets financed with debt 4. Computer Geeks has sales of $521,000, a profit margin of 14.8%, a total asset turnover rate of 2.16, and an equity multiplier of 1.3. What is the return on equity? a. 8.91% b. 18.28% c. 32.11% d. 41.56% 5. Which of the following best indicates a firm is utilizing its assets efficiently that it has in the past? a. An increase in the asset turnover ratio b. An increase in days' sales outstanding c. A decrease in profit margin d. A decrease in the inventory turnover rate

Answer 1

Current ratio will be increased upon payment of an current tiability so, corect option & cash payment of an account payable. Ex let Current ratio = 10 looooo- current asse 2 ato = Souro y current liabilities paid. Assume sa cash account payable worth & lovoo is is also reduced by & 10000 so current ratio (rivised) = 9 uoooo = 2.25 ration has increased. current 2) Equity multiplier a assett equity = (equity + dest) /equity s equity debt equity equity - It debt unity So, option au a one ophy the debt equity rating

1 3) Debit to equity ratio = Debit equity. Debit equity ratio of 0.50 represents that firm has $0.50 debt for every & 1 of equity held by the firm. In this kind firm, value of equity will be double than debt.

Return on equity= net income Total equity Net income = 0.1488521000 = 77008: Total equity - Total asset/ equity multiplier, Total Assets sales asset den over - 521000/0.0216 a $24120370.37 Total equity = 24120370-37/00013 = $ 1855013105413105 Rota +1108 1855413105. 413105 = 41.56% option 'D' is correct.