Question

1.When using Ratios to evaluate a Firms performance which will lead to a faulty analysis of the Firm?

Rely only on historic Financial Statements

Accounting procedures that a firm is using don’t matter

Financial Statements from outside the United States are dependable

All of the above

2.

The top part of Bobbie's Inc.'s 201x balance sheet is listed as follows (in millions of dollars).

Current assets:		Current liabilities
Cash and marketable securities	$ .5	Accrued wages and taxes	$ 6
Accounts receivable	15	Accounts payable	10
Inventory	95	Notes payable	50
Total	$115	Total	$ 66

What are Bobbie's Inc.'s current ratio, quick ratio, and cash ratio for 201x?

1.74242, 0.30303, 0.07576

7.1875, 1.25, 0.3125

1.43939, 0.30303, 0.07576

19.16667, 3.33333, 0.83333

3.Bobbette's Company reported sales for 201x of $66 million. Bobbette's Company listed $25 million of inventory on its balance sheet. How many times per year did Bobbette's Company inventory turn over? (Answer to 1 decimal place, e.g. x.x or 1.2)

4.If net income available to stockholders is US$122 and total assets are US$2052 and total liabilities are $270 then return on total assets would be. ? %... (Express answer as a percentage to 2 decimal places, with no % sign needed, e.g. x.xx or 1.23)

Answer 1

Solution:
1) All of the above
2)
Current Ratio :
Current Ratio = Current Assets/Current Liabilities
$115/$66
1.742424242
Current Ratio = 1.74242
Quick Ratio:
Quick Ratio = (Current Assets- Inventory)/(Current Liabilities-Notes Payable)
($115-$95)/($66-$50)
1.25
Quick Ratio = 1.25
Cash Ratio:
Cash Ratio = Cash and cash Equivalent/Current Liabilities	$0.5/$66
	0.007575758
Cash and cash equivalent = Cash and marketable
Securities
Cash Ratio = 0.07576
3)
Given:
Sales	$66 Million
Inventory	$25 Million
Inventory turnover ratio = Sales/Inventory
$66 Million/$25 Million
2.64
Inventory turnover ratio = 2.6 Times
4)
Given:
Net income	$122
Total asset	$2052
Total Liabilities	$270
Return on total Assets:
Return on total Assets = Net income/Total Assets
US$122/US$2052*100
5.945419103
Return on total Assets = 5.95