Question

Gaither Mack is preparing projected financial statements to include in the business plan he is preparing for the launch of a specialty retail store. Using published financial statistics, Mack finds that the typical net profit margin for a store like his is 7.3 percent. If Mack's target income for his first year of operation is $32,000, what level of sales must he achieve to reach it?

Select one:

a. $233,600

b. $438,356

c. $2,966,400

d. Cannot be determined from the information provided.

________ ratios help a business owner evaluate the company's performance and indicate how effectively the business employs its resources.

Select one:

a. Liquidity

b. Leverage

c. Operating

d. Profitability

Which of the following combinations of ratios would indicate that a company is financially mismanaged and is not a good credit risk?

Select one:

a. High liquidity; high leverage

b. Low liquidity; high leverage

c. High liquidity; low leverage

d. Low liquidity; low leverage

Bettina has just calculated her company's current ratio. To calculate the quick ratio, she should ________.

Select one:

a. subtract current liabilities from current assets before dividing by total liabilities

b. subtract total liabilities from current assets before dividing by current liabilities

c. subtract inventory from current assets before dividing by current liabilities

d. subtract depreciation expense from current assets before dividing by current liabilities

Answer 1

Ans 1: b. $438,356

Ans 2: c. Operating

Ans 3: b. Low liquidity; high leverage

Ans 4: c. subtract inventory from current assets before dividing by current liabilities