QUESTION 14: Which of the following ratios would be most useful to a creditor to determine an ongoing concern’s (ongoing company’s) creditworthiness?
current ratio |
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quick ratio |
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total asset turnover |
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times interest earned |
QUESTION 21: Trico Windshield Wipers Corporation has a 24% return on equity. The debt ratio is 35%. If the total asset turnover is 1.5X, what is the firm's profit margin?
13.85% |
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11.31% |
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14.25% |
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10.40% |
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none of these |
14.
times interest earned
this is related to meeting the debt obligations of the company, thus related to creditworthiness
15.
debt ratio=35%
(debt/assets)=35%
1-(debt/assets)=1-35%
equity/assets=65%
equity multiplier=1/65%=1.5385
what is the firm's profit margin
=return on equity/(asset turnover*equity multiplier)
=24%/(1.5*1.5385)
=10.40%
QUESTION 14: Which of the following ratios would be most useful to a creditor to determine...
QUESTION 21 Trico Windshield Wipers Corporation has a 24% return on equity. The debt ratio is 35%. If the total asset turnover is 1.5X, what is the firm's profit margin? 13.85% 11.31% 14.25% 10.40% none of these
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