Question

16. Which one of the fol hich one of the following statements incorrect? A If the total debt ratio is greater than 50, then the det ty ratio must be less than 10 B. Long-term creditors would prefer the time interest earneration be 1.4 rather than 1.5. C. The debt-equity ratio can be computed as the equity multiplier minus 1. D. An equity multiplier of 12 means a firm has $1.20 in sales for every $1 in equity E. An increase in the depreciation expense will affect the cash co- erage ratio. 17. If a firm has a debt-equity ratio of 4.0, then its total debt ratio must be which one of the following? A. 0.2 De bot -og ratio 4.0 B. 0.8 C. 1.0 D. 1.6 E. 2.0 18. Beach Wear has current liabilities of $490,000, a quick ratio of 1.2, in- ventory turnover of 1.5, and a current ratio of 2.9. What is the cost of goods sold? 112= 1421000-X A. $999, 600 QR=1,2 & 490,000 490,000 B. $1,060,000 558,000= 142006- C. $1,249,500 TT=1.5= inu Y=833.000 D. $1,400,000 E. $1,560,000 19. Russell's Deli has cash of $500, accounts receivable of $100, accounts payable of $210, and inventory of $409. What is the value of the quick 532004 CR=29=CA 1,421,00 CR=2ut 1 EA= 1,724000 a 490,000 V ob 200 ratio? CA-I U 600 - A. 0.31 Cash 500 892 500+106) - 404 AK 5100 AP=210 - 210 inu 409 191125 - 4

Answer 1

Solutions 1.2. NO.17 Debt equity Ratto = 4 Total Debt Ratio = ? → Debt equity Ratio = Total Debt Total equily 4 Total Debt - Total equity it means Total Debt = 4, Total equity = 1 - Total Debt Ratio - Total Assets -- Totalequity Total Assets - Total Assets - Total Debt + Total equity Na Total Assen. = 4+ 1 =5 So Total Peka Ratio = 5=1-4 = 0.8 Total Debt Ratio - 0.8 Option 'B' will be correct

Solution 4.2.10 As giren, (CL) cernent Wabilities = $490.000 (QR) Quile Ratio = 112 Inventory tumoves Ratio - 1,5 (CR) Current Ratio = 2.9 (coas) cost of goods sold = ? → Current Ratio (CR), Curent Assens (CA) Cesent liabilitiesi .. Putting the value in the above formnla, 2.92 SA O CA = 219 x $490000 $490000 CA $1421,000 Current Asset = $1421,000 Quick Ratio - Quick Assel (QA) (OR). Current liabilities. (CL) . 1.2 - Quick Arrets i Quick Anes. $490,000x1.2. B $490000 Quick Asset= $588000

- Inventory = Current, Quick ✓ Asset - Assets Pnventory = $1421,000 - $ 508,000 Inventory = $833,000 - Inventery tumorer Ratio - Castof grach sold (coas) . Inventory ;LOGS = $83.000*185 1,53 coled. __ 1.5= $033,000 Costf grach sold = $1249,500 O option'c' will be correct

Solution 1 0.19 As given, Casha $ 500 Acount Receivable = $100 Auounts payable = $210 Priventory = $409 Quick Ratio - ? Cument Appet = cash + Account + Inventory von Receivable Current Asseto= $500 + $100 +$409= $ 1009 - - QuickAssets - Curent Assets- Inventory Quick Asseto $1009 - $409 $600 A nti Daueble-current = $ 210 hastuttes - Quick Ratio= Qulle Afet : $600 current lasi üttes $210 Quick Ratio - 2.0572) 2106 Ouick Ratto = 2:06 |