Question Details

What was its basic earning power (BEP) ratio 



1. A firm- new president wants to strengthen the company- financial position.  Which of the following actions would make it financially stronger?

a.	Increase accounts receivable while holding sales constant.
b.	Increase EBIT while holding sales and assets constant.  
c.	Increase accounts payable while holding sales constant.
d.	Increase notes payable while holding sales constant.

2. Which of the following would indicate an improvement in a company- financial position, holding other things constant?

a.	The inventory and total assets turnover ratios both decline.
b.	The profit margin declines.
c.	The times-interest-earned ratio declines.
d.	The current and quick ratios both increase.

3. If a bank loan officer were considering a company- loan request, which of the following statements would you consider to be CORRECT?

a.	The lower the company- inventory turnover ratio, other things held constant, the lower the interest rate the bank would charge the firm.
b.	Other things held constant, the higher the days sales outstanding ratio, the lower the interest rate the bank would charge.
c.	Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge.  
d.	The lower the company- TIE ratio, other things held constant, the lower the interest rate the bank would charge.

4. Ryngard Corp's sales last year were $38,000, and its total assets were $16,000.  What was its total assets turnover ratio (TATO)?

a.	2.04
b.	2.14
c.	2.26
d.	2.38  



5. Beranek Corp has $720,000 of assets, and it uses no debt--it is financed only with common equity.  The new CFO wants to employ enough debt to raise the debt/assets ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value.  How much must the firm borrow to achieve the target debt ratio?

a.	$273,600
b.	$288,000  
c.	$302,400
d.	$317,520



6.  X-1 Corp's total assets at the end of last year were $405,000 and its EBIT was 52,500.  What was its basic earning power (BEP) ratio ?

a.	11.70%
b.	12.31%
c.	12.96% 
d.	13.61%




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