Question 1 out of 1 points Which of the following statements is CORRECT?

1 out of 1 points
Which of the following statements is CORRECT?
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Question 2
1 out of 1 points
The balance sheet and income statement shown below are for Pettijohn Inc.
Note that the firm has no amortization charges, it does not lease any assets,
none of its debt must be retired during the next 5 years, and the notes
payable will be rolled over.
Balance Sheet (Millions of $)
Assets 2010
Cash and securities $1,554.0
Accounts receivable 9,660.0
Inventories 13,440.0
Total current assets $24,654.0
Net plant and equipment 17,346.0
Total assets $42,000.0
Liabilities and Equity
Accounts payable $7,980.0
Notes payable 5,880.0
Accruals 4,620.0
Total current liabilities $18,480.0
Long-term bonds 10,920.0
Total debt $29,400.0
Common stock 3,360.0
Retained earnings 9,240.0
Total common equity $12,600.0
Total liabilities and equity $42,000.0
Income Statement (Millions of $) 2010
Net sales $58,800.00
Operating costs except depr’n $54,978.0
Depreciation $1,029.0
Earnings bef int and taxes (EBIT) $2,793.0
Less interest 1,050.0
Earnings before taxes (EBT) $1,743.0
Taxes $610.1
Net income $1,133.0
Other data:
Shares outstanding (millions) 175.00
Common dividends $509.83
Int rate on notes payable & L-T bonds 6.25%
Federal plus state income tax rate 35%
Year-end stock price $77.69
What is the firm’s total assets turnover?
Question 3
1 out of 1 points
Companies E and P each reported the same earnings per share (EPS), but
Company E’s stock trades at a higher price. Which of the following statements
is CORRECT?
Question 4
1 out of 1 points
A new firm is developing its business plan. It will require $565,000 of assets,
and it projects $452,800 of sales and $354,300 of operating costs for the first
year. Management is quite sure of these numbers because of contracts with its
customers and suppliers. It can borrow at a rate of 7.5%, but the bank requires
it to have a TIE of at least 4.0, and if the TIE falls below this level the bank will
call in the loan and the firm will go bankrupt. What is the maximum debt ratio
the firm can use? (Hint: Find the maximum dollars of interest, then the debt
that produces that interest, and then the related debt ratio.)
Question 5
0 out of 1 points
The balance sheet and income statement shown below are for Pettijohn Inc.
Note that the firm has no amortization charges, it does not lease any assets,
none of its debt must be retired during the next 5 years, and the notes
payable will be rolled over.
Balance Sheet (Millions of $)
Assets 2010
Cash and securities $1,554.0
Accounts receivable 9,660.0
Inventories 13,440.0
Total current assets $24,654.0
Net plant and equipment 17,346.0
Total assets $42,000.0
Liabilities and Equity
Accounts payable $7,980.0
Notes payable 5,880.0
Accruals 4,620.0
Total current liabilities $18,480.0
Long-term bonds 10,920.0
Total debt $29,400.0
Common stock 3,360.0
Retained earnings 9,240.0
Total common equity $12,600.0
Total liabilities and equity $42,000.0
Income Statement (Millions of $) 2010
Net sales $58,800.00
Operating costs except depr’n $54,978.0
Depreciation $1,029.0
Earnings bef int and taxes (EBIT) $2,793.0
Less interest 1,050.0
Earnings before taxes (EBT) $1,743.0
Taxes $610.1
Net income $1,133.0
Other data:
Shares outstanding (millions) 175.00
Common dividends $509.83
Int rate on notes payable & L-T bonds 6.25%
Federal plus state income tax rate 35%
Year-end stock price $77.69
What is the firm’s cash flow per share?
Question 6
0 out of 1 points
Last year Urbana Corp. had $197,500 of assets, $307,500 of sales, $19,575 of
net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a
new computer program will enable it to reduce costs and thus raise net
income to $33,000. Assets, sales, and the debt ratio would not be affected. By
how much would the cost reduction improve the ROE?
Question 7
1 out of 1 points
Bonner Corp.’s sales last year were $415,000, and its year-end total assets
were $355,000. The average firm in the industry has a total assets turnover
ratio (TATO) of 2.4. Bonner’s new CFO believes the firm has excess assets that
can be sold so as to bring the TATO down to the industry average without
affecting sales. By how much must the assets be reduced to bring the TATO to

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