Ch4

Question 1

1. Last year’s asset turnover ratio was 2.0. Sales have increased by 25% and total assets have increased by 10% since that time. What is the current asset turnover ratio?
   a. 2.15
   b. 2.27
   c. 1.82
   d. 2.05
   fictief vb maken waar uitkomst 2 is dus bv 100/50 en dan elk verhogen met bijpassend % dus (1001,25)/(501,1)

Answer 1

b. 2.27

Question 2

2. High levels of liquidity may indicate:
   a. low levels of net working capital.
   b. high levels of economic value added.
   c. low profit margins.
   d. inefficient use of assets.

Answer 2

d. inefficient use of assets.

Question 3

3. Efficiency ratios:
   a. are used to measure how liquid the company is.
   b. measure the profits generated by a firm’s equity and assets.
   c. are used to measure how well the company uses its assets.
   d. include the quick ratio, asset turnover ratio, and return on equity.

Answer 3

c. are used to measure how well the company uses its assets.

Question 4

4. Which of the following is the least effective measure of operating performance?
   a. ROA
   b. ROE
   c. All of the options are equally ineffective measures of operating performance.
   d. ROC

Answer 4

b. ROE

Question 5

5. Which one of these changes indicates an improvement in a firm’s asset management efficiency?
   a. An increase in the average days in inventory
   b. A decrease in the receivables turnover rate
   c. An increase in the inventory turnover rate
   d. An increase in the amount of assets per dollar of sales

Answer 5

c. An increase in the inventory turnover rate

Question 6

6. What is the ROA of a firm with $150,000 in receivables, which represents 60 days sales, assets of $750,000, and an operating profit margin of 9%?
   a. 7.50%
   b. 9.00%
   c. 16.70%
   d. 10.95%
   ROA = (150.000*(365/60))/750.000 * 0.09

Answer 6

d. 10.95%