Corporate Finance

1. In 2008, how many days on average did it take Bayside to sell its inventory? A. 126.1 days
B. 127.9 days
C. 153.8 days
D. 176.5 days
E. 178.9 days
Inventory turnover for 2008 = $4,060  $1,990 = 2.04; Days' sales in inventory = 365  2.04 = 178.9 days

TEST MODEL : CHAPTER 3 CORPORATE FINANCE

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2. What is the debt-equity ratio for 2008?
A. 22.5%
B. 26.2%
C. 35.5%
D. 45.1%
E. 47.7%
Debt-equity ratio for 2008 = ($1,170 + $500)  ($3,500 + $1,200) = .355
= 35.5%
3. What is the times interest earned ratio for 2008?
A. 30
B. 36
C. 40
D. 50
E. 54Times interest earned for 2008 = $1,200  $30 = 40
4. What is the equity multiplier for 2008?
A. 1.21
B. 1.36
C. 1.44
D. 1.82
E. 1.9
Equity multiplier for 2008 = $6,370  ($3,500 + $1,200) = 1.36
5. What is the return on equity for 2008?
A. 16.2%
B. 20.9%
C. 21.7%
D. 22.1%
E. 23.3%
Return on equity for 2008 = $760  ($3,500 + $1,200) = .162 = 16.2%

TEST MODEL : CHAPTER 3 CORPORATE FINANCE

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6. The Green Giant has a 5% profit margin and a 40% dividend payout ratio. The total asset turnover is 1.40 and the equity multiplier is 1.50.
What is the sustainable rate of growth?
A. 6.30%
B. 6.53%
C. 6.72%
D. 6.80%
E. 6.83%
Return on equity = .05  1.40  1.50 = .105; Sustainable growth = {.105 
(1 - .40)}  {1 - [.105  (1 - .40)]} = .06724 = 6.72%
7. Lee Sun's has sales of $3,000, total assets of $2,500, and a profit margin of 5%. The firm has a total debt ratio of 40%. What is the return on equity?
A. 6%
B. 8%
C. 10%
D. 12%
E. 15%
Return on equity = (.05  $3,000)  [$2,500  (1 - .40)] = $150  $1,500 =
.10 = 10%
8. Jupiter Explorers has $6,400 in sales. The profit margin is 4%. There are 6,400 shares of stock outstanding. The market price per share is
$1.20. What is the price-earnings ratio?
A. 13
B. 14
C. 21
D. 30
E. 48
Earnings per share = (.04  $6,400)  6,400 = .04; Price-earnings ratio =
$1.20  .04 = 30

TEST MODEL : CHAPTER 3 CORPORATE FINANCE

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9. Patti's has net income of $1,800, a price-earnings