# Financial Ratios and Cash Flows

Which of the following presents a summary of the changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?

The statement of cash flows.

The statement of net worth.

The statement of retained earnings.

The statement of working capital.

Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?

61.7 days

57.9 days

65.2 days

64.3 days

Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?

1.74

0.60

1.47

0

Which of the following is not a method of “benchmarking”?

Evaluating a single firm’s performance over time.

Conduct an industry group analysis.

Utilize the DuPont system to analyze a firm’s performance.

Identify a group of firms that compete with the company being analyzed

Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)

$26,454

$22,680

$16,670

$19,444

PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)

$2,735,200

$2,431,224

$2,615,432

$2,815,885

PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

$477,235

$429,560

$414,322

$480,906

Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)

$3,594,524

$1,745,600

$5,233,442

$2,667,904

Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

16%

32%

40%

12%

Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

$972

$1,014

$1,066

$923

PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the next four years?

$9.72

$11.63

$13.50

$12.50

Capital rationing. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?

1.11

0.90

1.90

0.11

What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?

The modified internal rate of return.

The discounted payback.

The profitability index.

The internal rate of return.

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