33 A firm has a debt to equity ratio of 50%, debt of $300,000, and net income of $90,000. The return on equity is a. 60% b. 15% C. 30% d. Insufficient information e. None of the above. The correct answer is 'b'.
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Exhibit 13-1
Xavier Company reported the following income statement andbalance sheet amounts on December 31, 2017.
2017 | 2016 | |
Net sales revenue (all credit) | $1,700,000 | |
Cost of goods sold | 1,040,000 | |
Gross margin | 660,000 | |
Selling and general expenses | 420,000 | |
Interest expense | 60,000 | |
Net income | $ 180,000 | |
Current assets | $ 100,000 | $ 90,000 |
Long-term assets | 830,000 | 800,000 |
Total assets | $930,000 | $890,000 |
Current liabilities | $ 72,000 | $ 56,000 |
Long-term liabilities | 204,000 | 390,000 |
Common stockholdersâ equity | 654,000 | 444,000 |
Total liabilities and stockholders' equity | $930,000 | $890,000 |
Inventory and prepaid expenses account for $50,000 of the 2017current assets.
Average inventory for 2017 is $36,000.
Average net accounts receivable for 2017 is $62,000.
Average one-day sales are $5,900.
There are 12,000 shares of common stock outstanding at the endof 2017.
The market price per share of common stock is $27 at the end of2017.
The EPS for 2017 is equal to $1.50 per share.
72. Refer to Exhibit 13-1. What is the debt to assets ratio for2016 (rounded to two decimal places)?
a. 0.30
b. 0.50
c. 2.00
d. 2.05
e. None of the answer choices is correct.
73. Refer to Exhibit 13-1. What is the debt to assets ratio for2017 (rounded to two decimal places)?
a. 0.30
b. 0.50
c. 2.00
d. 1.00
e. None of the answer choices is correct.
74. Declan Inc. calculated its accounts receivable turnover for2017 to be 20.0. Both years prior to 2017 showed accountsreceivable turnovers to be 12.0. Based on this information, what isthe best explanation for the change?
a. The company had fewer accounts receivable in 2017than the prior two years.
b. The company had more sales in 2017 than in theprior two years.
c. The company had fewer sales in 2017 than in theprior two years.
d. The company took longer to collect their accountsreceivable in 2017 than the prior two years.
e. None of the answer choices is correct.
75.The following debt to equity ratio is for two companies inthe same industry.
Company A | Company B | |
Debt to equity ratio | 4.5 to 1 | 13.6 to 1 |
Which of the following statements is always true?
a. Company A is more profitable than Company B.
b. Company B is more profitable than Company A.
c. Company A is more highly leveraged than CompanyB.
d. Company B is more highly leveraged than CompanyA.
e. None of the answer choices is correct.
