SOLVED

11) A company had sales revenue of $665,000 and $692,000 in two successive quarters. The cost of goods sold was $226,000 and $277,000 respectively. Operating expenses in each quarter were: selling expenses of $95,000, distribution expenses of $85,000, and administration expenses of $170,000. Interest expenses were $20,000 in each of the two quarters. What was the change in operating margin? A) 4% B) 14.7% C) 32.7% D) 42.5% E) 55.2% 12) The gross profit margin will be impacted by A) Higher productivity from their production equipment B) A $50,000 loss of an uninsured warehouse to fire C) An interest rate hike on the Company’s variable rate mortgage D) Retiring the outstanding principal of a bank loans E) A reduction in the number of people employed 13) Rattray Interiors and Design Ltd. has four managers and six support staff who generate $2,400,000 of revenue. If the company wants to expand its business and to hire 2 design technicians to assist the partners, how much more revenue must each manager bring in to maintain their current sales revenue per employee ratio? A) $80,000 B) $120,000 C) $200,000 D) $240,000 E) $480,000 14) The Body Store has annual credit sales of $75,372,500 in average level of accounts receivable of $5,162,500. What is the Company’s average collection period for receivables? A) 2 days B) 3 days C) 15 days D) 25 days E) 53 days 15) Mount Blanc’s Dairy’s sales inventory at the start of the previous year was valued at $310,000 and the company’s ending inventory was $374,000. The cost of goods sold for that period for the company was $13,870,000. Because stocked-outs have been a problem, a new refrigerated warehouse will allow the company to hold three more days worth of inventory. Mount Blanc will then be carrying an average inventory of A) $342,000 B) $228,000 C) $114,000 D) $380,000 E) $456,000 16) Blauker Auto Sales & Service Ltd’s accounts make $27,740,000 purchases on credit each year. The level of its accounts payable is $2,660,000. Due to a slowdown in car sales, Blauker would like to extend its accounts payables to 45 days. If Blauker would have to pay 7% per annum for short-term financing, how much interest will the company save in a year by extending its payment period? A) $16,226 B) $53,200 C) $186,200 D) $239,400 E) $1,757,880 17) Two companies have the same sales revenue for the year which equalled $22,550,000. Co. A has average total assets of $10,560,000 and current liabilities of $1,200,000. Co. B has average long-term liabilities of $3,750,000 in total shareholder equity of $5,610,000. When examining how well a company uses its assets A) Co. B. is 2.4 times more efficient than Co. A B) The data provided are insufficient to make a reliable comparison C) Co. A. is as efficient as Co. B D) Co. B. is more efficient than Co. A. by 12% E) Co. A. is 3x more efficient than Co. B 18) The current ratio for Joshua Wines is 2.2 and the acid test ratio for the business is 0.7. These ratios suggest that the company A) Is carrying too much inventory B) Is carrying too many current liabilities C) Has sufficient liquidity to meet a long-term financial commitments D) Has sufficient liquidity to meet short-term financial commitments E) Has too much investment in Accounts Receivables 19) The company’s leverage ratio has moved from 15.2% to 32%. Its return on equity ratio has also moved up, from 20.5% to 45.3%. Its times interest earned ratio has dropped to 3.5. Which of the following is the best statement to describe the company? A) Is not in a risky financial position B) Is depending on debt to finance its expansion C) Cannot pay the interest on its long-term debt D) Is depending on equity to finance its expansion E) Has a sizable cushion to pay the interest on its debt 20) Mehal Mechanics Ltd’s leverage ratio moved from 15.3% to 9% between 2005 and 2007. No common or preferred shares were issued in the year. Which of the following situations is most likely to achieve this result? A) Higher net income and a decrease in the dividend payout ratio B) Higher net income and increase in the dividend payout ratio C) Lower return on capital employed and a higher debt to equity ratio D) Higher return on capital employed and a higher debt to equity ratio E) Higher net income regardless of dividend payout ratio