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d.\$166.67

12. Culver Inc. has earnings before interest and taxes (EBIT )of \$300.  The company’s times interest earned ratio is 7.00.  Calculate the company’s interest charges.

a.\$42.86 *

b.\$50.00

c.\$40.00

d.\$60.00

13.The Wilson Corporation has the following relationships:

Sales/Total assets2.0

Return on assets (ROA)4.0%

Return on equity (ROE)6.0%

What is Wilson’s profit margin and debt ratio?

a.2%; 0.33  *

b.4%; 0.33

c.4%; 0.67

d.2%; 0.67

14. A fire has destroyed a large percentage of the financial records of the Carter Company.  You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 18 percent.  If sales were \$4 million, the debt ratio was 0.40, and total liabilities were \$2 million, what would be the return on assets (ROA)?

a.10.80%  *

b. 0.80%

c. 1.25%

d.12.60%

15. A firm that has an equity multiplier of 4.0 will have a debt ratio of

a.4.00

b.3.00

c.1.00

d.0.75  *

16. The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that went into this calculation.  You are given the following information: total debt/total assets = 0.35 and total assets turnover = 2.8.  What is the profit margin?

a. 3.48%  *

b. 5.42%

c. 6.96%

d. 2.45%

USE THE FOLLOWING INFORMATION FOR THE NEXT TWO PROBLEMS

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