Problem 1: McMaster Inc, has a times interest earned ratio of 4.0. Based on this ratio, a creditor knows that McMasters EBIT must decline by more than____ before McMaster will be unable to cover its interest expense.
A 33%
B 40%
C 67%
D 75%
E 80%
Problem 2: A firm has sales of $500, total assets of $300 and a debt-equity ratio of 2. If its return on equity is 15%, what is its net income?
A $ 7.50
B $15.00
C $22.00
D $32.50
E $50.00
Problem 3: A firm sells 45, 000 units a year. It has an EOQ of 1,800 units. The firm offers it customers credit terms of 2/10, net 30. The firm uses a 360-day year. If both the firm and the customers operate in a manner that maximizes the benefits to themselves, the firm will have an operating cycle equal to __days.
A 24.4
B 25.0
C 35.0
D 35.6
E 44.4