Use the following information to answer Questions 1 through 4:
MegaFrame Computer Company
Balance Sheet
As of December 31, 2007
Assets
Cash $40,000
Accounts Receivable $60,000
Inventory $90,000
New Plant and Equipment $220,000
Total Assets $410,000
Liabilities and Stockholder's Equity
Accounts Payable $60,000
Accrued Expenses $40,000
Long-Term Debt $130,000
Common Stock $60,000
Paid-In Capital $20,000
Retained Earnings $100,000
Total Liabilities and Stockholder's Equity $410,000
MegaFrame Computer Company
Income Statement
For the Year Ended December 31, 2007
Sales (all on credit) $720,000
Cost of Goods Sold $500,000
Gross Profit $220,000
Sales and Administrative Expense $20,000
Depreciation $40,000
Operating Profit $160,000
Interest Expense $16,000
Profit before Taxes $144,000
Taxes (30%) $43,200
Net Income $100,800
Question 1: Refer to the figure above. The firm's average collection period is:
a. 30 days
b. 25 days
c. 14.4 days
d. 20 days
Question 2: Refer to the figure above. Using the DuPont method, return on assets (investment) for MegaFrame Computer is approximately:
a. 15%
b. 25%
c. 29%
d. 35%
Question 3: Refer to the figure above. Compute MegaFrame's after tax profit margin.
a. 10%
b. 14%
c. 15.4%
d. 20%
Question 4: Refer to the figure above. The firm's return on equity is
a. 52.8%
b. 55.6%
c. 56%
d. 100%