Chapter 3, Problem 1, page 79. Profitability ratios (LO2) Low Carb Diet Supplement Inc. has two divisions. Division A has a profit of $156,000 on sales of $2,010,000. Division B is able to make only $28,800 on sales of $329,000. Based on the profit margins (returns on sales), which division is superior?

Chapter 3, Problem 14, page 81 Du Pont system of analysis (LO3) Gates Appliances has a return-on-assets (investment) ratio of 8 percent.

a. If the debt-to-total-assets ratio is 40 percent, what is the return on equity?

b. If the firm had no debt, what would the return-on-equity ratio be?

Chapter 3, Problem 22, page 83. Overall ratio analysis (LO2) The balance sheet for Stud Clothiers is shown next. Sales for the year were $2,400,000, with 90 percent of sales sold on credit.

STUD CLOTHIERS

Balance Sheet 20X1

Assets

Liabilities and Equity

Cash........................

$ 60,000

Accounts payable.................

$ 220,000

Accounts receivable......

240,000

Accrued taxes.....................

30,000

Inventory..................

350,000

Bonds payable

(long-term)........................

150,000

Plant and equipment......

410,000

Common stock....................

80,000

Paid-in capital.....................

200,000

Retained earnings.................

380,000

Total assets............

$1,060,000

Total liabilities and equity...

$1,060,000

Compute the following ratios:

a. Current ratio.

b. Quick ratio.

c. Debt-to-total-assets ratio.

d. Asset turnover.

e. Average collection period.