Reference no: EM132623402

Question 1: The liquidity ratios show the relationship a firm's ____________ to its ______________

Option a) Sales, total assets

Option b) Debt, total equity

Option c) Current assets, current liabilities

Option d) Net Income, Sales

Option e) None of the above

Question 2: DEF Inc. sales were $4 million in 2015 and its year-end total assets were $2.5 million. Also at year end the company had current liabilities of $1 million consisting of $500,000 of accounts payable, $200,000 of accruals and $300,000 of short-term debt. The company is currently operating at full capacity. The company has no long term debt. Other than short-term debt all of the asset accounts increase with sales. In addition, the company's profit margin does not change. Therefore, the company's profit margin will be 10% and its payout ratio will be 40%. The company forecasts that sales will increase by 20%. What is the amount of the additional funds needed (or the external funds needed)?

Option a) $168,000

Option b) $120,000

Option c) $72,000

Option d) $24,000

Option e) None of the above