Question 1

On the balance sheet,short-term debt appears:

Accepted Answer

A) in the Stockholders' Equity section. 
B) in the Operating Expenses section. 
C) in the Current Assets section. 
D) in the Current Liabilities section. 
A) in the Stockholders' Equity section. 
B) in the Operating Expenses section. 
C) in the Current Assets section. 
D) in the Current Liabilities section.

Question 2

Use the table for the question(s)below.
Consider the following income statement and other information:
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions)  
-Luther's EBIT coverage ratio for the year ending December 31,2019 is closest to:

Accepted Answer

A) 1.64. 
B) 1.78. 
C) 1.98. 
D) 2.19. 
A) 1.64. 
B) 1.78. 
C) 1.98. 
D) 2.19.

Question 3

Use the table for the question(s)below.
Consider the following income statement and other information:
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions)  
-Wyatt Oil has a net profit margin of 4.0%,a total asset turnover of 2.2,total assets of $525 million,and a book value of equity of $220 million.Wyatt Oil's current return-on-assets (ROA)is closest to:

Accepted Answer

A) 8.8%. 
B) 9.5%. 
C) 21.0%. 
D) 22.8%. 
A) 8.8%. 
B) 9.5%. 
C) 21.0%. 
D) 22.8%.

Question 4

Which of the following balance sheet equations is INCORRECT?

Accepted Answer

A) Assets - Liabilities = Shareholders' Equity 
B) Assets = Liabilities + Shareholders' Equity 
C) Assets - Current Liabilities = Long Term Liabilities 
D) Assets - Current Liabilities = Long Term Liabilities + Shareholders' Equity 
A) Assets - Liabilities = Shareholders' Equity 
B) Assets = Liabilities + Shareholders' Equity 
C) Assets - Current Liabilities = Long Term Liabilities 
D) Assets - Current Liabilities = Long Term Liabilities + Shareholders' Equity

Question 5

A 30-year mortgage loan is a:

Accepted Answer

A) long-term liability. 
B) current liability. 
C) current asset. 
D) long-term asset. 
A) long-term liability. 
B) current liability. 
C) current asset. 
D) long-term asset.

Question 6

Use the table for the question(s)below.
Consider the following income statement and other information:
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions)  
-For the year ending December 31,2019 Luther's earnings per share are closest to:

Accepted Answer

A) $0.96. 
B) $1.04. 
C) $1.28. 
D) $1.33. 
A) $0.96. 
B) $1.04. 
C) $1.28. 
D) $1.33.

Question 7

The inventory days ratio measures:

Accepted Answer

A) the average length of time it takes a company to sell its inventory. 
B) the average length of time it takes the company's suppliers to deliver its inventory. 
C) the level of sales required to keep a company's average inventory on the books. 
D) the percentage change in inventory over the past year. 
A) the average length of time it takes a company to sell its inventory. 
B) the average length of time it takes the company's suppliers to deliver its inventory. 
C) the level of sales required to keep a company's average inventory on the books. 
D) the percentage change in inventory over the past year.

Question 8

In addition to the balance sheet,income statement,and the statement of cash flows,a firm's complete financial statements will include all of the following EXCEPT:

Accepted Answer

A) management discussion and analysis. 
B) notes to the financial statements. 
C) securities and Exchange Commission's (SE
C) commentary. 
D) statement of stockholders' equity. 
A) management discussion and analysis. 
B) notes to the financial statements. 
C) securities and Exchange Commission's (SE
C) commentary. 
D) statement of stockholders' equity.

Question 9

Use the table for the question(s)below.
Consider the following balance sheet:    
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2019 is $23.4 million.Its Debt-to-Enterprise Value Ratio in 2019 is closest to:

Accepted Answer

A) 0.696. 
B) 0.37. 
C) 0.255. 
D) 0.654. 
A) 0.696. 
B) 0.37. 
C) 0.255. 
D) 0.654.

Question 10

The Sarbanes-Oxley Act (SOX)forced companies to validate their internal financial control processes by:

Accepted Answer

A) putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits. 
B) requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
C) requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D) requiring senior management and the boards of public companies to validate and certify the process through which funds are allocated and controlled. 
A) putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits. 
B) requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
C) requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D) requiring senior management and the boards of public companies to validate and certify the process through which funds are allocated and controlled.

Question 11

Which of the following is NOT a reason why cash flow may not equal net income?

Accepted Answer

A) Amortization is added in when calculating net income. 
B) Changes in inventory will change cash flows but not income. 
C) Capital expenditures are not recorded on the income statement. 
D) Depreciation is deducted when calculating net income. 
A) Amortization is added in when calculating net income. 
B) Changes in inventory will change cash flows but not income. 
C) Capital expenditures are not recorded on the income statement. 
D) Depreciation is deducted when calculating net income.

Question 12

Use the table for the question(s)below.
Consider the following balance sheet:    
-Luther Corporation's total sales for 2019 were $610.1 million,and gross profit was $109.0 million.Accounts payable days for 2019 is closest to:

Accepted Answer

A) 27.5. 
B) 5.71. 
C) 52.4. 
D) 63.8. 
A) 27.5. 
B) 5.71. 
C) 52.4. 
D) 63.8.

Question 13

Which of the following is NOT a financial statement that every public company is required to produce?

Accepted Answer

A) Income Statement 
B) Statement of Sources and Uses of Cash 
C) Balance Sheet 
D) Statement of Stockholders' Equity 
A) Income Statement 
B) Statement of Sources and Uses of Cash 
C) Balance Sheet 
D) Statement of Stockholders' Equity

Question 14

Use the information for the question(s)below.
In November 2019,Perrigo Co.(PRGO)had a share price of $39.20.They had 91.33 million shares outstanding,a market-to-book ratio of 3.76.In addition,PRGO had $845.01 million in outstanding debt,$163.82 million in net income,and cash of $257.09 million.
-Luther's Operating Margin for the year ending December 31,2018 is closest to:

Accepted Answer

A) 0.5%. 
B) 0.7%. 
C) 5.4%. 
D) 6.8%. 
A) 0.5%. 
B) 0.7%. 
C) 5.4%. 
D) 6.8%.

Question 15

Use the table for the question(s)below.
Consider the following balance sheet:    
-What is Luther's net working capital in 2018?

Accepted Answer

A) $12 million 
B) $27 million 
C) $39 million 
D) $63.6 million 
A) $12 million 
B) $27 million 
C) $39 million 
D) $63.6 million

Question 16

Use the table for the question(s)below.
Consider the following balance sheet:    
-If on December 31,2018 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Accepted Answer

market-to-book = market value

Question 17

If Moon Corporation has depreciation or amortization expense,which of the following is TRUE?

Accepted Answer

A) Its EBITDA/Interest Coverage ratio will be greater than its EBIT/Interest Coverage ratio. 
B) Its EBITDA/Interest Coverage ratio will be less than its EBIT/Interest Coverage ratio. 
C) Its EBITDA/Interest Coverage ratio will be equal to its EBIT/Interest Coverage ratio. 
D) Not enough information to answer the question. 
A) Its EBITDA/Interest Coverage ratio will be greater than its EBIT/Interest Coverage ratio. 
B) Its EBITDA/Interest Coverage ratio will be less than its EBIT/Interest Coverage ratio. 
C) Its EBITDA/Interest Coverage ratio will be equal to its EBIT/Interest Coverage ratio. 
D) Not enough information to answer the question.

Question 18

Use the table for the question(s)below.
Consider the following balance sheet:    
-Luther's current ratio for 2019 is closest to:

Accepted Answer

A) 0.84. 
B) 0.92. 
C) 1.09. 
D) 1.19. 
A) 0.84. 
B) 0.92. 
C) 1.09. 
D) 1.19.

Question 19

Off-balance sheet transactions are required to be disclosed:

Accepted Answer

A) in the management discussion and analysis. 
B) in the auditor's report. 
C) in the Securities and Exchange Commission's commentary. 
D) in the statement of stockholders' equity. 
A) in the management discussion and analysis. 
B) in the auditor's report. 
C) in the Securities and Exchange Commission's commentary. 
D) in the statement of stockholders' equity.

Question 20

Cash is a:

Accepted Answer

A) long-term asset. 
B) current asset. 
C) current liability. 
D) long-term liability. 
A) long-term asset. 
B) current asset. 
C) current liability. 
D) long-term liability.

Exam 2: Introduction to Financial Statement Analysis

On the balance sheet,short-term debt appears:

Use the table for the question(s)below. Consider the following income statement and other information: Luther Corporation Consolidated Income Statement Year ended December 31 (in $ millions) -Luther's EBIT coverage ratio for the year ending December 31,2019 is closest to:

Which of the following balance sheet equations is INCORRECT?

A 30-year mortgage loan is a:

Use the table for the question(s)below. Consider the following income statement and other information: Luther Corporation Consolidated Income Statement Year ended December 31 (in $ millions) -For the year ending December 31,2019 Luther's earnings per share are closest to:

The inventory days ratio measures:

In addition to the balance sheet,income statement,and the statement of cash flows,a firm's complete financial statements will include all of the following EXCEPT:

Use the table for the question(s)below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2019 is $23.4 million.Its Debt-to-Enterprise Value Ratio in 2019 is closest to:

The Sarbanes-Oxley Act (SOX)forced companies to validate their internal financial control processes by:

Which of the following is NOT a reason why cash flow may not equal net income?

Use the table for the question(s)below. Consider the following balance sheet: -Luther Corporation's total sales for 2019 were $610.1 million,and gross profit was $109.0 million.Accounts payable days for 2019 is closest to:

Which of the following is NOT a financial statement that every public company is required to produce?

Use the table for the question(s)below. Consider the following balance sheet: -What is Luther's net working capital in 2018?

Use the table for the question(s)below. Consider the following balance sheet: -If on December 31,2018 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

If Moon Corporation has depreciation or amortization expense,which of the following is TRUE?

Use the table for the question(s)below. Consider the following balance sheet: -Luther's current ratio for 2019 is closest to:

Off-balance sheet transactions are required to be disclosed:

Cash is a:

The Corporation

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters