Question 1

For publicly traded firms, which of these ratios measure what investors think of the company's future performance and risk?

Accepted Answer

A)  liquidity ratios 
B)  market value ratios 
C)  price value ratios 
D)  profitability ratios 
A)  liquidity ratios 
B)  market value ratios 
C)  price value ratios 
D)  profitability ratios

Question 2

Which of the following measures the operating return on the firm's assets, irrespective of financial leverage and taxes?

Accepted Answer

A)  basic earnings power ratio 
B)  profit margin 
C)  return on assets 
D)  return on equity 
A)  basic earnings power ratio 
B)  profit margin 
C)  return on assets 
D)  return on equity

Question 3

An investor wanting large returns will be interested in companies that have

Accepted Answer

A)  high ROAs. 
B)  high ROEs. 
C)  high current ratios. 
D)  high times interest earned. 
A)  high ROAs. 
B)  high ROEs. 
C)  high current ratios. 
D)  high times interest earned.

Question 4

Which of the following statements is correct?

Accepted Answer

A)  The use of debt in the capital structure results in tax benefits to the firm. 
B)  Debt is referred to as "financial leverage" because it magnifies returns to shareholders. 
C)  Debt management ratios evaluate whether a firm is financing its assets with a reasonable amount of debt versus equity financing. 
D)  All of these choices are correct. 
A)  The use of debt in the capital structure results in tax benefits to the firm. 
B)  Debt is referred to as "financial leverage" because it magnifies returns to shareholders. 
C)  Debt management ratios evaluate whether a firm is financing its assets with a reasonable amount of debt versus equity financing. 
D)  All of these choices are correct.

Question 5

Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina's Track Supply's common stock is currently selling at $100 per share, what is the book value per share and earnings per share?

Accepted Answer

A)  $450, $1,050, respectively 
B)  $1,050, $450, respectively 
C)  $22.2222, $9.5238, respectively 
D)  $9.5238, $22.2222, respectively 
A)  $450, $1,050, respectively 
B)  $1,050, $450, respectively 
C)  $22.2222, $9.5238, respectively 
D)  $9.5238, $22.2222, respectively

Question 6

Which statement is true of ratio analysis:

Accepted Answer

A)  can provide useful information on a firm's current position but should never be used to forecast future performance. 
B)  can provide useful information on a firm's current position and hint at future performance. 
C)  can provide useful information on a firm's past but not current position. 
D)  can provide useful information on a firm's past and current position, but should never be used to forecast future performance. 
A)  can provide useful information on a firm's current position but should never be used to forecast future performance. 
B)  can provide useful information on a firm's current position and hint at future performance. 
C)  can provide useful information on a firm's past but not current position. 
D)  can provide useful information on a firm's past and current position, but should never be used to forecast future performance.

Question 7

Which of the following activities will increase a firm's current ratio?

Accepted Answer

A)  sale of inventory for a profit 
B)  buy equipment with a long-term bank loan 
C)  pay the current month's rent 
A)  sale of inventory for a profit 
B)  buy equipment with a long-term bank loan 
C)  pay the current month's rent

Question 8

Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent. What is the sustainable growth rate?

Accepted Answer

A)  1.11 percent 
B)  2.04 percent 
C)  44.44 percent 
D)  50.00 percent 
A)  1.11 percent 
B)  2.04 percent 
C)  44.44 percent 
D)  50.00 percent

Question 9

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

Accepted Answer

A)  fixed asset to working capital ratio 
B)  fixed asset turnover ratio 
C)  fixed asset management ratio 
D)  sales to working capital ratio 
A)  fixed asset to working capital ratio 
B)  fixed asset turnover ratio 
C)  fixed asset management ratio 
D)  sales to working capital ratio

Question 10

If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?

Accepted Answer

A)  0.0833 
B)  0.192 
C)  0.5208 
D)  0.75 
A)  0.0833 
B)  0.192 
C)  0.5208 
D)  0.75

Question 11

Ernie's Mufflers has current liabilities of $45 million. Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets. Ernie's current ratio = 1.5 times. What is the value of inventory listed on the firm's balance sheet?

Accepted Answer

A)  $13.75m. 
B)  $20.25m. 
C)  $30.375m. 
D)  $33.75m. 
A)  $13.75m. 
B)  $20.25m. 
C)  $30.375m. 
D)  $33.75m.

Question 12

You have located the following information on Maize Company: debt ratio = 20 percent, capital intensity ratio = 1.25 times, profit margin = 12 percent, and dividend payout ratio = 10 percent. What is the sustainable growth rate for Maize?

Accepted Answer

A)  1.20 percent 
B)  10.10 percent 
C)  12.11 percent 
D)  73.26 percent 
A)  1.20 percent 
B)  10.10 percent 
C)  12.11 percent 
D)  73.26 percent

Question 13

The term "capital structure" refers to

Accepted Answer

A)  the amount of current versus long-term debt on the balance sheet. 
B)  the amount of current versus fixed assets on the balance sheet. 
C)  the amount of long-term debt versus equity on the balance sheet. 
A)  the amount of current versus long-term debt on the balance sheet. 
B)  the amount of current versus fixed assets on the balance sheet. 
C)  the amount of long-term debt versus equity on the balance sheet.

Question 14

The key to cross-sectional analysis comparison of firm ratios include:

Accepted Answer

A)  Identifying similar firms that compete in the same markets. 
B)  Identifying similar firms that have similar asset sizes. 
C)  Identifying firms that operate in a similar manner. 
D)  All of the above. 
A)  Identifying similar firms that compete in the same markets. 
B)  Identifying similar firms that have similar asset sizes. 
C)  Identifying firms that operate in a similar manner. 
D)  All of the above.

Question 15

Trina'sTrikes, Inc. reported a debt-to-equity ratio of 2 times at the end of 2018. If the firm's total debt at year-end was $10 million, how much equity does Trina's Trikes have?

Accepted Answer

A)  $2 million 
B)  $5 million 
C)  $10 million 
D)  $20 million 
A)  $2 million 
B)  $5 million 
C)  $10 million 
D)  $20 million

Question 16

Which of the following is unlikely to have a high capital intensity ratio?

Accepted Answer

A)  railroad 
B)  automobile manufacturer 
C)  law firm 
D)  shipbuilder 
A)  railroad 
B)  automobile manufacturer 
C)  law firm 
D)  shipbuilder

Question 17

Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent. What is the internal growth rate?

Accepted Answer

A)  1.19 percent 
B)  13.64 percent 
C)  25.40 percent 
D)  33.33 percent 
A)  1.19 percent 
B)  13.64 percent 
C)  25.40 percent 
D)  33.33 percent

Question 18

Which of the following statements is correct?

Accepted Answer

A)  The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities. 
B)  Holding high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm. 
C)  The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt. 
D)  The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio. 
A)  The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities. 
B)  Holding high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm. 
C)  The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt. 
D)  The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio.

Question 19

You have the following information on Marco's Polo Shop: total liabilities and equity = $205 million, current liabilities = $45 million, inventory = $60 million, and quick ratio = 2.4 times. Using this information, what is the balance for fixed assets on Marco's Polo balance sheet?

Accepted Answer

A)  $37m. 
B)  $97m. 
C)  $145m. 
D)  $157m. 
A)  $37m. 
B)  $97m. 
C)  $145m. 
D)  $157m.

Question 20

You have the following information on Zip's Diner, Inc.: sales to working capital = 8 times, profit margin = 5 percent, net income available to common stockholders = $20 million, and current liabilities = $4 million. What is the firm's balance of current assets?

Accepted Answer

A)  $4.125m 
B)  $6.5m 
C)  $46m 
D)  $54m 
A)  $4.125m 
B)  $6.5m 
C)  $46m 
D)  $54m

For publicly traded firms, which of these ratios measure what investors think of the company's future performance and risk?

Which of the following measures the operating return on the firm's assets, irrespective of financial leverage and taxes?

An investor wanting large returns will be interested in companies that have

Which of the following statements is correct?

Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina's Track Supply's common stock is currently selling at $100 per share, what is the book value per share and earnings per share?

Which statement is true of ratio analysis:

Which of the following activities will increase a firm's current ratio?

Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent. What is the sustainable growth rate?

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?

Ernie's Mufflers has current liabilities of $45 million. Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets. Ernie's current ratio = 1.5 times. What is the value of inventory listed on the firm's balance sheet?

You have located the following information on Maize Company: debt ratio = 20 percent, capital intensity ratio = 1.25 times, profit margin = 12 percent, and dividend payout ratio = 10 percent. What is the sustainable growth rate for Maize?

The term "capital structure" refers to

The key to cross-sectional analysis comparison of firm ratios include:

Trina'sTrikes, Inc. reported a debt-to-equity ratio of 2 times at the end of 2018. If the firm's total debt at year-end was $10 million, how much equity does Trina's Trikes have?

Which of the following is unlikely to have a high capital intensity ratio?

Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent. What is the internal growth rate?

Which of the following statements is correct?

You have the following information on Marco's Polo Shop: total liabilities and equity = $205 million, current liabilities = $45 million, inventory = $60 million, and quick ratio = 2.4 times. Using this information, what is the balance for fixed assets on Marco's Polo balance sheet?

You have the following information on Zip's Diner, Inc.: sales to working capital = 8 times, profit margin = 5 percent, net income available to common stockholders = $20 million, and current liabilities = $4 million. What is the firm's balance of current assets?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 3: Analyzing Financial Statements

For publicly traded firms, which of these ratios measure what investors think of the company's future performance and risk?

Which of the following measures the operating return on the firm's assets, irrespective of financial leverage and taxes?

An investor wanting large returns will be interested in companies that have

Which of the following statements is correct?

Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina's Track Supply's common stock is currently selling at $100 per share, what is the book value per share and earnings per share?

Which statement is true of ratio analysis:

Which of the following activities will increase a firm's current ratio?

Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent. What is the sustainable growth rate?

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?

Ernie's Mufflers has current liabilities of $45 million. Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets. Ernie's current ratio = 1.5 times. What is the value of inventory listed on the firm's balance sheet?

You have located the following information on Maize Company: debt ratio = 20 percent, capital intensity ratio = 1.25 times, profit margin = 12 percent, and dividend payout ratio = 10 percent. What is the sustainable growth rate for Maize?

The term "capital structure" refers to

The key to cross-sectional analysis comparison of firm ratios include:

Trina'sTrikes, Inc. reported a debt-to-equity ratio of 2 times at the end of 2018. If the firm's total debt at year-end was $10 million, how much equity does Trina's Trikes have?

Which of the following is unlikely to have a high capital intensity ratio?

Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent. What is the internal growth rate?

Which of the following statements is correct?

You have the following information on Marco's Polo Shop: total liabilities and equity = $205 million, current liabilities = $45 million, inventory = $60 million, and quick ratio = 2.4 times. Using this information, what is the balance for fixed assets on Marco's Polo balance sheet?

You have the following information on Zip's Diner, Inc.: sales to working capital = 8 times, profit margin = 5 percent, net income available to common stockholders = $20 million, and current liabilities = $4 million. What is the firm's balance of current assets?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters