Question 1

A source of cash is defined as:

Accepted Answer

A)  Any transaction which increases the value of an asset account. 
B)  Any statement of financial position account which increases in value. 
C)  The change in a firm's liquid accounts over a stated period of time. 
D)  Any activity which brings in cash to the firm. 
E)  Any activity which decreases the liabilities of a firm. 
A)  Any transaction which increases the value of an asset account. 
B)  Any statement of financial position account which increases in value. 
C)  The change in a firm's liquid accounts over a stated period of time. 
D)  Any activity which brings in cash to the firm. 
E)  Any activity which decreases the liabilities of a firm. D

Question 2

A London Ontario firm has a net income of $32,000 which provides a 12% return on assets. The firm has a debt-equity ratio of.40. What is the return on equity?

Accepted Answer

A)  7.20% 
B)  8.57% 
C)  11.67% 
D)  12.00% 
E)  16.80% 
A)  7.20% 
B)  8.57% 
C)  11.67% 
D)  12.00% 
E)  16.80% E

Question 3

Calculate net income given the following information: fixed asset turnover = 8 times; profit margin = 18.75%; net fixed assets = $30,000.

Accepted Answer

A)  $42,000 
B)  $43,000 
C)  $44,000 
D)  $45,000 
E)  $46,000 
A)  $42,000 
B)  $43,000 
C)  $44,000 
D)  $45,000 
E)  $46,000 D

Question 4

Cash is $500, inventory is $4,800, accounts receivable is $3,200 and accounts payable is $2,400. What is the quick ratio?

Accepted Answer

A)  0.77 
B)  1.54 
C)  1.67 
D)  3.33 
E)  3.54 
A)  0.77 
B)  1.54 
C)  1.67 
D)  3.33 
E)  3.54

Question 5

The quick ratio:

Accepted Answer

A)  Indicates the ability of a firm to meet its current obligations without disposing of any inventory. 
B)  Depicts the ability of a firm to pay off its long-term debts in a timely manner. 
C)  Compares the current cash holdings of a firm to the current liabilities. 
D)  Measures a firm's ability to generate cash from its operations. 
E)  Indicates how quickly a firm can liquidate its inventory. 
A)  Indicates the ability of a firm to meet its current obligations without disposing of any inventory. 
B)  Depicts the ability of a firm to pay off its long-term debts in a timely manner. 
C)  Compares the current cash holdings of a firm to the current liabilities. 
D)  Measures a firm's ability to generate cash from its operations. 
E)  Indicates how quickly a firm can liquidate its inventory.

Question 6

Big Foot Wholesalers has sales of $1,387,400, costs of goods sold of $891,400, inventory of $188,936, and accounts receivable of $94,800. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

Accepted Answer

A)  49.8 days 
B)  53.2 days 
C)  77.4 days 
D)  84.1 days 
E)  86.3 days 
A)  49.8 days 
B)  53.2 days 
C)  77.4 days 
D)  84.1 days 
E)  86.3 days

Question 7

Financial ratios that measure the firm's ability to pay its bills over the short run without undue stress are known as:

Accepted Answer

A)  Asset management ratios. 
B)  Long-term solvency ratios. 
C)  Short-term solvency ratios. 
D)  Profitability ratios. 
E)  Market value ratios. 
A)  Asset management ratios. 
B)  Long-term solvency ratios. 
C)  Short-term solvency ratios. 
D)  Profitability ratios. 
E)  Market value ratios.

Question 8

How many days does it take for inventory to sell? (Use 2018 inventory)

Accepted Answer

A)  4 
B)  6 
C)  59 
D)  76 
E)  99 
A)  4 
B)  6 
C)  59 
D)  76 
E)  99

Question 9

How many additional assets can RTF, Inc. acquire if the company issues an additional $1,000 in common stock ($ in millions)?

Accepted Answer

A)  $1,000 
B)  $1,190 
C)  $1,500 
D)  $1,780 
E)  Cannot be determined from the information given. 
A)  $1,000 
B)  $1,190 
C)  $1,500 
D)  $1,780 
E)  Cannot be determined from the information given.

Question 10

Calculate the current ratio given the following information: cash = $12,000; total current assets = $28,000; cash ratio = 0.375.

Accepted Answer

A)  0.575 
B)  0.675 
C)  0.775 
D)  0.875 
E)  0.975 
A)  0.575 
B)  0.675 
C)  0.775 
D)  0.875 
E)  0.975

Question 11

According to the statement of cash flows, an increase in accounts receivable will _____ the cash flow from _____ activities.

Accepted Answer

A)  decrease; operating 
B)  decrease; financing 
C)  increase; operating 
D)  increase; financing 
E)  decrease; investment 
A)  decrease; operating 
B)  decrease; financing 
C)  increase; operating 
D)  increase; financing 
E)  decrease; investment

Question 12

An increase in the receivables turnover means that:

Accepted Answer

A)  The majority of customers are paying slower. 
B)  The prices of items purchased are rising. 
C)  The days' sales in receivables are rising. 
D)  Profit margins are rising. 
E)  Customers are paying their bills faster. 
A)  The majority of customers are paying slower. 
B)  The prices of items purchased are rising. 
C)  The days' sales in receivables are rising. 
D)  Profit margins are rising. 
E)  Customers are paying their bills faster.

Question 13

Days' sales in inventory of car dealerships are generally higher when compared to grocery stores.

Accepted Answer

A) True 
 B)False

Question 14

Hilton Publishing and Jordan Publishing have identical debt-equity ratios and profit margins. However, Hilton's ROA is higher than Jordan's. Therefore, it must be true that:

Accepted Answer

A)  Hilton has a lower total asset turnover ratio. 
B)  Jordan's ROE is higher than Hilton's. 
C)  Hilton uses its assets more efficiently to generate sales. 
D)  Hilton's operating efficiency is higher than Jordan's. 
E)  Hilton has a lower investment in total assets than Jordan does. 
A)  Hilton has a lower total asset turnover ratio. 
B)  Jordan's ROE is higher than Hilton's. 
C)  Hilton uses its assets more efficiently to generate sales. 
D)  Hilton's operating efficiency is higher than Jordan's. 
E)  Hilton has a lower investment in total assets than Jordan does.

Question 15

Prepare common-size statement of financial positions for Marble Comics using the data below. Comment on the firm's liquidity.

Accepted Answer

This is a relatively straightforward exe

Question 16

Earnings before interest and taxes is $74,300. Interest is $8,300 and depreciation is $9,700. What is the cash coverage ratio?

Accepted Answer

A)  7.78 
B)  8.52 
C)  8.95 
D)  9.95 
E)  10.12 
A)  7.78 
B)  8.52 
C)  8.95 
D)  9.95 
E)  10.12

Question 17

Calculate total current assets given the following information. Cash $10,000; supplies $3,000; average collection period 54.75 days; days' sales in inventory 91.25 days; sales $80,000; COGS $60,000.

Accepted Answer

A)  $42,000 
B)  $40,000 
C)  $38,000 
D)  $36,000 
E)  $34,000 
A)  $42,000 
B)  $40,000 
C)  $38,000 
D)  $36,000 
E)  $34,000

Question 18

Danny Corporation's total current assets are valued at $233,000 and are comprised of cash, accounts receivable and inventory. Determine the value of the cash account given the following information: sales = $225,000; cost of goods sold = $135,000; accounts receivable turnover = 3 times; inventory turnover = 1.5 times.

Accepted Answer

A)  $68,000 
B)  $66,000 
C)  $64,000 
D)  $62,000 
E)  $60,000 
A)  $68,000 
B)  $66,000 
C)  $64,000 
D)  $62,000 
E)  $60,000

Question 19

If a firm decreases its operating costs, all else constant, then:

Accepted Answer

A)  The profit margin increases while the return on equity decreases. 
B)  The return on assets increases while the return on equity decreases. 
C)  The total asset turnover rate decreases while the profit margin increases. 
D)  Both the profit margin and the equity multiplier increase. 
E)  Both the return on assets and the return on equity increase. 
A)  The profit margin increases while the return on equity decreases. 
B)  The return on assets increases while the return on equity decreases. 
C)  The total asset turnover rate decreases while the profit margin increases. 
D)  Both the profit margin and the equity multiplier increase. 
E)  Both the return on assets and the return on equity increase.

Question 20

Which of Marble Comics' liquidity measures increased from 2017 to 2018?

Accepted Answer

A)  Current ratio 
B)  Quick ratio 
C)  Cash ratio 
D)  NWC to total assets 
E)  Interval measure 
A)  Current ratio 
B)  Quick ratio 
C)  Cash ratio 
D)  NWC to total assets 
E)  Interval measure

Exam 3: Working With Financial Statements

A source of cash is defined as:

A London Ontario firm has a net income of $32,000 which provides a 12% return on assets. The firm has a debt-equity ratio of.40. What is the return on equity?

Calculate net income given the following information: fixed asset turnover = 8 times; profit margin = 18.75%; net fixed assets = $30,000.

Cash is $500, inventory is $4,800, accounts receivable is $3,200 and accounts payable is $2,400. What is the quick ratio?

The quick ratio:

Big Foot Wholesalers has sales of $1,387,400, costs of goods sold of $891,400, inventory of $188,936, and accounts receivable of $94,800. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

Financial ratios that measure the firm's ability to pay its bills over the short run without undue stress are known as:

How many days does it take for inventory to sell? (Use 2018 inventory)

How many additional assets can RTF, Inc. acquire if the company issues an additional $1,000 in common stock ($ in millions)?

Calculate the current ratio given the following information: cash = $12,000; total current assets = $28,000; cash ratio = 0.375.

According to the statement of cash flows, an increase in accounts receivable will _____ the cash flow from _____ activities.

An increase in the receivables turnover means that:

Days' sales in inventory of car dealerships are generally higher when compared to grocery stores.

Hilton Publishing and Jordan Publishing have identical debt-equity ratios and profit margins. However, Hilton's ROA is higher than Jordan's. Therefore, it must be true that:

Prepare common-size statement of financial positions for Marble Comics using the data below. Comment on the firm's liquidity.

Earnings before interest and taxes is $74,300. Interest is $8,300 and depreciation is $9,700. What is the cash coverage ratio?

Calculate total current assets given the following information. Cash $10,000; supplies $3,000; average collection period 54.75 days; days' sales in inventory 91.25 days; sales $80,000; COGS $60,000.

If a firm decreases its operating costs, all else constant, then:

Which of Marble Comics' liquidity measures increased from 2017 to 2018?

Introduction to Corporate Finance

Financial Statements, Cash Flow, and Taxes

Long-Term Financial Planning and Corporate Growth

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Enterprise Risk Management

Options and Corporate Securities

Behavioural Finance: Implications for Financial Management

Filters

According to the statement of cash flows, an increase in accounts receivable will _ the cash flow from _ activities.