Question 1

Swenson Motors has total debt of $682,400 and a debt-equity ratio of.65. What is the value of the total assets?

Accepted Answer

A)  $1,049,846 
B)  $1,364,800 
C)  $1,414,141 
D)  $1,578,002 
E)  $1,732,246 
A)  $1,049,846 
B)  $1,364,800 
C)  $1,414,141 
D)  $1,578,002 
E)  $1,732,246

Question 2

Due to the difficulty of access the true enterprise value, one can use the market cap as a proxy for enterprise value to calculate the EV/EBITDA ratio.

Accepted Answer

A) True 
 B)False

Question 3

The interval measure is an example of a(n)____________ ratio.

Accepted Answer

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

Question 4

Which of the following is a correct interpretation of a profit margin of 0.20?

Accepted Answer

A)  For each $1 of sales the firm earns twenty cents in net income. 
B)  For each $1 of sales the firm earns twenty cents before operating expenses. 
C)  For each $1 of sales, $2 fall to the bottom line. 
D)  It takes sales of $1 to generate $20 in net profit after taxes. 
E)  It takes twenty cents in sales to generate $1 in profit. 
A)  For each $1 of sales the firm earns twenty cents in net income. 
B)  For each $1 of sales the firm earns twenty cents before operating expenses. 
C)  For each $1 of sales, $2 fall to the bottom line. 
D)  It takes sales of $1 to generate $20 in net profit after taxes. 
E)  It takes twenty cents in sales to generate $1 in profit.

Question 5

A firm has 5,000 shares of stock outstanding, sales of $6,000, net income of $800, a price-earnings ratio of 10, and a book value per share of $.50. What is the market-to-book ratio?

Accepted Answer

A)  1.6 
B)  2.4 
C)  3.0 
D)  3.2 
E)  3.6 
A)  1.6 
B)  2.4 
C)  3.0 
D)  3.2 
E)  3.6

Question 6

A Toronto banker considering loaning money to a firm for ten years would most likely prefer the firm have a debt ratio of _____ and a times interest earned ratio of _____.

Accepted Answer

A)  .75;.75 
B)  .50; 1.00 
C)  .45; 1.75 
D)  .40; 2.50 
E)  .35; 3.00 
A)  .75;.75 
B)  .50; 1.00 
C)  .45; 1.75 
D)  .40; 2.50 
E)  .35; 3.00

Question 7

Which of the following is NOT a correct statement about the price/earnings ratio?

Accepted Answer

A)  A high P/E ratio is often taken to mean the firm has significant prospects for future growth. 
B)  A P/E ratio of 15 means investors are willing to pay $15 for each $1 of current earnings. 
C)  Care must be taken in interpreting very high P/E ratios since they can result from a firm having very low earnings. 
D)  A P/E ratio of 15 means the firm's shares are selling for 15 times current earnings. 
E)  A firm with high earnings per share will also have a very high P/E ratio. 
A)  A high P/E ratio is often taken to mean the firm has significant prospects for future growth. 
B)  A P/E ratio of 15 means investors are willing to pay $15 for each $1 of current earnings. 
C)  Care must be taken in interpreting very high P/E ratios since they can result from a firm having very low earnings. 
D)  A P/E ratio of 15 means the firm's shares are selling for 15 times current earnings. 
E)  A firm with high earnings per share will also have a very high P/E ratio.

Question 8

What was the greatest source of funds for Bo Knows Profit Corp.?

Accepted Answer

A)  Sale of inventory. 
B)  Increase in long-term debt. 
C)  Acquisition of more fixed assets. 
D)  Increase in notes payable. 
E)  Increase in common stock. 
A)  Sale of inventory. 
B)  Increase in long-term debt. 
C)  Acquisition of more fixed assets. 
D)  Increase in notes payable. 
E)  Increase in common stock.

Question 9

Calculate the value of long-term debt given the following information: total debt = $100,000; debt/equity ratio = 0.40; long-term debt ratio = 0.2308.

Accepted Answer

A)  $75,000 
B)  $70,000 
C)  $65,000 
D)  $60,000 
E)  $55,000 
A)  $75,000 
B)  $70,000 
C)  $65,000 
D)  $60,000 
E)  $55,000

Question 10

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

Accepted Answer

A)  Accounts payable 
B)  Cash 
C)  Inventory 
D)  Accounts receivable 
E)  Fixed assets 
A)  Accounts payable 
B)  Cash 
C)  Inventory 
D)  Accounts receivable 
E)  Fixed assets

Question 11

BD Hydro increases its operating efficiency such that costs decrease while sales remain constant. As a result, given all else constant, the:

Accepted Answer

A)  Return on equity will increase. 
B)  Return on assets will decrease. 
C)  Profit margin will decline. 
D)  Equity multiplier will decrease. 
E)  Price-earnings ratio will increase. 
A)  Return on equity will increase. 
B)  Return on assets will decrease. 
C)  Profit margin will decline. 
D)  Equity multiplier will decrease. 
E)  Price-earnings ratio will increase.

Question 12

Larry's Lounge has cash of $1,670, accounts receivable of $610, accounts payable of $2,900, and inventory of $3,690. What is the value of the quick ratio?

Accepted Answer

A)  .58 
B)  .62 
C)  .79 
D)  2.06 
E)  2.13 
A)  .58 
B)  .62 
C)  .79 
D)  2.06 
E)  2.13

Question 13

On the statement of cash flows, the change in current assets is listed in the section entitled:

Accepted Answer

A)  Operating activity. 
B)  Merger activity. 
C)  Working activity. 
D)  Investment activity. 
E)  Financing activity. 
A)  Operating activity. 
B)  Merger activity. 
C)  Working activity. 
D)  Investment activity. 
E)  Financing activity.

Question 14

Calculate Marble Comics' ROE for 2018.

Accepted Answer

A)  20.5% 
B)  22.1% 
C)  23.4% 
D)  25.6% 
E)  161.8% 
A)  20.5% 
B)  22.1% 
C)  23.4% 
D)  25.6% 
E)  161.8%

Question 15

The ___________ breaks down return on equity into three component parts: operating efficiency of the firm, its asset use efficiency, and financial leverage.

Accepted Answer

A)  Du Pont identity 
B)  Return on assets 
C)  Statement of cash flows 
D)  Asset turnover ratio 
E)  Equity multiplier 
A)  Du Pont identity 
B)  Return on assets 
C)  Statement of cash flows 
D)  Asset turnover ratio 
E)  Equity multiplier

Question 16

Which of the following is not a liquidity ratio?

Accepted Answer

A)  Interval measure. 
B)  Current ratio. 
C)  Quick ratio. 
D)  Net working capital to total assets. 
E)  Current asset amplifier. 
A)  Interval measure. 
B)  Current ratio. 
C)  Quick ratio. 
D)  Net working capital to total assets. 
E)  Current asset amplifier.

Question 17

Without making reference to its formula, provide a definition of accounts receivable turnover.

Accepted Answer

A ratio used to examine the ef

Question 18

A firm has a profit margin of 9% on sales of $400,000. There are 10,000 shares of common stock outstanding. What is the earnings per share?

Accepted Answer

A)  $1.80 
B)  $3.60 
C)  $4.00 
D)  $36.00 
E)  $40.00 
A)  $1.80 
B)  $3.60 
C)  $4.00 
D)  $36.00 
E)  $40.00

Question 19

The uses of cash include ($ in millions):

Accepted Answer

A)  $110 from notes payable. 
B)  $1,075 from retained earnings. 
C)  $840 from fixed assets. 
D)  $370 from inventory. 
E)  $70 from accounts receivable. 
A)  $110 from notes payable. 
B)  $1,075 from retained earnings. 
C)  $840 from fixed assets. 
D)  $370 from inventory. 
E)  $70 from accounts receivable.

Question 20

Calculate the current ratio given the following information: cash = $4,000; total current assets = $21,000; cash ratio = 0.40.

Accepted Answer

A)  2.09 
B)  2.10 
C)  2.11 
D)  2.12 
E)  2.13 
A)  2.09 
B)  2.10 
C)  2.11 
D)  2.12 
E)  2.13

Exam 3: Working With Financial Statements

Swenson Motors has total debt of $682,400 and a debt-equity ratio of.65. What is the value of the total assets?

Due to the difficulty of access the true enterprise value, one can use the market cap as a proxy for enterprise value to calculate the EV/EBITDA ratio.

The interval measure is an example of a(n)____________ ratio.

Which of the following is a correct interpretation of a profit margin of 0.20?

A firm has 5,000 shares of stock outstanding, sales of $6,000, net income of $800, a price-earnings ratio of 10, and a book value per share of $.50. What is the market-to-book ratio?

A Toronto banker considering loaning money to a firm for ten years would most likely prefer the firm have a debt ratio of _____ and a times interest earned ratio of _____.

Which of the following is NOT a correct statement about the price/earnings ratio?

What was the greatest source of funds for Bo Knows Profit Corp.?

Calculate the value of long-term debt given the following information: total debt = $100,000; debt/equity ratio = 0.40; long-term debt ratio = 0.2308.

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

BD Hydro increases its operating efficiency such that costs decrease while sales remain constant. As a result, given all else constant, the:

Larry's Lounge has cash of $1,670, accounts receivable of $610, accounts payable of $2,900, and inventory of $3,690. What is the value of the quick ratio?

On the statement of cash flows, the change in current assets is listed in the section entitled:

Calculate Marble Comics' ROE for 2018.

The ___________ breaks down return on equity into three component parts: operating efficiency of the firm, its asset use efficiency, and financial leverage.

Which of the following is not a liquidity ratio?

Without making reference to its formula, provide a definition of accounts receivable turnover.

A firm has a profit margin of 9% on sales of $400,000. There are 10,000 shares of common stock outstanding. What is the earnings per share?

The uses of cash include ($ in millions):

Calculate the current ratio given the following information: cash = $4,000; total current assets = $21,000; cash ratio = 0.40.

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

A Toronto banker considering loaning money to a firm for ten years would most likely prefer the firm have a debt ratio of _ and a times interest earned ratio of _.