Question 1

On a common-size statement of financial position, all _____ accounts are shown as a percentage of _____.

Accepted Answer

A)  Income; total assets. 
B)  Liability; net income. 
C)  Asset; sales. 
D)  Liability; total assets. 
E)  Equity; sales. 
A)  Income; total assets. 
B)  Liability; net income. 
C)  Asset; sales. 
D)  Liability; total assets. 
E)  Equity; sales.

Question 2

All else unchanged, which of the following is true when a firm sells a fixed asset on credit (an account receivable is created)?

Accepted Answer

A)  The current ratio goes up but the quick ratio is unchanged. 
B)  The current ratio goes up but the quick ratio declines. 
C)  The quick ratio goes up but the current ratio is unchanged. 
D)  The quick ratio goes up but the current ratio declines. 
E)  The quick ratio and the current ratio both go up. 
A)  The current ratio goes up but the quick ratio is unchanged. 
B)  The current ratio goes up but the quick ratio declines. 
C)  The quick ratio goes up but the current ratio is unchanged. 
D)  The quick ratio goes up but the current ratio declines. 
E)  The quick ratio and the current ratio both go up.

Question 3

Without making reference to its formula, provide a definition of cash ratio.

Accepted Answer

The cash ratio measures the amount of ca

Question 4

In addition to days' sales in receivables and days' sales in inventory we could calculate "days' sales in payables" by computing the accounts payable turnover and dividing it into 365 days. In words, what do these ratios tell us?

Accepted Answer

A)  The number of days it takes before the current ratio falls to zero. 
B)  The number of days of sales needed to make a profit. 
C)  The time it takes to completely replace total current assets. 
D)  The rate at which assets are replaced. 
E)  How long it takes, on average, to entirely deplete these accounts. 
A)  The number of days it takes before the current ratio falls to zero. 
B)  The number of days of sales needed to make a profit. 
C)  The time it takes to completely replace total current assets. 
D)  The rate at which assets are replaced. 
E)  How long it takes, on average, to entirely deplete these accounts.

Question 5

Qwik Stop has accounts receivable of $4,830, inventory of $9,083, sales of $38,600, and cost of goods sold of $21,400. How many days does it take the firm to both sell their inventory and collect the payment on the sale?

Accepted Answer

A)  186 days 
B)  193 days 
C)  201 days 
D)  214 days 
E)  217 days 
A)  186 days 
B)  193 days 
C)  201 days 
D)  214 days 
E)  217 days

Question 6

Calculate price earnings growth ratio given the following information: net income = $750,000; shares outstanding = 500,000; stock price = $28; future earnings growth rate = 6%.

Accepted Answer

A)  3.01 
B)  3.11 
C)  3.21 
D)  3.31 
E)  3.41 
A)  3.01 
B)  3.11 
C)  3.21 
D)  3.31 
E)  3.41

Question 7

Which of the following is NOT a source of industry benchmark information for Canadian companies?

Accepted Answer

A)  Statistics Canada. 
B)  Dun & Bradstreet Canada. 
C)  Foster's Statistics. 
D)  Financial Post Datagroup. 
E)  All of these are sources for industry benchmark information. 
A)  Statistics Canada. 
B)  Dun & Bradstreet Canada. 
C)  Foster's Statistics. 
D)  Financial Post Datagroup. 
E)  All of these are sources for industry benchmark information.

Question 8

Calculate gross profit ratio given the following information: accounts receivable = $3,500; inventory = $4,500; receivable turnover = 80 times; inventory turnover = 18 times.

Accepted Answer

A)  70% 
B)  71% 
C)  72% 
D)  73% 
E)  74% 
A)  70% 
B)  71% 
C)  72% 
D)  73% 
E)  74%

Question 9

The net cash from financing activity for 2018 is ($ in millions):

Accepted Answer

A)  -$975 
B)  -$775 
C)  -$475 
D)  $475 
E)  $775 
A)  -$975 
B)  -$775 
C)  -$475 
D)  $475 
E)  $775

Question 10

If the total assets of a firm decrease while all other components of ROE remain unchanged, you would expect the firm's:

Accepted Answer

A)  ROE to increase. 
B)  ROA to decrease. 
C)  Equity multiplier to increase. 
D)  ROE to remain unchanged. 
E)  Profit margin to decrease. 
A)  ROE to increase. 
B)  ROA to decrease. 
C)  Equity multiplier to increase. 
D)  ROE to remain unchanged. 
E)  Profit margin to decrease.

Question 11

Use the following statement of financial position and statement of comprehensive income     What is the net cash flow from financing activities for 2018?

Accepted Answer

A)  $260 cash outflow 
B)  $325 cash outflow 
C)  $800 cash inflow 
D)  $1,220 cash inflow 
E)  $1,860 cash inflow 
A)  $260 cash outflow 
B)  $325 cash outflow 
C)  $800 cash inflow 
D)  $1,220 cash inflow 
E)  $1,860 cash inflow

Question 12

Which one of the following statements is correct concerning ratio analysis?

Accepted Answer

A)  A single ratio is often computed differently by different individuals. 
B)  Ratios do NOT address the problem of size differences among firms. 
C)  There is only a very limited number of ratios which can be used for analytical purposes. 
D)  Each ratio has a specific formula that is used consistently by all analysts. 
E)  Ratios can NOT be used for comparison purposes over periods of time. 
A)  A single ratio is often computed differently by different individuals. 
B)  Ratios do NOT address the problem of size differences among firms. 
C)  There is only a very limited number of ratios which can be used for analytical purposes. 
D)  Each ratio has a specific formula that is used consistently by all analysts. 
E)  Ratios can NOT be used for comparison purposes over periods of time.

Question 13

Rosita's Resources paid $250 in interest and $130 in dividends last year. The times interest earned ratio is 3.8 and the depreciation expense is $60. What is the value of the cash coverage ratio?

Accepted Answer

A)  2.40 
B)  3.52 
C)  3.80 
D)  4.04 
E)  4.28 
A)  2.40 
B)  3.52 
C)  3.80 
D)  4.04 
E)  4.28

Question 14

Activities of the firm in which cash is spent are known as:

Accepted Answer

A)  Sources of cash. 
B)  Uses of cash. 
C)  Cash payments. 
D)  Cash receipts. 
E)  Cash on hand. 
A)  Sources of cash. 
B)  Uses of cash. 
C)  Cash payments. 
D)  Cash receipts. 
E)  Cash on hand.

Question 15

If the level of inventory rises, all else constant, then:

Accepted Answer

A)  The days' sales in inventory will also rise. 
B)  The NWC ratio will also rise. 
C)  Inventory turnover will also rise. 
D)  Fixed asset turnover will decline. 
E)  Current ratio will decline. 
A)  The days' sales in inventory will also rise. 
B)  The NWC ratio will also rise. 
C)  Inventory turnover will also rise. 
D)  Fixed asset turnover will decline. 
E)  Current ratio will decline.

Question 16

When would the return on equity (ROE) definitely equal the return on assets (ROA)?

Accepted Answer

A)  Whenever a firm has no long-term debt. 
B)  Whenever a firm's debt-to-equity ratio is equal to one. 
C)  Whenever a firm's long-term debt ratio is equal to zero. 
D)  Whenever a firm's return on equity is equal to 100%. 
E)  Whenever a firm's total debt ratio is equal to zero. 
A)  Whenever a firm has no long-term debt. 
B)  Whenever a firm's debt-to-equity ratio is equal to one. 
C)  Whenever a firm's long-term debt ratio is equal to zero. 
D)  Whenever a firm's return on equity is equal to 100%. 
E)  Whenever a firm's total debt ratio is equal to zero.

Question 17

What is the net working capital turnover rate for 2018?

Accepted Answer

A)  1.16 
B)  1.25 
C)  2.28 
D)  2.34 
E)  2.87 
A)  1.16 
B)  1.25 
C)  2.28 
D)  2.34 
E)  2.87

Question 18

Which one of the following is true concerning the market-to-book ratio?

Accepted Answer

A)  Extending the depreciation life of a firm's assets will increase the market-to-book ratio. 
B)  A decrease in the price of the stock on the stock exchange will increase the market-to-book ratio. 
C)  An increase in the market value of the common stock will increase the market-to-book ratio. 
D)  The market-to-book ratio is of most interest to the creditors of a firm. 
E)  The market-to-book ratio provides the selling price of a firm's inventory. 
A)  Extending the depreciation life of a firm's assets will increase the market-to-book ratio. 
B)  A decrease in the price of the stock on the stock exchange will increase the market-to-book ratio. 
C)  An increase in the market value of the common stock will increase the market-to-book ratio. 
D)  The market-to-book ratio is of most interest to the creditors of a firm. 
E)  The market-to-book ratio provides the selling price of a firm's inventory.

Question 19

The following statement of financial position and statement of comprehensive income should be used.     What is Woodburn's times interest earned ratio for 2018?

Accepted Answer

A)  37.34 times 
B)  38.10 times 
C)  38.37 times 
D)  42.03 times 
E)  42.22 times 
A)  37.34 times 
B)  38.10 times 
C)  38.37 times 
D)  42.03 times 
E)  42.22 times

Question 20

List and interpret three liquidity ratios.

Accepted Answer

Choose any three of:
1) Current ratio: t

Exam 3: Working With Financial Statements

On a common-size statement of financial position, all _____ accounts are shown as a percentage of _____.

All else unchanged, which of the following is true when a firm sells a fixed asset on credit (an account receivable is created)?

Without making reference to its formula, provide a definition of cash ratio.

In addition to days' sales in receivables and days' sales in inventory we could calculate "days' sales in payables" by computing the accounts payable turnover and dividing it into 365 days. In words, what do these ratios tell us?

Qwik Stop has accounts receivable of $4,830, inventory of $9,083, sales of $38,600, and cost of goods sold of $21,400. How many days does it take the firm to both sell their inventory and collect the payment on the sale?

Calculate price earnings growth ratio given the following information: net income = $750,000; shares outstanding = 500,000; stock price = $28; future earnings growth rate = 6%.

Which of the following is NOT a source of industry benchmark information for Canadian companies?

Calculate gross profit ratio given the following information: accounts receivable = $3,500; inventory = $4,500; receivable turnover = 80 times; inventory turnover = 18 times.

The net cash from financing activity for 2018 is ($ in millions):

If the total assets of a firm decrease while all other components of ROE remain unchanged, you would expect the firm's:

Use the following statement of financial position and statement of comprehensive income What is the net cash flow from financing activities for 2018?

Which one of the following statements is correct concerning ratio analysis?

Rosita's Resources paid $250 in interest and $130 in dividends last year. The times interest earned ratio is 3.8 and the depreciation expense is $60. What is the value of the cash coverage ratio?

Activities of the firm in which cash is spent are known as:

If the level of inventory rises, all else constant, then:

When would the return on equity (ROE) definitely equal the return on assets (ROA)?

What is the net working capital turnover rate for 2018?

Which one of the following is true concerning the market-to-book ratio?

The following statement of financial position and statement of comprehensive income should be used. What is Woodburn's times interest earned ratio for 2018?

List and interpret three liquidity ratios.

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

On a common-size statement of financial position, all _ accounts are shown as a percentage of _.