Question 1

Which of the following are considered a source of cash?

Accepted Answer

A)  Common stock decreases. 
B)  Accounts payable increase. 
C)  Accounts receivable increase. 
D)  Inventory increases. 
E)  Expenses increase. 
A)  Common stock decreases. 
B)  Accounts payable increase. 
C)  Accounts receivable increase. 
D)  Inventory increases. 
E)  Expenses increase.

Question 2

Discuss what the market to book ratio attempts to accomplish.

Accepted Answer

The market-to-book ratio attem

Question 3

The times interest earned ratio is defined as:

Accepted Answer

A)  Net income divided by interest expense. 
B)  Interest expense divided by net income. 
C)  EBIT divided by interest expense. 
D)  Interest expense divided by EBIT. 
E)  Sales divided by interest expense. 
A)  Net income divided by interest expense. 
B)  Interest expense divided by net income. 
C)  EBIT divided by interest expense. 
D)  Interest expense divided by EBIT. 
E)  Sales divided by interest expense.

Question 4

Use the following statement of financial position and statement of comprehensive income     Blue Bird, Inc. has 1,500 shares of stock outstanding. The price-earnings ratio for 2018 is 21. What is the market price per share of stock?

Accepted Answer

A)  $18.90 
B)  $21.00 
C)  $23.94 
D)  $24.16 
E)  $26.87 
A)  $18.90 
B)  $21.00 
C)  $23.94 
D)  $24.16 
E)  $26.87

Question 5

What factors might make the comparison of the financial statements between two firms in the same industry difficult?

Accepted Answer

Factors may include: if the si

Question 6

It is easier to evaluate a firm using its financial statements when the firm:

Accepted Answer

A)  Is a conglomerate. 
B)  Is global in nature. 
C)  Uses the same accounting procedures as other firms in its industry. 
D)  Has a different fiscal year than other firms in its industry. 
E)  Tends to have one-time events such as asset sales and property acquisitions. 
A)  Is a conglomerate. 
B)  Is global in nature. 
C)  Uses the same accounting procedures as other firms in its industry. 
D)  Has a different fiscal year than other firms in its industry. 
E)  Tends to have one-time events such as asset sales and property acquisitions.

Question 7

Assume that your firm has a positive cash balance and that the cash balance is increasing each year. Why then is it important to analyze a statement of cash flows?

Accepted Answer

t is possible that the increase in the c

Question 8

A small local company has net income of $200, interest expenses of $50, and depreciation of $51. The corporate tax rate is 50%. What is the cash coverage ratio?

Accepted Answer

A)  1.2 times 
B)  1.8 times 
C)  3.0 times 
D)  9.0 times 
E)  10.0 times 
A)  1.2 times 
B)  1.8 times 
C)  3.0 times 
D)  9.0 times 
E)  10.0 times

Question 9

The financial ratio measured as net income divided by sales is known as the firm's:

Accepted Answer

A)  Profit margin. 
B)  Return on assets. 
C)  Return on equity. 
D)  Asset turnover. 
E)  Earnings before interest and taxes (EBIT). 
A)  Profit margin. 
B)  Return on assets. 
C)  Return on equity. 
D)  Asset turnover. 
E)  Earnings before interest and taxes (EBIT).

Question 10

What is the current ratio for Young in 2018?

Accepted Answer

A)  1.13 
B)  1.21 
C)  1.23 
D)  1.33 
E)  1.47 
A)  1.13 
B)  1.21 
C)  1.23 
D)  1.33 
E)  1.47

Question 11

A Quebec City firm has a debt-equity ratio of.65. From this, you can determine that the firm has _____ in assets for every $1 in equity.

Accepted Answer

A)  $.54 
B)  $.65 
C)  $1.54 
D)  $1.65 
E)  $2.54 
A)  $.54 
B)  $.65 
C)  $1.54 
D)  $1.65 
E)  $2.54

Question 12

Calculate cash coverage ratio given the following information: depreciation expense = $30,000; EBIT = $480,000; times interest earned = 12 times.

Accepted Answer

A)  12.25 times 
B)  12.50 times 
C)  12.75 times 
D)  13.00 times 
E)  13.25 times 
A)  12.25 times 
B)  12.50 times 
C)  12.75 times 
D)  13.00 times 
E)  13.25 times

Question 13

What is the equity multiplier for 2018?

Accepted Answer

A)  0.29 
B)  0.66 
C)  1.17 
D)  1.52 
E)  2.42 
A)  0.29 
B)  0.66 
C)  1.17 
D)  1.52 
E)  2.42

Question 14

A decrease in a(n) _____________ account would be considered a(n) __________ of funds.

Accepted Answer

A)  Asset; use 
B)  Liability; use 
C)  Liabilities; source 
D)  Expense; use 
E)  Revenues; source 
A)  Asset; use 
B)  Liability; use 
C)  Liabilities; source 
D)  Expense; use 
E)  Revenues; source

Question 15

Last year, which is used as the base year, a firm had cash of $60, accounts receivable of $100, inventory of $200, and fixed assets of $500. This year the firm has cash of $50, accounts receivable of $150, inventory of $250, and fixed assets of $550. What is the common-base year value of accounts receivable?

Accepted Answer

A)  .12 
B)  .15 
C)  .67 
D)  1.16 
E)  1.50 
A)  .12 
B)  .15 
C)  .67 
D)  1.16 
E)  1.50

Question 16

When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that the operations of the two firms may vary geographically.

Accepted Answer

A) True 
 B)False

Question 17

How would a $5,000 increase in AR and a $2,000 decrease in inventory affect cash?

Accepted Answer

A)  $5,000 source; $2,000 use 
B)  $2,000 source; $5,000 use 
C)  $5,000 source; $2,000 source 
D)  $3,000 source 
E)  $7,000 source 
A)  $5,000 source; $2,000 use 
B)  $2,000 source; $5,000 use 
C)  $5,000 source; $2,000 source 
D)  $3,000 source 
E)  $7,000 source

Question 18

Life Industries has sales of $46,230, costs of goods sold of $27,742.50, inventory of $675, and accounts receivable of $2,300. How many days, on average, does it take Life Industries to sell the inventory and collect the payment on the sale?

Accepted Answer

A)  9.28 days 
B)  21.00 days 
C)  27.04 days 
D)  36.67 days 
E)  61.20 days 
A)  9.28 days 
B)  21.00 days 
C)  27.04 days 
D)  36.67 days 
E)  61.20 days

Question 19

CatchaTan Co. of British Columbia had net sales of $800,000 over the past year. During that time, average receivables were $200,001. What was the average collection period?

Accepted Answer

A)  4 days 
B)  5 days 
C)  36 days 
D)  48 days 
E)  91 days 
A)  4 days 
B)  5 days 
C)  36 days 
D)  48 days 
E)  91 days

Question 20

Which of the following is NOT incorporated into the calculation of the Du Pont identity?

Accepted Answer

A)  Return on assets 
B)  Equity multiplier 
C)  Total asset turnover 
D)  Profit margin 
E)  Receivables turnover 
A)  Return on assets 
B)  Equity multiplier 
C)  Total asset turnover 
D)  Profit margin 
E)  Receivables turnover

Exam 3: Working With Financial Statements

Which of the following are considered a source of cash?

Discuss what the market to book ratio attempts to accomplish.

The times interest earned ratio is defined as:

Use the following statement of financial position and statement of comprehensive income Blue Bird, Inc. has 1,500 shares of stock outstanding. The price-earnings ratio for 2018 is 21. What is the market price per share of stock?

What factors might make the comparison of the financial statements between two firms in the same industry difficult?

It is easier to evaluate a firm using its financial statements when the firm:

Assume that your firm has a positive cash balance and that the cash balance is increasing each year. Why then is it important to analyze a statement of cash flows?

A small local company has net income of $200, interest expenses of $50, and depreciation of $51. The corporate tax rate is 50%. What is the cash coverage ratio?

The financial ratio measured as net income divided by sales is known as the firm's:

What is the current ratio for Young in 2018?

A Quebec City firm has a debt-equity ratio of.65. From this, you can determine that the firm has _____ in assets for every $1 in equity.

Calculate cash coverage ratio given the following information: depreciation expense = $30,000; EBIT = $480,000; times interest earned = 12 times.

What is the equity multiplier for 2018?

A decrease in a(n) _____________ account would be considered a(n) __________ of funds.

When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that the operations of the two firms may vary geographically.

How would a $5,000 increase in AR and a $2,000 decrease in inventory affect cash?

Life Industries has sales of $46,230, costs of goods sold of $27,742.50, inventory of $675, and accounts receivable of $2,300. How many days, on average, does it take Life Industries to sell the inventory and collect the payment on the sale?

CatchaTan Co. of British Columbia had net sales of $800,000 over the past year. During that time, average receivables were $200,001. What was the average collection period?

Which of the following is NOT incorporated into the calculation of the Du Pont identity?

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 decrease in a(n) ___ account would be considered a(n) of funds.