Question 1

What is the current ratio for 2018?

Accepted Answer

A)  1.49 
B)  2.03 
C)  2.18 
D)  2.85 
E)  4.37 
A)  1.49 
B)  2.03 
C)  2.18 
D)  2.85 
E)  4.37

Question 2

Which of the following are considered a use of cash?

Accepted Answer

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

Question 3

Marble Comics' times interest earned ratio is:

Accepted Answer

A)  0.34 
B)  1.46 
C)  1.95 
D)  2.95 
E)  4.80 
A)  0.34 
B)  1.46 
C)  1.95 
D)  2.95 
E)  4.80

Question 4

An increase in which one of the following is a source of cash?

Accepted Answer

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

Question 5

What is the cash coverage ratio for 2018?

Accepted Answer

A)  5.2 
B)  6.8 
C)  8.7 
D)  9.7 
E)  9.2 
A)  5.2 
B)  6.8 
C)  8.7 
D)  9.7 
E)  9.2

Question 6

Calculate net income given the following information: fixed asset turnover = 4 times; profit margin = 20%; net fixed assets = $25,000.

Accepted Answer

A)  $16,000 
B)  $18,000 
C)  $20,000 
D)  $22,000 
E)  $24,000 
A)  $16,000 
B)  $18,000 
C)  $20,000 
D)  $22,000 
E)  $24,000

Question 7

Which one of the following sets of ratios applies most directly to shareholders?

Accepted Answer

A)  Return on assets and profit margin 
B)  Quick ratio and times interest earned 
C)  Price-earnings ratio and debt-equity ratio 
D)  Market-to-book ratio and price-earnings ratio 
E)  Cash coverage ratio and times equity multiplier 
A)  Return on assets and profit margin 
B)  Quick ratio and times interest earned 
C)  Price-earnings ratio and debt-equity ratio 
D)  Market-to-book ratio and price-earnings ratio 
E)  Cash coverage ratio and times equity multiplier

Question 8

Last year Ty's Grocery had inventory of $237,500 and fixed assets of $51,400. This year, Ty's has inventory of $231,900 and fixed assets of $48,700. Depreciation for this year is $6,300. Which one of the following statements is true given this information?

Accepted Answer

A)  Both inventory and fixed assets are uses of cash in the amounts of $5,600 and $3,600, respectively. 
B)  Both inventory and fixed assets are uses of cash in the amounts of $5,600 and $2,700, respectively. 
C)  Inventory is a source of cash in the amount of $5,600 and fixed assets is a use of cash in the amount of $2,700. 
D)  Inventory is a source of cash in the amount of $5,600 and fixed assets is a use of cash in the amount of $3,600. 
E)  Both inventory and fixed assets are sources of cash in the amounts of $5,600 and $3,600 respectively. 
A)  Both inventory and fixed assets are uses of cash in the amounts of $5,600 and $3,600, respectively. 
B)  Both inventory and fixed assets are uses of cash in the amounts of $5,600 and $2,700, respectively. 
C)  Inventory is a source of cash in the amount of $5,600 and fixed assets is a use of cash in the amount of $2,700. 
D)  Inventory is a source of cash in the amount of $5,600 and fixed assets is a use of cash in the amount of $3,600. 
E)  Both inventory and fixed assets are sources of cash in the amounts of $5,600 and $3,600 respectively.

Question 9

Peter's Pool House has an interval measure of 51. This means that the Pool House has:

Accepted Answer

A)  To replace its inventory every 51 days. 
B)  To wait for 7.16 days to collect its receivables after a sale is made. 
C)  Enough cash to pay for 51 days of operating expenses. 
D)  Sufficient current assets to operate the business for 7.16 days. 
E)  Sufficient current assets to operate the business for 51 days. 
A)  To replace its inventory every 51 days. 
B)  To wait for 7.16 days to collect its receivables after a sale is made. 
C)  Enough cash to pay for 51 days of operating expenses. 
D)  Sufficient current assets to operate the business for 7.16 days. 
E)  Sufficient current assets to operate the business for 51 days.

Question 10

Calculate net income given the following information: tax rate = 30%; times interest earned = 21 times; sales = $2,000; cost of goods sold = $800; general and administrative expenses = $150.

Accepted Answer

A)  $850 
B)  $800 
C)  $750 
D)  $700 
E)  $650 
A)  $850 
B)  $800 
C)  $750 
D)  $700 
E)  $650

Question 11

A source of cash can be defined as any activity that:

Accepted Answer

A)  Increases the current assets of a firm. 
B)  Increases the cash reserves of a firm. 
C)  Involves accounts receivable or inventory. 
D)  Involves the sale or return of merchandise by a customer. 
E)  Involves the spending of cash. 
A)  Increases the current assets of a firm. 
B)  Increases the cash reserves of a firm. 
C)  Involves accounts receivable or inventory. 
D)  Involves the sale or return of merchandise by a customer. 
E)  Involves the spending of cash.

Question 12

Freda's, Inc. has sales of $3,200, current liabilities of $900, total assets of $3,000, and net working capital of $500. How many dollars' worth of sales are generated from every $1 in net fixed assets?

Accepted Answer

A)  $.91 
B)  $1.07 
C)  $1.67 
D)  $2.00 
E)  $2.29 
A)  $.91 
B)  $1.07 
C)  $1.67 
D)  $2.00 
E)  $2.29

Question 13

The net working capital turnover ratio is measured as:

Accepted Answer

A)  Sales divided by net working capital. 
B)  Sales minus net working capital. 
C)  Sales times net working capital. 
D)  Net working capital divided by sales. 
E)  Net working capital plus sales. 
A)  Sales divided by net working capital. 
B)  Sales minus net working capital. 
C)  Sales times net working capital. 
D)  Net working capital divided by sales. 
E)  Net working capital plus sales.

Question 14

The Vice President of Finance of Alpha, Inc. wants to improve the current ratio on the company's next financial statement. Explain what he/she can legitimately do now to help accomplish this goal. Provide specific examples in your answer.

Accepted Answer

Some examples of actions that could be t

Question 15

Return on equity will increase if the _________________.

Accepted Answer

A)  profit margin decreases 
B)  return on assets increases 
C)  debt-equity ratio decreases 
D)  accounts receivable turnover increases 
E)  total asset turnover decreases 
A)  profit margin decreases 
B)  return on assets increases 
C)  debt-equity ratio decreases 
D)  accounts receivable turnover increases 
E)  total asset turnover decreases

Question 16

Cora Operation has an inventory turnover of 121 and a receivables turnover of 36. This means that it takes _____ days for the firm to sell its inventory and collect payment for that sale.

Accepted Answer

A)  2.32 
B)  4.29 
C)  11.86 
D)  13.16 
E)  14.09 
A)  2.32 
B)  4.29 
C)  11.86 
D)  13.16 
E)  14.09

Question 17

How did Marble Comics' net working capital to total assets ratio change from 2017 to 2018?

Accepted Answer

A)  Decreased from 0.66 to 0.43 
B)  Increased from 0.54 to 0.60 
C)  Decreased from 0.17 to -0.01 
D)  Increased from 0.21 to 0.67 
E)  Increased from 0.17 to 0.89 
A)  Decreased from 0.66 to 0.43 
B)  Increased from 0.54 to 0.60 
C)  Decreased from 0.17 to -0.01 
D)  Increased from 0.21 to 0.67 
E)  Increased from 0.17 to 0.89

Question 18

Which one of the following will increase the return on equity as computed using the Du Pont identity given that all else is held constant?

Accepted Answer

A)  A decrease in total equity 
B)  A decrease in sales 
C)  A decrease in net income 
D)  An increase in total assets 
E)  An increase in costs 
A)  A decrease in total equity 
B)  A decrease in sales 
C)  A decrease in net income 
D)  An increase in total assets 
E)  An increase in costs

Question 19

Describe some of the problems that are encountered when comparing the financial statements of various firms.

Accepted Answer

Student answers should include some of t

Question 20

Relationships determined from a firm's financial information and used for comparison purposes are known as:

Accepted Answer

A)  Financial ratios. 
B)  Comparison statements. 
C)  Dimensional analysis. 
D)  Scenario analysis. 
E)  Solvency analysis. 
A)  Financial ratios. 
B)  Comparison statements. 
C)  Dimensional analysis. 
D)  Scenario analysis. 
E)  Solvency analysis.

Exam 3: Working With Financial Statements

What is the current ratio for 2018?

Which of the following are considered a use of cash?

Marble Comics' times interest earned ratio is:

An increase in which one of the following is a source of cash?

What is the cash coverage ratio for 2018?

Calculate net income given the following information: fixed asset turnover = 4 times; profit margin = 20%; net fixed assets = $25,000.

Which one of the following sets of ratios applies most directly to shareholders?

Last year Ty's Grocery had inventory of $237,500 and fixed assets of $51,400. This year, Ty's has inventory of $231,900 and fixed assets of $48,700. Depreciation for this year is $6,300. Which one of the following statements is true given this information?

Peter's Pool House has an interval measure of 51. This means that the Pool House has:

Calculate net income given the following information: tax rate = 30%; times interest earned = 21 times; sales = $2,000; cost of goods sold = $800; general and administrative expenses = $150.

A source of cash can be defined as any activity that:

Freda's, Inc. has sales of $3,200, current liabilities of $900, total assets of $3,000, and net working capital of $500. How many dollars' worth of sales are generated from every $1 in net fixed assets?

The net working capital turnover ratio is measured as:

The Vice President of Finance of Alpha, Inc. wants to improve the current ratio on the company's next financial statement. Explain what he/she can legitimately do now to help accomplish this goal. Provide specific examples in your answer.

Return on equity will increase if the _________________.

Cora Operation has an inventory turnover of 121 and a receivables turnover of 36. This means that it takes _____ days for the firm to sell its inventory and collect payment for that sale.

How did Marble Comics' net working capital to total assets ratio change from 2017 to 2018?

Which one of the following will increase the return on equity as computed using the Du Pont identity given that all else is held constant?

Describe some of the problems that are encountered when comparing the financial statements of various firms.

Relationships determined from a firm's financial information and used for comparison purposes are known as:

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

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