Question 1

If a firm's debt ratio was 25%, its debt/equity ratio would be:

Accepted Answer

A)  25%. 
B)  50%. 
C)  33.33%. 
D)  75%. 
A)  25%. 
B)  50%. 
C)  33.33%. 
D)  75%. C

Question 2

Financial leverage:

Accepted Answer

A)  arises because most borrowed funds have a fixed interest rate. 
B)  arises because most borrowed funds have a variable interest rate. 
C)  usually has no bearing on the risk associated with a company. 
D)  is a concept that does not apply to individuals. 
A)  arises because most borrowed funds have a fixed interest rate. 
B)  arises because most borrowed funds have a variable interest rate. 
C)  usually has no bearing on the risk associated with a company. 
D)  is a concept that does not apply to individuals. A

Question 3

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

Accepted Answer

A)  less than 10. 
B)  between 10 and 25. 
C)  between 25 and 40. 
D)  over 40. 
A)  less than 10. 
B)  between 10 and 25. 
C)  between 25 and 40. 
D)  over 40. B

Question 4

The price/earnings ratio:

Accepted Answer

A)  is a measure of the relative expensiveness of a firm's common stock. 
B)  does not usually change by more than 1.0 during the year. 
C)  can be used to determine the cash dividend to be received during the year. 
D)  is calculated by dividing the earnings multiple by net income. 
A)  is a measure of the relative expensiveness of a firm's common stock. 
B)  does not usually change by more than 1.0 during the year. 
C)  can be used to determine the cash dividend to be received during the year. 
D)  is calculated by dividing the earnings multiple by net income.

Question 5

A higher P/E ratio means that:

Accepted Answer

A)  the stock is more reasonably priced. 
B)  the stock is relatively expensive. 
C)  investors are wary of the stock. 
D)  earnings are expected to decrease. 
A)  the stock is more reasonably priced. 
B)  the stock is relatively expensive. 
C)  investors are wary of the stock. 
D)  earnings are expected to decrease.

Question 6

Which of the following is not a category of financial statement ratios?

Accepted Answer

A)  Financial leverage. 
B)  Liquidity. 
C)  Profitability. 
D)  Prospectus. 
A)  Financial leverage. 
B)  Liquidity. 
C)  Profitability. 
D)  Prospectus.

Question 7

If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:

Accepted Answer

A)  the market value of the common stock would be $20.83 per share. 
B)  the market value of the common stock would be $25.00 per share. 
C)  an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share. 
D)  an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share. 
A)  the market value of the common stock would be $20.83 per share. 
B)  the market value of the common stock would be $25.00 per share. 
C)  an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share. 
D)  an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share.

Question 8

A common size income statement:

Accepted Answer

A)  uses the same dollar amount of revenues for each year. 
B)  expresses items as a percentage of revenues. 
C)  makes comparisons between years more difficult. 
D)  is useful in estimating the impact of inflation. 
A)  uses the same dollar amount of revenues for each year. 
B)  expresses items as a percentage of revenues. 
C)  makes comparisons between years more difficult. 
D)  is useful in estimating the impact of inflation.

Question 9

When a firm has financial leverage:

Accepted Answer

A)  ROI will be greater than ROE. 
B)  ROI will usually be less than it would be without leverage. 
C)  risk is greater than if there wasn't any leverage. 
D)  the firm will always have a higher ROE than it would without leverage. 
A)  ROI will be greater than ROE. 
B)  ROI will usually be less than it would be without leverage. 
C)  risk is greater than if there wasn't any leverage. 
D)  the firm will always have a higher ROE than it would without leverage.

Question 10

When a corporation has both common stock and preferred stock outstanding:

Accepted Answer

A)  dividends on preferred stock are paid only if the company has current earnings. 
B)  dividends on preferred stock must be paid before dividends on common stock can be paid. 
C)  preferred stockholders receive the same dividend per share as common stockholders. 
D)  dividends on preferred stock are paid only if dividends are to be paid on the common stock. 
A)  dividends on preferred stock are paid only if the company has current earnings. 
B)  dividends on preferred stock must be paid before dividends on common stock can be paid. 
C)  preferred stockholders receive the same dividend per share as common stockholders. 
D)  dividends on preferred stock are paid only if dividends are to be paid on the common stock.

Question 11

An individual interested in making a judgment about the profitability of a company should:

Accepted Answer

A)  review the trend of working capital for several years. 
B)  calculate the company's ROI for the most recent year. 
C)  review the trend of the company's ROI for several years. 
D)  compare the company's ROI for the most recent year with the industry average ROI for the most recent year. 
A)  review the trend of working capital for several years. 
B)  calculate the company's ROI for the most recent year. 
C)  review the trend of the company's ROI for several years. 
D)  compare the company's ROI for the most recent year with the industry average ROI for the most recent year.

Question 12

Asset turnover calculations:

Accepted Answer

A)  are made by dividing the average asset balance during the year by the sales for the year. 
B)  are made by dividing sales for the year by the asset balance at the end of the year. 
C)  communicate information about how promptly the entity pays its bills. 
D)  should be evaluated by observing the turnover trend over a period of time. 
A)  are made by dividing the average asset balance during the year by the sales for the year. 
B)  are made by dividing sales for the year by the asset balance at the end of the year. 
C)  communicate information about how promptly the entity pays its bills. 
D)  should be evaluated by observing the turnover trend over a period of time.

Question 13

Which of the following is(are) an example of a measure of leverage?

Accepted Answer

A)  Debt yield. 
B)  Debt payout ratio. 
C)  Preferred dividend coverage ratio. 
D)  Debt/equity ratio. 
A)  Debt yield. 
B)  Debt payout ratio. 
C)  Preferred dividend coverage ratio. 
D)  Debt/equity ratio.

Question 14

The inventory turnover calculation:

Accepted Answer

A)  is wrong unless cost of goods sold is used in the numerator. 
B)  is wrong unless sales is used in the numerator. 
C)  is an alternative way of expressing the number of days' sales in inventory. 
D)  requires knowledge of the inventory cost flow assumption being used. 
A)  is wrong unless cost of goods sold is used in the numerator. 
B)  is wrong unless sales is used in the numerator. 
C)  is an alternative way of expressing the number of days' sales in inventory. 
D)  requires knowledge of the inventory cost flow assumption being used.

Question 15

The dividend payout ratio describes:

Accepted Answer

A)  the proportion of earnings paid as dividends. 
B)  the relationship of dividends per share to market price per share. 
C)  the percentage change in dividends this year compared to last year. 
D)  dividends as a percentage of the price/earnings ratio. 
A)  the proportion of earnings paid as dividends. 
B)  the relationship of dividends per share to market price per share. 
C)  the percentage change in dividends this year compared to last year. 
D)  dividends as a percentage of the price/earnings ratio.

Question 16

An entity's current ratio will be influenced by:

Accepted Answer

A)  the inventory cost flow assumption used. 
B)  writing off an overdue account receivable against the allowance for uncollectible accounts. 
C)  the depreciation method used. 
D)  issuance of a stock dividend. 
A)  the inventory cost flow assumption used. 
B)  writing off an overdue account receivable against the allowance for uncollectible accounts. 
C)  the depreciation method used. 
D)  issuance of a stock dividend.

Question 17

Book value per share of common stock of a manufacturing company:

Accepted Answer

A)  is not a very useful measure most of the time. 
B)  is calculated by dividing market value per share by earnings per share. 
C)  reflects the fair value of the company's stock. 
D)  is the same as the total balance sheet asset value per share of common stock. 
A)  is not a very useful measure most of the time. 
B)  is calculated by dividing market value per share by earnings per share. 
C)  reflects the fair value of the company's stock. 
D)  is the same as the total balance sheet asset value per share of common stock.

Question 18

Another term for the price/earnings ratio is:

Accepted Answer

A)  cost ratio. 
B)  sales multiple. 
C)  earnings multiple. 
D)  profit ratio. 
A)  cost ratio. 
B)  sales multiple. 
C)  earnings multiple. 
D)  profit ratio.

Question 19

For the fiscal year ended March 31, 2014, a company reported earnings per share of $3.25 and cash dividends per share of $0.50. During fiscal 2015, the company had a 3-for-2 stock split. In the annual report for the fiscal year ended March 31, 2015, earnings per share and cash dividends for fiscal 2014 would be reported, respectively, as:

Accepted Answer

A)  $3.25 and $0.50. 
B)  $4.85 and $0.75. 
C)  $2.17 and $0.33. 
D)  $1.09 and $0.17. 
A)  $3.25 and $0.50. 
B)  $4.85 and $0.75. 
C)  $2.17 and $0.33. 
D)  $1.09 and $0.17.

Question 20

Management's use of resources can best be evaluated by focusing on measures of:

Accepted Answer

A)  liquidity. 
B)  activity. 
C)  leverage. 
D)  book value. 
A)  liquidity. 
B)  activity. 
C)  leverage. 
D)  book value.

If a firm's debt ratio was 25%, its debt/equity ratio would be:

Financial leverage:

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

The price/earnings ratio:

A higher P/E ratio means that:

Which of the following is not a category of financial statement ratios?

If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:

A common size income statement:

When a firm has financial leverage:

When a corporation has both common stock and preferred stock outstanding:

An individual interested in making a judgment about the profitability of a company should:

Asset turnover calculations:

Which of the following is(are) an example of a measure of leverage?

The inventory turnover calculation:

The dividend payout ratio describes:

An entity's current ratio will be influenced by:

Book value per share of common stock of a manufacturing company:

Another term for the price/earnings ratio is:

Management's use of resources can best be evaluated by focusing on measures of:

Accountingpresent and Past

Financial Statements and Accounting Conceptsprinciples

Fundamental Interpretations Made From Financial Statement Data

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant and Equipment,and Other Noncurrent Assets

Accounting for and Presentation of Liabilities

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements and Other Disclosures

Managerial Accounting and Costvolumeprofit Analysis

Cost Accounting and Reporting

Cost Planning

Cost Control

Costs for Decision Making

Filters

Exam 11: Financial Statement Analysis

If a firm's debt ratio was 25%, its debt/equity ratio would be:

Financial leverage:

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

The price/earnings ratio:

A higher P/E ratio means that:

Which of the following is not a category of financial statement ratios?

If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:

A common size income statement:

When a firm has financial leverage:

When a corporation has both common stock and preferred stock outstanding:

An individual interested in making a judgment about the profitability of a company should:

Asset turnover calculations:

Which of the following is(are) an example of a measure of leverage?

The inventory turnover calculation:

The dividend payout ratio describes:

An entity's current ratio will be influenced by:

Book value per share of common stock of a manufacturing company:

Another term for the price/earnings ratio is:

Management's use of resources can best be evaluated by focusing on measures of:

Accountingpresent and Past

Financial Statements and Accounting Conceptsprinciples

Fundamental Interpretations Made From Financial Statement Data

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant and Equipment,and Other Noncurrent Assets

Accounting for and Presentation of Liabilities

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements and Other Disclosures

Managerial Accounting and Costvolumeprofit Analysis

Cost Accounting and Reporting

Cost Planning

Cost Control

Costs for Decision Making

Filters