Question 1

Which ratio does not focus on turnover?

Accepted Answer

A)  Inventory turnover. 
B)  Days' sales in inventory. 
C)  Receivable turnover. 
D)  Total asset turnover. 
E)  Interval measure. 
A)  Inventory turnover. 
B)  Days' sales in inventory. 
C)  Receivable turnover. 
D)  Total asset turnover. 
E)  Interval measure. E

Question 2

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. A

Question 3

If a ﬁrm has only current assets and no ﬁxed assets of any kind, its times interest earned ratio must
exceed its cash coverage ratio.

Accepted Answer

A) True 
 B)False  False

Question 4

The net cash from ﬁnancing activity for 2015 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 5

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 6

Use the following statement of ﬁnancial position and statement of comprehensive income       What is the return on equity for Bluebird for 2015?

Accepted Answer

A)  26.98 % 
B)  27.03 % 
C)  27.59 % 
D)  27.63 % 
E)  28.00 % 
A)  26.98 % 
B)  27.03 % 
C)  27.59 % 
D)  27.63 % 
E)  28.00 %

Question 7

A ﬁrm has a total book value of equity of $2 million, a market to book ratio of 2, and a book value per share of $5.00. What is the total market value of the ﬁrm's equity?

Accepted Answer

A)  $10 
B)  $500,000 
C)  $2 million 
D)  $4 million 
E)  $20 million 
A)  $10 
B)  $500,000 
C)  $2 million 
D)  $4 million 
E)  $20 million

Question 8

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 9

Calculate the return on assets given the following information: common shares outstanding = 250,000; earning per share = $2.00; total assets = $2,000,000; total equity = $800,000.

Accepted Answer

A)  21% 
B)  22% 
C)  23% 
D)  24% 
E)  25% 
A)  21% 
B)  22% 
C)  23% 
D)  24% 
E)  25%

Question 10

Create a common size statement for the ﬁnancial statements below.

Accepted Answer

The answer of Create a common size statement for the...

Question 11

Return on assets is deﬁned as:

Accepted Answer

A)  Sales divided by net ﬁxed assets. 
B)  EBIT divided by net ﬁxed assets. 
C)  Net income divided by net ﬁxed assets. 
D)  EBIT divided by total assets. 
E)  Net income divided by total assets. 
A)  Sales divided by net ﬁxed assets. 
B)  EBIT divided by net ﬁxed assets. 
C)  Net income divided by net ﬁxed assets. 
D)  EBIT divided by total assets. 
E)  Net income divided by total assets.

Question 12

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 13

Monika's Gift Barn has cash of $316, accounts receivable of $687, accounts payable of $709, and inventory of $2,108. What is the value of the quick ratio?

Accepted Answer

A)  .23 
B)  .45 
C)  .71 
D)  1.41 
E)  4.38 
A)  .23 
B)  .45 
C)  .71 
D)  1.41 
E)  4.38

Question 14

Gwen's Pastry Shop has annual sales of $238,000, a proﬁt margin of 6 %, and a return on assets of 7.7 %. The ﬁrm has _____ in total assets.

Accepted Answer

A)  $176,067 
B)  $185,455 
C)  $220,984 
D)  $224,528 
E)  $256,326 
A)  $176,067 
B)  $185,455 
C)  $220,984 
D)  $224,528 
E)  $256,326

Question 15

Square D's has $42,700 in sales and a proﬁt margin of 7.2 %. There are 5,700 shares of stock outstanding at a market price per share of $13.20. What is the price-earnings ratio?

Accepted Answer

A)  7.12 
B)  17.63 
C)  24.47 
D)  26.08 
E)  29.00 
A)  7.12 
B)  17.63 
C)  24.47 
D)  26.08 
E)  29.00

Question 16

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 17

If a ﬁrm decreases its operating costs, all else constant, then:

Accepted Answer

A)  The proﬁt margin increases while the return on equity decreases. 
B)  The return on assets increases while the return on equity decreases. 
C)  The total asset turnover rate decreases while the proﬁt margin increases. 
D)  Both the proﬁt margin and the equity multiplier increase. 
E)  Both the return on assets and the return on equity increase. 
A)  The proﬁt margin increases while the return on equity decreases. 
B)  The return on assets increases while the return on equity decreases. 
C)  The total asset turnover rate decreases while the proﬁt margin increases. 
D)  Both the proﬁt margin and the equity multiplier increase. 
E)  Both the return on assets and the return on equity increase.

Question 18

Calculate net working capital turnover given the following data. Total ﬁxed assets $200,000; long- term liabilities $55,000; total liabilities $80,000; total shareholders' equity $220,000; total sales
$800,000.

Accepted Answer

A)  13.75 
B)  12.67 
C)  11.75 
D)  10.67 
E)  9.67 
A)  13.75 
B)  12.67 
C)  11.75 
D)  10.67 
E)  9.67

Question 19

Current assets expressed as a multiple of current liabilities is called the:

Accepted Answer

A)  Working capital ratio. 
B)  Quick ratio. 
C)  Acid-test ratio. 
D)  Current ratio. 
E)  Cash ratio. 
A)  Working capital ratio. 
B)  Quick ratio. 
C)  Acid-test ratio. 
D)  Current ratio. 
E)  Cash ratio.

Question 20

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

Exam 3: Working With Financial Statements

Which ratio does not focus on turnover?

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

If a ﬁrm has only current assets and no ﬁxed assets of any kind, its times interest earned ratio must exceed its cash coverage ratio.

The net cash from ﬁnancing activity for 2015 is ($ in millions):

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%.

Use the following statement of ﬁnancial position and statement of comprehensive income What is the return on equity for Bluebird for 2015?

A ﬁrm has a total book value of equity of $2 million, a market to book ratio of 2, and a book value per share of $5.00. What is the total market value of the ﬁrm's equity?

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

Calculate the return on assets given the following information: common shares outstanding = 250,000; earning per share = $2.00; total assets = $2,000,000; total equity = $800,000.

Create a common size statement for the ﬁnancial statements below.

Return on assets is deﬁned as:

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

Monika's Gift Barn has cash of $316, accounts receivable of $687, accounts payable of $709, and inventory of $2,108. What is the value of the quick ratio?

Gwen's Pastry Shop has annual sales of $238,000, a proﬁt margin of 6 %, and a return on assets of 7.7 %. The ﬁrm has _____ in total assets.

Square D's has $42,700 in sales and a proﬁt margin of 7.2 %. There are 5,700 shares of stock outstanding at a market price per share of $13.20. What is the price-earnings ratio?

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

If a ﬁrm decreases its operating costs, all else constant, then:

Calculate net working capital turnover given the following data. Total ﬁxed assets $200,000; long- term liabilities $55,000; total liabilities $80,000; total shareholders' equity $220,000; total sales $800,000.

Current assets expressed as a multiple of current liabilities is called the:

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?

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Long-Term Financial Planning and 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

Some 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 Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Filters