Question 1

Determine the value of cash given the following information: cash ratio = 2; cash equivalents = $600 ; current liabilities = $800.

Accepted Answer

A)  $1,000 
B)  $1,100 
C)  $1,200 
D)  $1,300 
E)  $1,400 
A)  $1,000 
B)  $1,100 
C)  $1,200 
D)  $1,300 
E)  $1,400

Question 2

The industry in which RTF Corporation operates has an industry average of 21% for earnings before taxes. In 2015 is RTF outperforming or underperforming the industry and why?

Accepted Answer

A)  Outperforming because RTF has an EBT of 19%. 
B)  Outperforming because RTF has an EBT of 21%. 
C)  Underperforming because RTF has an EBT of 19%. 
D)  Underperforming because RTF has an EBT of 20%. 
E)  Performing in line with the industry at 21%. 
A)  Outperforming because RTF has an EBT of 19%. 
B)  Outperforming because RTF has an EBT of 21%. 
C)  Underperforming because RTF has an EBT of 19%. 
D)  Underperforming because RTF has an EBT of 20%. 
E)  Performing in line with the industry at 21%.

Question 3

The debt-equity ratio is measured as total:

Accepted Answer

A)  Equity minus total debt. 
B)  Equity divided by total debt. 
C)  Debt divided by total equity. 
D)  Debt plus total equity. 
E)  Debt minus total assets, divided by total equity. 
A)  Equity minus total debt. 
B)  Equity divided by total debt. 
C)  Debt divided by total equity. 
D)  Debt plus total equity. 
E)  Debt minus total assets, divided by total equity.

Question 4

The PE ratio is deﬁned as:

Accepted Answer

A)  Dividends per share divided by earnings per share. 
B)  Earnings per share divided by dividends per share. 
C)  Price per share divided by earnings per share. 
D)  Earnings per share divided by price per share. 
E)  Price per share divided by equity per share. 
A)  Dividends per share divided by earnings per share. 
B)  Earnings per share divided by dividends per share. 
C)  Price per share divided by earnings per share. 
D)  Earnings per share divided by price per share. 
E)  Price per share divided by equity per share.

Question 5

Current assets are $94,700. Accounts payable is $36,200, net income is $12,400 and sales are $110,800. What is the net working capital turnover rate?

Accepted Answer

A)  0.21 
B)  0.85 
C)  1.17 
D)  1.68 
E)  1.89 
A)  0.21 
B)  0.85 
C)  1.17 
D)  1.68 
E)  1.89

Question 6

Calculate net income given the following information: tax rate = 30%; times interest earned = 10.75 times; sales = $4,500; cost of goods sold = $1,600; general and administrative expenses = $750.

Accepted Answer

A)  $965 
B)  $1,065 
C)  $1,165 
D)  $1,265 
E)  $1,365 
A)  $965 
B)  $1,065 
C)  $1,165 
D)  $1,265 
E)  $1,365

Question 7

Calculate gross proﬁt given the following information: accounts receivable = $40,000; inventory = $80,000; receivable turnover = 25 times; inventory turnover = 6 times.

Accepted Answer

A)  $500,000 
B)  $520,000 
C)  $540,000 
D)  $580,000 
E)  $620,000 
A)  $500,000 
B)  $520,000 
C)  $540,000 
D)  $580,000 
E)  $620,000

Question 8

What is the current ratio for 2015?

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 9

Calculate the times interest earned ratio given the following information: depreciation expense = $6,000; EBIT = $90,000; cash coverage ratio = 8 times.

Accepted Answer

A)  8.0 times 
B)  7.5 times 
C)  7.0 times 
D)  6.5 times 
E)  6.0 times 
A)  8.0 times 
B)  7.5 times 
C)  7.0 times 
D)  6.5 times 
E)  6.0 times

Question 10

When a ﬁrm wishes to increase its net working capital turnover rate, it should _____, all else constant.

Accepted Answer

A)  increase its current assets 
B)  increase its total assets 
C)  decrease its current liabilities 
D)  decrease its total liabilities 
E)  increase its sales 
A)  increase its current assets 
B)  increase its total assets 
C)  decrease its current liabilities 
D)  decrease its total liabilities 
E)  increase its sales

Question 11

The cash ratio is measured as:

Accepted Answer

A)  Current assets divided by current liabilities. 
B)  Current assets minus cash on hand, divided by current liabilities. 
C)  Current liabilities plus current assets, divided by cash on hand. 
D)  Cash on hand plus inventory, divided by current liabilities. 
E)  Cash on hand divided by current liabilities. 
A)  Current assets divided by current liabilities. 
B)  Current assets minus cash on hand, divided by current liabilities. 
C)  Current liabilities plus current assets, divided by cash on hand. 
D)  Cash on hand plus inventory, divided by current liabilities. 
E)  Cash on hand divided by current liabilities.

Question 12

Calculate the value of total equity given the following information: total debt ratio = 0.76; total assets = $1,250.

Accepted Answer

A)  $300 
B)  $325 
C)  $350 
D)  $375 
E)  $400 
A)  $300 
B)  $325 
C)  $350 
D)  $375 
E)  $400

Question 13

Calculate the value of total assets given the following information: total debt ratio = 0.26; total equity = $32,560.

Accepted Answer

A)  $11,000 
B)  $22,000 
C)  $33,000 
D)  $44,000 
E)  $55,000 
A)  $11,000 
B)  $22,000 
C)  $33,000 
D)  $44,000 
E)  $55,000

Question 14

How would a $15,000 decrease in AR and a $8,000 increase in inventory affect cash?

Accepted Answer

A)  $15,000 source; $8,000 use 
B)  $15,000 use; $8,000 source 
C)  $7,000 use 
D)  $23,000 use 
E)  $23,000 source 
A)  $15,000 source; $8,000 use 
B)  $15,000 use; $8,000 source 
C)  $7,000 use 
D)  $23,000 use 
E)  $23,000 source

Question 15

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 16

Which ratio does not focus on short-term solvency?

Accepted Answer

A)  Quick ratio. 
B)  Cash ratio. 
C)  Net working capital to total assets. 
D)  Interval measure. 
E)  Cash coverage ratio. 
A)  Quick ratio. 
B)  Cash ratio. 
C)  Net working capital to total assets. 
D)  Interval measure. 
E)  Cash coverage ratio.

Question 17

List and interpret three liquidity ratios.

Accepted Answer

Choose any three of:
1) Current ratio: t

Question 18

According to the statement of cash ﬂows, an increase in accounts receivable will _____ the cash ﬂow from _____ activities.

Accepted Answer

A)  decrease; operating 
B)  decrease; ﬁnancing 
C)  increase; operating 
D)  increase; ﬁnancing 
E)  decrease; investment 
A)  decrease; operating 
B)  decrease; ﬁnancing 
C)  increase; operating 
D)  increase; ﬁnancing 
E)  decrease; investment

Question 19

If a ﬁrm has a total debt ratio of 0.5, what is its equity multiplier?

Accepted Answer

A)  2.00 times 
B)  0.50 times 
C)  0.67 times 
D)  1.50 times 
E)  3.00 times 
A)  2.00 times 
B)  0.50 times 
C)  0.67 times 
D)  1.50 times 
E)  3.00 times

Question 20

The Du Pont identity is deﬁned as the:

Accepted Answer

A)  Proﬁt margin times the total asset turnover times the equity multiplier. 
B)  Proﬁt margin times the inventory turnover times the equity multiplier. 
C)  Return on equity times the proﬁt margin times the total asset turnover. 
D)  Return on equity times the total asset turnover times the equity multiplier. 
E)  Return on assets times the total asset turnover times the proﬁt margin. 
A)  Proﬁt margin times the total asset turnover times the equity multiplier. 
B)  Proﬁt margin times the inventory turnover times the equity multiplier. 
C)  Return on equity times the proﬁt margin times the total asset turnover. 
D)  Return on equity times the total asset turnover times the equity multiplier. 
E)  Return on assets times the total asset turnover times the proﬁt margin.

Exam 3: Working With Financial Statements

Determine the value of cash given the following information: cash ratio = 2; cash equivalents = $600 ; current liabilities = $800.

The industry in which RTF Corporation operates has an industry average of 21% for earnings before taxes. In 2015 is RTF outperforming or underperforming the industry and why?

The debt-equity ratio is measured as total:

The PE ratio is deﬁned as:

Current assets are $94,700. Accounts payable is $36,200, net income is $12,400 and sales are $110,800. What is the net working capital turnover rate?

Calculate net income given the following information: tax rate = 30%; times interest earned = 10.75 times; sales = $4,500; cost of goods sold = $1,600; general and administrative expenses = $750.

Calculate gross proﬁt given the following information: accounts receivable = $40,000; inventory = $80,000; receivable turnover = 25 times; inventory turnover = 6 times.

What is the current ratio for 2015?

Calculate the times interest earned ratio given the following information: depreciation expense = $6,000; EBIT = $90,000; cash coverage ratio = 8 times.

When a ﬁrm wishes to increase its net working capital turnover rate, it should _____, all else constant.

The cash ratio is measured as:

Calculate the value of total equity given the following information: total debt ratio = 0.76; total assets = $1,250.

Calculate the value of total assets given the following information: total debt ratio = 0.26; total equity = $32,560.

How would a $15,000 decrease in AR and a $8,000 increase in inventory affect cash?

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.

Which ratio does not focus on short-term solvency?

List and interpret three liquidity ratios.

According to the statement of cash ﬂows, an increase in accounts receivable will _____ the cash ﬂow from _____ activities.

If a ﬁrm has a total debt ratio of 0.5, what is its equity multiplier?

The Du Pont identity is deﬁned as the:

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

According to the statement of cash ﬂows, an increase in accounts receivable will _ the cash ﬂow from _ activities.