Question 1

Which of the following is a use of cash?

Accepted Answer

A)  An increase in accounts payable. 
B)  A reduction in inventory. 
C)  An increase in retained earnings. 
D)  An increase in notes payable. 
E)  An increase in accounts receivable. 
A)  An increase in accounts payable. 
B)  A reduction in inventory. 
C)  An increase in retained earnings. 
D)  An increase in notes payable. 
E)  An increase in accounts receivable.

Question 2

The ﬁnancial ratio days' sales in receivables is measured as:

Accepted Answer

A)  Receivables turnover plus 365 days. 
B)  Accounts receivable times 365 days. 
C)  Accounts receivable plus sales, divided by 365 days. 
D)  365 days divided by receivables turnover. 
E)  365 days divided by accounts receivable. 
A)  Receivables turnover plus 365 days. 
B)  Accounts receivable times 365 days. 
C)  Accounts receivable plus sales, divided by 365 days. 
D)  365 days divided by receivables turnover. 
E)  365 days divided by accounts receivable.

Question 3

A Vancouver ﬁrm has sales of $1,640, net income of $135, net ﬁxed assets of $1,200, and current assets of $530. The ﬁrm has $280 in inventory. What is the common-size statement value of
Inventory?

Accepted Answer

A)  15.01 % 
B)  15.68 % 
C)  16.18 % 
D)  30.42 % 
E)  52.83 % 
A)  15.01 % 
B)  15.68 % 
C)  16.18 % 
D)  30.42 % 
E)  52.83 %

Question 4

Julie's Market Place has earnings per share of $.35, a book value of $2.10 per share, and a market- to-book ratio of 3. What is the ﬁrm's price-earnings ratio?

Accepted Answer

A)  15 
B)  16 
C)  17 
D)  18 
E)  19 
A)  15 
B)  16 
C)  17 
D)  18 
E)  19

Question 5

The coding system that classiﬁes ﬁrms by their speciﬁc type of business operations is known as the:

Accepted Answer

A)  NASDAQ 100. 
B)  Standard & Poor's 500. 
C)  NAICS. 
D)  Governmental ID system. 
E)  Government Engineering Enterprise system. 
A)  NASDAQ 100. 
B)  Standard & Poor's 500. 
C)  NAICS. 
D)  Governmental ID system. 
E)  Government Engineering Enterprise system.

Question 6

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 7

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 17%; total asset turnover 0.88; return on equity 17.95%.

Accepted Answer

A)  1.6 
B)  1.4 
C)  1.2 
D)  1.0 
E)  0.8 
A)  1.6 
B)  1.4 
C)  1.2 
D)  1.0 
E)  0.8

Question 8

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

Accepted Answer

A)  Diminishes the cash balance of a ﬁrm. 
B)  Generates cash for the ﬁrm. 
C)  Affects the cash on hand only. 
D)  Involves a checking account. 
E)  Affects current assets only. 
A)  Diminishes the cash balance of a ﬁrm. 
B)  Generates cash for the ﬁrm. 
C)  Affects the cash on hand only. 
D)  Involves a checking account. 
E)  Affects current assets only.

Question 9

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 10

What is the current ratio for Young in 2015?

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

Which one of the following is a measure of liquidity?

Accepted Answer

A)  Debt-equity ratio. 
B)  Return on assets. 
C)  Inventory turnover. 
D)  Interval measure. 
E)  Times interest earned ratio. 
A)  Debt-equity ratio. 
B)  Return on assets. 
C)  Inventory turnover. 
D)  Interval measure. 
E)  Times interest earned ratio.

Question 12

A ﬁrm has an ROA of 8%, sales of $100, and total assets of $71. What is its proﬁt margin?

Accepted Answer

A)  1.3% 
B)  4.3% 
C)  5.7% 
D)  10.7% 
E)  16.7% 
A)  1.3% 
B)  4.3% 
C)  5.7% 
D)  10.7% 
E)  16.7%

Question 13

Calculate total asset value given the following information: ROA = 5%; Total equity = $600,000 and ROE = 8%.

Accepted Answer

A)  $960,000 
B)  $1,100,000 
C)  $1,200,000 
D)  $1,300,000 
E)  $1,400,000 
A)  $960,000 
B)  $1,100,000 
C)  $1,200,000 
D)  $1,300,000 
E)  $1,400,000

Question 14

Which of the following regarding ﬁnancial statement analysis is NOT correct?

Accepted Answer

A)  According to the Du Pont identity, ROE is affected by operating eﬃciency, asset use eﬃciency, and ﬁnancial leverage. 
B)  It is straightforward to calculate the market value based measures of ﬁrm performance using ﬁnancial statements prepared according to GAAP. 
C)  Asset management ratios measure the intensity and eﬃciency of asset use. 
D)  For common size statements, we divide asset and liability accounts by total assets and statement of comprehensive income accounts by sales. 
E)  An increase in a ﬁrm's net ﬁxed assets is considered to be a use of cash. 
A)  According to the Du Pont identity, ROE is affected by operating eﬃciency, asset use eﬃciency, and ﬁnancial leverage. 
B)  It is straightforward to calculate the market value based measures of ﬁrm performance using ﬁnancial statements prepared according to GAAP. 
C)  Asset management ratios measure the intensity and eﬃciency of asset use. 
D)  For common size statements, we divide asset and liability accounts by total assets and statement of comprehensive income accounts by sales. 
E)  An increase in a ﬁrm's net ﬁxed assets is considered to be a use of cash.

Question 15

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 16

Provide a list of the top ten stakeholders that will ﬁnd ﬁnancial statement analysis useful.

Accepted Answer

Creditors, fund managers, inve

Question 17

Another name for return on equity is return on total capitalization.

Accepted Answer

A) True 
 B)False

Question 18

The price-earnings ratio is deﬁned as:

Accepted Answer

A)  The book value per share divided by the earnings per share. 
B)  The market price per share divided by the earnings per share. 
C)  Total revenue divided by net income. 
D)  The market price per share divided by the dividends per share. 
E)  The book value per share divided by the dividends per share. 
A)  The book value per share divided by the earnings per share. 
B)  The market price per share divided by the earnings per share. 
C)  Total revenue divided by net income. 
D)  The market price per share divided by the dividends per share. 
E)  The book value per share divided by the dividends per share.

Question 19

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

It is possible that the increase in the

Question 20

If cash inﬂows for the company cease, the ﬁrm will be able to stay in business for about:

Accepted Answer

A)  111 days. 
B)  118 days. 
C)  146 days. 
D)  1,872 days. 
E)  2,139 days. 
A)  111 days. 
B)  118 days. 
C)  146 days. 
D)  1,872 days. 
E)  2,139 days.

Exam 3: Working With Financial Statements

Which of the following is a use of cash?

The ﬁnancial ratio days' sales in receivables is measured as:

A Vancouver ﬁrm has sales of $1,640, net income of $135, net ﬁxed assets of $1,200, and current assets of $530. The ﬁrm has $280 in inventory. What is the common-size statement value of Inventory?

Julie's Market Place has earnings per share of $.35, a book value of $2.10 per share, and a market- to-book ratio of 3. What is the ﬁrm's price-earnings ratio?

The coding system that classiﬁes ﬁrms by their speciﬁc type of business operations is known as the:

Which of the following are considered a source of cash?

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 17%; total asset turnover 0.88; return on equity 17.95%.

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

Return on equity will increase if the _________________.

What is the current ratio for Young in 2015?

Which one of the following is a measure of liquidity?

A ﬁrm has an ROA of 8%, sales of $100, and total assets of $71. What is its proﬁt margin?

Calculate total asset value given the following information: ROA = 5%; Total equity = $600,000 and ROE = 8%.

Which of the following regarding ﬁnancial statement analysis is NOT correct?

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

Provide a list of the top ten stakeholders that will ﬁnd ﬁnancial statement analysis useful.

Another name for return on equity is return on total capitalization.

The price-earnings ratio is deﬁned as:

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?

If cash inﬂows for the company cease, the ﬁrm will be able to stay in business for about:

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