Question 1

The total asset turnover ratio is measured as:

Accepted Answer

A)  Sales minus total assets. 
B)  Sales divided total assets. 
C)  Sales times total assets. 
D)  Total assets divided by sales. 
E)  Total assets plus sales. 
A)  Sales minus total assets. 
B)  Sales divided total assets. 
C)  Sales times total assets. 
D)  Total assets divided by sales. 
E)  Total assets plus sales.

Question 2

Vendors providing trade credit to a ﬁrm tend to be most interested in the ﬁrm's __________ ratios.

Accepted Answer

A)  liquidity 
B)  proﬁtability 
C)  market value 
D)  asset management 
E)  ﬁnancial leverage 
A)  liquidity 
B)  proﬁtability 
C)  market value 
D)  asset management 
E)  ﬁnancial leverage

Question 3

The component values used in the Du Pont analysis for 2015 are:

Accepted Answer

A)  12.7%, 0.37, and 1.19. 
B)  12.7%, 1.77, and 1.19. 
C)  19.2%, 1.77, and 1.19. 
D)  19.2%, 0.37, and 2.11. 
E)  12.7%, 1.77, and 2.11. 
A)  12.7%, 0.37, and 1.19. 
B)  12.7%, 1.77, and 1.19. 
C)  19.2%, 1.77, and 1.19. 
D)  19.2%, 0.37, and 2.11. 
E)  12.7%, 1.77, and 2.11.

Question 4

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 5

Etling Eccentricities has 400,000 shares of common stock outstanding, net income after tax of $1.2 million, retained earnings of $17 million, and total equity of $35 million. What is EE's earnings per
Share?

Accepted Answer

A)  $3.00 
B)  $4.00 
C)  $4.25 
D)  $8.75 
E)  $13.50 
A)  $3.00 
B)  $4.00 
C)  $4.25 
D)  $8.75 
E)  $13.50

Question 6

Use the following statement of ﬁnancial position and statement of comprehensive income       What is the net cash ﬂow from ﬁnancing activities for 2015?

Accepted Answer

A)  $260 cash outﬂow 
B)  $325 cash outﬂow 
C)  $800 cash inﬂow 
D)  $1,220 cash inﬂow 
E)  $1,860 cash inﬂow 
A)  $260 cash outﬂow 
B)  $325 cash outﬂow 
C)  $800 cash inﬂow 
D)  $1,220 cash inﬂow 
E)  $1,860 cash inﬂow

Question 7

Calculate the value of long-term debt given the following information: total debt = $100,000; debt/equity ratio = 0.50; long-term debt ratio = 0.32.

Accepted Answer

A)  $72,000 
B)  $74,000 
C)  $76,000 
D)  $78,000 
E)  $94,118 
A)  $72,000 
B)  $74,000 
C)  $76,000 
D)  $78,000 
E)  $94,118

Question 8

What was the proﬁt margin in 2015?

Accepted Answer

A)  7.9% 
B)  18.4% 
C)  22.7% 
D)  26.2% 
E)  60.0% 
A)  7.9% 
B)  18.4% 
C)  22.7% 
D)  26.2% 
E)  60.0%

Question 9

CatchaTan Co. of British Columbia had net sales of $800,000 over the past year. During that time, average receivables were $200,001. What was the average collection period?

Accepted Answer

A)  4 days 
B)  5 days 
C)  36 days 
D)  48 days 
E)  91 days 
A)  4 days 
B)  5 days 
C)  36 days 
D)  48 days 
E)  91 days

Question 10

All else the same, which of the following occurs when a ﬁrm buys inventory with cash?

Accepted Answer

A)  The quick ratio goes up if it was greater than one before the change. 
B)  The current ratio goes down if it was greater than one before the change. 
C)  The current ratio goes down if it was lower than one before the change. 
D)  The quick ratio goes up if it was lower than one before the change. 
E)  The quick ratio declines but the current ratio remains unchanged. 
A)  The quick ratio goes up if it was greater than one before the change. 
B)  The current ratio goes down if it was greater than one before the change. 
C)  The current ratio goes down if it was lower than one before the change. 
D)  The quick ratio goes up if it was lower than one before the change. 
E)  The quick ratio declines but the current ratio remains unchanged.

Question 11

The ___________ breaks down return on equity into three component parts: operating eﬃciency of the ﬁrm, its asset use eﬃciency, and ﬁnancial leverage.

Accepted Answer

A)  Du Pont identity 
B)  Return on assets 
C)  Statement of cash ﬂows 
D)  Asset turnover ratio 
E)  Equity multiplier 
A)  Du Pont identity 
B)  Return on assets 
C)  Statement of cash ﬂows 
D)  Asset turnover ratio 
E)  Equity multiplier

Question 12

Determine the value of cash given the following information: cash ratio = 1.5625; cash equivalents = $500 ; current liabilities = $1,600.

Accepted Answer

A)  $1,500 
B)  $2,000 
C)  $2,500 
D)  $3,000 
E)  $3,500 
A)  $1,500 
B)  $2,000 
C)  $2,500 
D)  $3,000 
E)  $3,500

Question 13

Explain the value provided by the Du Pont identity that is not provided by just knowing the return on
equity percentage.

Accepted Answer

The Du Pont identity consists of the equ

Question 14

Frederico's has a proﬁt margin of 6 %, a return on assets of 8 %, and an equity multiplier of 1.4. What is the return on equity?

Accepted Answer

A)  6.7 % 
B)  8.4 % 
C)  11.2 % 
D)  14.6 % 
E)  19.6 % 
A)  6.7 % 
B)  8.4 % 
C)  11.2 % 
D)  14.6 % 
E)  19.6 %

Question 15

Last year Mittel (Ottawa) had a total debt ratio of .31. This year the total debt ratio is .33. Which one of the following statements can be made with certainty based on this information?

Accepted Answer

A)  The ﬁrm is bankrupt. 
B)  The ﬁrm increased its equity ﬁnancing. 
C)  The ﬁrm had to have sold some long-term assets. 
D)  The ﬁrm had to have borrowed more money. 
E)  The ﬁrm changed its capital structure. 
A)  The ﬁrm is bankrupt. 
B)  The ﬁrm increased its equity ﬁnancing. 
C)  The ﬁrm had to have sold some long-term assets. 
D)  The ﬁrm had to have borrowed more money. 
E)  The ﬁrm changed its capital structure.

Question 16

If the total assets of a ﬁrm decrease while all other components of ROE remain unchanged, you would expect the ﬁrm's:

Accepted Answer

A)  ROE to increase. 
B)  ROA to decrease. 
C)  Equity multiplier to increase. 
D)  ROE to remain unchanged. 
E)  Proﬁt margin to decrease. 
A)  ROE to increase. 
B)  ROA to decrease. 
C)  Equity multiplier to increase. 
D)  ROE to remain unchanged. 
E)  Proﬁt margin to decrease.

Question 17

Days' sales in inventory of car dealerships are generally higher when compared to grocery stores.

Accepted Answer

A) True 
 B)False

Question 18

Calculate net income given the following information: shares outstanding = 1,000,000; stock price = $18/share; PE ratio = 20.

Accepted Answer

A)  $750,000 
B)  $800,000 
C)  $850,000 
D)  $900,000 
E)  $950,000 
A)  $750,000 
B)  $800,000 
C)  $850,000 
D)  $900,000 
E)  $950,000

Question 19

Leaf, Inc. of Kingston has a ﬁxed asset turnover rate of 2.26 and a total asset turnover rate of 1.13. From this information, you know that the:

Accepted Answer

A)  Fixed assets equal 226 percent of the annual sales amount. 
B)  Annual sales are less than the value of the total assets of the ﬁrm. 
C)  Value of the current assets is equal to the value of the ﬁxed assets. 
D)  Firm has $2.13 in sales for every $1 in total assets. 
E)  Firm utilizes its assets more eﬃciently than a ﬁrm with a total asset turnover of 1.25. 
A)  Fixed assets equal 226 percent of the annual sales amount. 
B)  Annual sales are less than the value of the total assets of the ﬁrm. 
C)  Value of the current assets is equal to the value of the ﬁxed assets. 
D)  Firm has $2.13 in sales for every $1 in total assets. 
E)  Firm utilizes its assets more eﬃciently than a ﬁrm with a total asset turnover of 1.25.

Question 20

A Kingston ﬁrm has sales of $49,800, costs of $36,100, interest paid of $380, and depreciation of $3,200. The tax rate is 35 %. What is the value of the cash coverage ratio?

Accepted Answer

A)  25.73 
B)  30.00 
C)  32.11 
D)  36.05 
E)  41.08 
A)  25.73 
B)  30.00 
C)  32.11 
D)  36.05 
E)  41.08

Exam 3: Working With Financial Statements

The total asset turnover ratio is measured as:

Vendors providing trade credit to a ﬁrm tend to be most interested in the ﬁrm's __________ ratios.

The component values used in the Du Pont analysis for 2015 are:

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

Etling Eccentricities has 400,000 shares of common stock outstanding, net income after tax of $1.2 million, retained earnings of $17 million, and total equity of $35 million. What is EE's earnings per Share?

Use the following statement of ﬁnancial position and statement of comprehensive income What is the net cash ﬂow from ﬁnancing activities for 2015?

Calculate the value of long-term debt given the following information: total debt = $100,000; debt/equity ratio = 0.50; long-term debt ratio = 0.32.

What was the proﬁt margin in 2015?

CatchaTan Co. of British Columbia had net sales of $800,000 over the past year. During that time, average receivables were $200,001. What was the average collection period?

All else the same, which of the following occurs when a ﬁrm buys inventory with cash?

The ___________ breaks down return on equity into three component parts: operating eﬃciency of the ﬁrm, its asset use eﬃciency, and ﬁnancial leverage.

Determine the value of cash given the following information: cash ratio = 1.5625; cash equivalents = $500 ; current liabilities = $1,600.

Explain the value provided by the Du Pont identity that is not provided by just knowing the return on equity percentage.

Frederico's has a proﬁt margin of 6 %, a return on assets of 8 %, and an equity multiplier of 1.4. What is the return on equity?

Last year Mittel (Ottawa) had a total debt ratio of .31. This year the total debt ratio is .33. Which one of the following statements can be made with certainty based on this information?

If the total assets of a ﬁrm decrease while all other components of ROE remain unchanged, you would expect the ﬁrm's:

Days' sales in inventory of car dealerships are generally higher when compared to grocery stores.

Calculate net income given the following information: shares outstanding = 1,000,000; stock price = $18/share; PE ratio = 20.

Leaf, Inc. of Kingston has a ﬁxed asset turnover rate of 2.26 and a total asset turnover rate of 1.13. From this information, you know that the:

A Kingston ﬁrm has sales of $49,800, costs of $36,100, interest paid of $380, and depreciation of $3,200. The tax rate is 35 %. What is the value of the cash coverage ratio?

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