Question 1

Which ratio does not focus on ﬁnancial leverage?

Accepted Answer

A)  Total debt ratio. 
B)  Debt/equity ratio. 
C)  Equity multiplier. 
D)  Times interest earned. 
E)  Cash ratio. 
A)  Total debt ratio. 
B)  Debt/equity ratio. 
C)  Equity multiplier. 
D)  Times interest earned. 
E)  Cash ratio.

Question 2

Relationships determined from a ﬁrm's ﬁnancial information and used for comparison purposes are known as:

Accepted Answer

A)  Financial ratios. 
B)  Comparison statements. 
C)  Dimensional analysis. 
D)  Scenario analysis. 
E)  Solvency analysis. 
A)  Financial ratios. 
B)  Comparison statements. 
C)  Dimensional analysis. 
D)  Scenario analysis. 
E)  Solvency analysis.

Question 3

Calculate the current ratio given the following information: cash = $12,000; total current assets = $28,000; cash ratio = 0.375.

Accepted Answer

A)  0.575 
B)  0.675 
C)  0.775 
D)  0.875 
E)  0.975 
A)  0.575 
B)  0.675 
C)  0.775 
D)  0.875 
E)  0.975

Question 4

If you were to prepare a statement of cash ﬂows, what is the net cash ﬂow from ﬁnancing activities ($ in millions)?

Accepted Answer

A)  - $678 
B)  - $108 
C)  $15 
D)  $1,325 
E)  $3,003 
A)  - $678 
B)  - $108 
C)  $15 
D)  $1,325 
E)  $3,003

Question 5

An Edmonton ﬁrm has a debt-equity ratio of 62 %, a total asset turnover of 1.39, and a proﬁt margin of 7.8 %. The total equity is $672,100. What is the amount of the net income?

Accepted Answer

A)  $118,048 
B)  $119,600 
C)  $120,202 
D)  $121,212 
E)  $124,097 
A)  $118,048 
B)  $119,600 
C)  $120,202 
D)  $121,212 
E)  $124,097

Question 6

Due to the diﬃculty of access the true enterprise value, one can use the market cap as a proxy for enterprise value to calculate the EV/EBITDA ratio.

Accepted Answer

A) True 
 B)False

Question 7

A London Ontario ﬁrm has a net income of $32,000 which provides a 12% return on assets. The ﬁrm has a debt-equity ratio of .40. What is the return on equity?

Accepted Answer

A)  7.20% 
B)  8.57% 
C)  11.67% 
D)  12.00% 
E)  16.80% 
A)  7.20% 
B)  8.57% 
C)  11.67% 
D)  12.00% 
E)  16.80%

Question 8

Bob's Toys has a ﬁxed asset turnover rate of 1.2 and a total asset turnover rate of .84. Gerold's Toys has a ﬁxed asset turnover rate of 1.1 and a total asset turnover rate of .96. Both companies have
Similar operations. Bob's Toys:

Accepted Answer

A)  Is using its ﬁxed assets more eﬃciently than Gerold's Toys. 
B)  Is using its total assets more eﬃciently than Gerold's Toys. 
C)  Is generating $1 in sales for every $1.20 in net ﬁxed assets. 
D)  Is generating $1.20 in net income for every $1 in net ﬁxed assets. 
E)  Has $.84 in total assets for every $.96 Gerold's has in total assets. 
A)  Is using its ﬁxed assets more eﬃciently than Gerold's Toys. 
B)  Is using its total assets more eﬃciently than Gerold's Toys. 
C)  Is generating $1 in sales for every $1.20 in net ﬁxed assets. 
D)  Is generating $1.20 in net income for every $1 in net ﬁxed assets. 
E)  Has $.84 in total assets for every $.96 Gerold's has in total assets.

Question 9

The ﬁnancial ratio measured as EBIT divided by interest expense is the __________.

Accepted Answer

A)  Cash coverage ratio. 
B)  Debt-equity ratio. 
C)  Times interest earned ratio. 
D)  Gross margin. 
E)  Total debt ratio. 
A)  Cash coverage ratio. 
B)  Debt-equity ratio. 
C)  Times interest earned ratio. 
D)  Gross margin. 
E)  Total debt ratio.

Question 10

Supreme Corporation's total current assets are valued at $35,000 and are comprised of cash, accounts receivable and inventory. Determine the value of the cash account given the following
Information: sales = $140,000; cost of goods sold = $120,000; accounts receivable turnover = 17.50
Times; inventory turnover = 8 times.

Accepted Answer

A)  $11,000 
B)  $12,000 
C)  $13,000 
D)  $14,000 
E)  $15,000 
A)  $11,000 
B)  $12,000 
C)  $13,000 
D)  $14,000 
E)  $15,000

Question 11

Freda's, Inc. has sales of $3,200, current liabilities of $900, total assets of $3,000, and net working capital of $500. How many dollars' worth of sales are generated from every $1 in net ﬁxed assets?

Accepted Answer

A)  $.91 
B)  $1.07 
C)  $1.67 
D)  $2.00 
E)  $2.29 
A)  $.91 
B)  $1.07 
C)  $1.67 
D)  $2.00 
E)  $2.29

Question 12

On a common size statement of comprehensive income for 2015, earnings before interest and taxes would be assigned a common value of:

Accepted Answer

A)  9% 
B)  15% 
C)  20% 
D)  22% 
E)  26% 
A)  9% 
B)  15% 
C)  20% 
D)  22% 
E)  26%

Question 13

The ﬁnancial ratio measured as total assets minus total equity, divided by total assets, is the:

Accepted Answer

A)  Total debt ratio. 
B)  Equity multiplier. 
C)  Debt-equity ratio. 
D)  Current ratio. 
E)  Times interest earned ratio. 
A)  Total debt ratio. 
B)  Equity multiplier. 
C)  Debt-equity ratio. 
D)  Current ratio. 
E)  Times interest earned ratio.

Question 14

Which of Marble Comics' liquidity measures increased from 2014 to 2015?

Accepted Answer

A)  Current ratio 
B)  Quick ratio 
C)  Cash ratio 
D)  NWC to total assets 
E)  Interval measure 
A)  Current ratio 
B)  Quick ratio 
C)  Cash ratio 
D)  NWC to total assets 
E)  Interval measure

Question 15

The equity multiplier, the proﬁt margin and the total asset turnover are the three parts of the Du
Pont identity.

Accepted Answer

A) True 
 B)False

Question 16

A ﬁrm has sales of $500, total assets of $300, and a debt/equity ratio of 1. If its return on equity is 15%, what is its net income?

Accepted Answer

A)  $7.50 
B)  $15.00 
C)  $22.50 
D)  $32.50 
E)  $50.00 
A)  $7.50 
B)  $15.00 
C)  $22.50 
D)  $32.50 
E)  $50.00

Question 17

When comparing the ﬁnancial statements of one ﬁrm with those of another ﬁrm, a problem that may
be encountered is that the operations of the two ﬁrms may vary geographically.

Accepted Answer

A) True 
 B)False

Question 18

The times interest earned ratio is deﬁned as:

Accepted Answer

A)  Net income divided by interest expense. 
B)  Interest expense divided by net income. 
C)  EBIT divided by interest expense. 
D)  Interest expense divided by EBIT. 
E)  Sales divided by interest expense. 
A)  Net income divided by interest expense. 
B)  Interest expense divided by net income. 
C)  EBIT divided by interest expense. 
D)  Interest expense divided by EBIT. 
E)  Sales divided by interest expense.

Question 19

All else unchanged, which of the following is true when a ﬁrm sells a ﬁxed asset on credit (an account receivable is created)?

Accepted Answer

A)  The current ratio goes up but the quick ratio is unchanged. 
B)  The current ratio goes up but the quick ratio declines. 
C)  The quick ratio goes up but the current ratio is unchanged. 
D)  The quick ratio goes up but the current ratio declines. 
E)  The quick ratio and the current ratio both go up. 
A)  The current ratio goes up but the quick ratio is unchanged. 
B)  The current ratio goes up but the quick ratio declines. 
C)  The quick ratio goes up but the current ratio is unchanged. 
D)  The quick ratio goes up but the current ratio declines. 
E)  The quick ratio and the current ratio both go up.

Question 20

Activities of the ﬁrm in which cash is spent are known as:

Accepted Answer

A)  Sources of cash. 
B)  Uses of cash. 
C)  Cash payments. 
D)  Cash receipts. 
E)  Cash on hand. 
A)  Sources of cash. 
B)  Uses of cash. 
C)  Cash payments. 
D)  Cash receipts. 
E)  Cash on hand.

Exam 3: Working With Financial Statements

Which ratio does not focus on ﬁnancial leverage?

Relationships determined from a ﬁrm's ﬁnancial information and used for comparison purposes are known as:

Calculate the current ratio given the following information: cash = $12,000; total current assets = $28,000; cash ratio = 0.375.

If you were to prepare a statement of cash ﬂows, what is the net cash ﬂow from ﬁnancing activities ($ in millions)?

An Edmonton ﬁrm has a debt-equity ratio of 62 %, a total asset turnover of 1.39, and a proﬁt margin of 7.8 %. The total equity is $672,100. What is the amount of the net income?

Due to the diﬃculty of access the true enterprise value, one can use the market cap as a proxy for enterprise value to calculate the EV/EBITDA ratio.

A London Ontario ﬁrm has a net income of $32,000 which provides a 12% return on assets. The ﬁrm has a debt-equity ratio of .40. What is the return on equity?

Bob's Toys has a ﬁxed asset turnover rate of 1.2 and a total asset turnover rate of .84. Gerold's Toys has a ﬁxed asset turnover rate of 1.1 and a total asset turnover rate of .96. Both companies have Similar operations. Bob's Toys:

The ﬁnancial ratio measured as EBIT divided by interest expense is the __________.

Freda's, Inc. has sales of $3,200, current liabilities of $900, total assets of $3,000, and net working capital of $500. How many dollars' worth of sales are generated from every $1 in net ﬁxed assets?

On a common size statement of comprehensive income for 2015, earnings before interest and taxes would be assigned a common value of:

The ﬁnancial ratio measured as total assets minus total equity, divided by total assets, is the:

Which of Marble Comics' liquidity measures increased from 2014 to 2015?

The equity multiplier, the proﬁt margin and the total asset turnover are the three parts of the Du Pont identity.

A ﬁrm has sales of $500, total assets of $300, and a debt/equity ratio of 1. If its return on equity is 15%, what is its net income?

When comparing the ﬁnancial statements of one ﬁrm with those of another ﬁrm, a problem that may be encountered is that the operations of the two ﬁrms may vary geographically.

The times interest earned ratio is deﬁned as:

All else unchanged, which of the following is true when a ﬁrm sells a ﬁxed asset on credit (an account receivable is created)?

Activities of the ﬁrm in which cash is spent are known as:

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