Question 1

Larry's Lounge has cash of $1,670, accounts receivable of $610, accounts payable of $2,900, and inventory of $3,690. What is the value of the quick ratio?

Accepted Answer

A)  .58 
B)  .62 
C)  .79 
D)  2.06 
E)  2.13 
A)  .58 
B)  .62 
C)  .79 
D)  2.06 
E)  2.13

Question 2

Calculate the cash ratio given the following information: current ratio = 3; total current assets = $21,000; cash and cash equivalents = $2,380.

Accepted Answer

A)  0.30 
B)  0.31 
C)  0.32 
D)  0.33 
E)  0.34 
A)  0.30 
B)  0.31 
C)  0.32 
D)  0.33 
E)  0.34

Question 3

Calculate the cash ratio given the following information: current ratio = 2; total current assets = $10,000; cash and cash equivalents = $1,250.

Accepted Answer

A)  0.21 
B)  0.22 
C)  0.23 
D)  0.24 
E)  0.25 
A)  0.21 
B)  0.22 
C)  0.23 
D)  0.24 
E)  0.25

Question 4

When would the return on equity (ROE) deﬁnitely equal the return on assets (ROA)?

Accepted Answer

A)  Whenever a ﬁrm has no long-term debt. 
B)  Whenever a ﬁrm's debt-to-equity ratio is equal to one. 
C)  Whenever a ﬁrm's long-term debt ratio is equal to zero. 
D)  Whenever a ﬁrm's return on equity is equal to 100%. 
E)  Whenever a ﬁrm's total debt ratio is equal to zero. 
A)  Whenever a ﬁrm has no long-term debt. 
B)  Whenever a ﬁrm's debt-to-equity ratio is equal to one. 
C)  Whenever a ﬁrm's long-term debt ratio is equal to zero. 
D)  Whenever a ﬁrm's return on equity is equal to 100%. 
E)  Whenever a ﬁrm's total debt ratio is equal to zero.

Question 5

In the most general sense, which of the following would you expect to be true?

Accepted Answer

A)  If a current asset account and a current liability account both increase by the same amount, there is a net use of funds. 
B)  If ﬁxed assets decrease by the amount of depreciation for the year, there is a net use of funds. 
C)  Changes in income and expense accounts do not affect sources and uses of funds. 
D)  If a liability account increases and an asset account decreases by the same amount, there is a net source of funds. 
E)  If the common stock outstanding increases there is a use of funds. 
A)  If a current asset account and a current liability account both increase by the same amount, there is a net use of funds. 
B)  If ﬁxed assets decrease by the amount of depreciation for the year, there is a net use of funds. 
C)  Changes in income and expense accounts do not affect sources and uses of funds. 
D)  If a liability account increases and an asset account decreases by the same amount, there is a net source of funds. 
E)  If the common stock outstanding increases there is a use of funds.

Question 6

A supplier, who requires payment within ten days, is most concerned with which one of the following ratios when granting credit?

Accepted Answer

A)  current 
B)  cash 
C)  debt-equity 
D)  quick 
E)  total debt 
A)  current 
B)  cash 
C)  debt-equity 
D)  quick 
E)  total debt

Question 7

A ﬁnancial manager who needs to ﬁnd out how long it will take before their ﬁrm runs out of cash if no further cash comes in should consider the ________________.

Accepted Answer

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

Question 8

A ﬁrm has total debt of $1,850 and a debt-equity ratio of .64. What is the value of the total assets?

Accepted Answer

A)  $1,128.05 
B)  $1,184.00 
C)  $2,571.95 
D)  $3,034.00 
E)  $4,740.63 
A)  $1,128.05 
B)  $1,184.00 
C)  $2,571.95 
D)  $3,034.00 
E)  $4,740.63

Question 9

Rojers Communications Inc. sells for $34.50 and there are 605 million shares outstanding at the end of 2015. Based on the 2015 annual report, EBIT is $2,024 million, net income is $1,002 million,
And depreciation is $1,760 million. What is the Enterprise Multiple?

Accepted Answer

A)  5.52 
B)  10.31 
C)  20.83 
D)  4.52 
E)  5.00 
A)  5.52 
B)  10.31 
C)  20.83 
D)  4.52 
E)  5.00

Question 10

A price earnings ratio of 14 means that:

Accepted Answer

A)  Stockholders are currently paying a price equal to 14 times earnings per share when they buy one share of stock. 
B)  The market value of each share of outstanding common stock is currently valued at $14 per share. 
C)  The market-to-book ratio must be equal to 4. 
D)  The current selling price of a product is equal to 14 times the net income generated from the sale of that product. 
E)  The market value of the common stock is currently equal to 14 times the book value per share. 
A)  Stockholders are currently paying a price equal to 14 times earnings per share when they buy one share of stock. 
B)  The market value of each share of outstanding common stock is currently valued at $14 per share. 
C)  The market-to-book ratio must be equal to 4. 
D)  The current selling price of a product is equal to 14 times the net income generated from the sale of that product. 
E)  The market value of the common stock is currently equal to 14 times the book value per share.

Question 11

If a ﬁrm uses cash to purchase inventory, its quick ratio will increase.

Accepted Answer

A) True 
 B)False

Question 12

The ﬁnancial ratio measured as current assets divided by average daily operating costs is the:

Accepted Answer

A)  Cash ratio. 
B)  NWC to total assets ratio. 
C)  Acid-test ratio. 
D)  Interval measure. 
E)  Operating measure. 
A)  Cash ratio. 
B)  NWC to total assets ratio. 
C)  Acid-test ratio. 
D)  Interval measure. 
E)  Operating measure.

Question 13

The following statement of ﬁnancial position and statement of comprehensive income should be used.     What is Woodburn's debt-equity ratio for 2015?

Accepted Answer

A)  .39 
B)  .47 
C)  .52 
D)  .55 
E)  .68 
A)  .39 
B)  .47 
C)  .52 
D)  .55 
E)  .68

Question 14

A decrease in a(n) _____________ account would be considered a(n) __________ of funds.

Accepted Answer

A)  Asset; use 
B)  Liability; use 
C)  Liabilities; source 
D)  Expense; use 
E)  Revenues; source 
A)  Asset; use 
B)  Liability; use 
C)  Liabilities; source 
D)  Expense; use 
E)  Revenues; source

Question 15

If the level of inventory rises, all else constant, then:

Accepted Answer

A)  The days' sales in inventory will also rise. 
B)  The NWC ratio will also rise. 
C)  Inventory turnover will also rise. 
D)  Fixed asset turnover will decline. 
E)  Current ratio will decline. 
A)  The days' sales in inventory will also rise. 
B)  The NWC ratio will also rise. 
C)  Inventory turnover will also rise. 
D)  Fixed asset turnover will decline. 
E)  Current ratio will decline.

Question 16

How many days does it take for inventory to sell? (Use 2015 inventory)

Accepted Answer

A)  4 
B)  6 
C)  59 
D)  76 
E)  99 
A)  4 
B)  6 
C)  59 
D)  76 
E)  99

Question 17

Which of the following contains the components of the Du Pont identity for the company? Use year- end 2015 values where appropriate.

Accepted Answer

A)  0.159; 1.77; 4.26 
B)  0.169; 1.56; 4.54 
C)  0.159; 1.66; 4.54 
D)  0.132; 1.66; 5.46 
E)  0.427; 1.40; 2.00 
A)  0.159; 1.77; 4.26 
B)  0.169; 1.56; 4.54 
C)  0.159; 1.66; 4.54 
D)  0.132; 1.66; 5.46 
E)  0.427; 1.40; 2.00

Question 18

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

Accepted Answer

A)  $450 cash outﬂow 
B)  $560 cash outﬂow 
C)  $870 cash outﬂow 
D)  $1,240 cash outﬂow 
E)  $1,570 cash outﬂow 
A)  $450 cash outﬂow 
B)  $560 cash outﬂow 
C)  $870 cash outﬂow 
D)  $1,240 cash outﬂow 
E)  $1,570 cash outﬂow

Question 19

The net working capital turnover ratio is measured as:

Accepted Answer

A)  Sales divided by net working capital. 
B)  Sales minus net working capital. 
C)  Sales times net working capital. 
D)  Net working capital divided by sales. 
E)  Net working capital plus sales. 
A)  Sales divided by net working capital. 
B)  Sales minus net working capital. 
C)  Sales times net working capital. 
D)  Net working capital divided by sales. 
E)  Net working capital plus sales.

Question 20

CCI Group Inc. (Toronto) has a current ratio of 1.1. This implies that if the ﬁrm liquidates its current assets in order to pay off its current liabilities, it can sell the current assets for as little as:

Accepted Answer

A)  15% of book value. 
B)  25% of book value. 
C)  33% of book value. 
D)  90% of book value. 
E)  150% of book value. 
A)  15% of book value. 
B)  25% of book value. 
C)  33% of book value. 
D)  90% of book value. 
E)  150% of book value.

Exam 3: Working With Financial Statements

Larry's Lounge has cash of $1,670, accounts receivable of $610, accounts payable of $2,900, and inventory of $3,690. What is the value of the quick ratio?

Calculate the cash ratio given the following information: current ratio = 3; total current assets = $21,000; cash and cash equivalents = $2,380.

Calculate the cash ratio given the following information: current ratio = 2; total current assets = $10,000; cash and cash equivalents = $1,250.

When would the return on equity (ROE) deﬁnitely equal the return on assets (ROA)?

In the most general sense, which of the following would you expect to be true?

A supplier, who requires payment within ten days, is most concerned with which one of the following ratios when granting credit?

A ﬁnancial manager who needs to ﬁnd out how long it will take before their ﬁrm runs out of cash if no further cash comes in should consider the ________________.

A ﬁrm has total debt of $1,850 and a debt-equity ratio of .64. What is the value of the total assets?

Rojers Communications Inc. sells for $34.50 and there are 605 million shares outstanding at the end of 2015. Based on the 2015 annual report, EBIT is $2,024 million, net income is $1,002 million, And depreciation is $1,760 million. What is the Enterprise Multiple?

A price earnings ratio of 14 means that:

If a ﬁrm uses cash to purchase inventory, its quick ratio will increase.

The ﬁnancial ratio measured as current assets divided by average daily operating costs is the:

The following statement of ﬁnancial position and statement of comprehensive income should be used. What is Woodburn's debt-equity ratio for 2015?

A decrease in a(n) _____________ account would be considered a(n) __________ of funds.

If the level of inventory rises, all else constant, then:

How many days does it take for inventory to sell? (Use 2015 inventory)

Which of the following contains the components of the Du Pont identity for the company? Use year- end 2015 values where appropriate.

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

The net working capital turnover ratio is measured as:

CCI Group Inc. (Toronto) has a current ratio of 1.1. This implies that if the ﬁrm liquidates its current assets in order to pay off its current liabilities, it can sell the current assets for as little 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

A decrease in a(n) ___ account would be considered a(n) of funds.