Question 1

Which of the following statements is true?

Accepted Answer

A)  The smaller the current ratio the more liquid the ﬁrm. 
B)  Since inventory is not as liquid as the other current assets it is excluded in calculation of the quick ratio. 
C)  A current ratio of greater than one indicates net working capital is negative. 
D)  In ﬁrms with inventory the quick ratio will always exceed the current ratio. 
E)  A current ratio can be less than zero. 
A)  The smaller the current ratio the more liquid the ﬁrm. 
B)  Since inventory is not as liquid as the other current assets it is excluded in calculation of the quick ratio. 
C)  A current ratio of greater than one indicates net working capital is negative. 
D)  In ﬁrms with inventory the quick ratio will always exceed the current ratio. 
E)  A current ratio can be less than zero.

Question 2

Earnings before interest and taxes divided by the interest paid is called the:

Accepted Answer

A)  Cash coverage ratio. 
B)  Times interest earned ratio. 
C)  Interval measure. 
D)  Debt-earnings ratio. 
E)  Debt-equity ratio. 
A)  Cash coverage ratio. 
B)  Times interest earned ratio. 
C)  Interval measure. 
D)  Debt-earnings ratio. 
E)  Debt-equity ratio.

Question 3

What factors might make the comparison of the ﬁnancial statements between two ﬁrms in the same
industry diﬃcult?

Accepted Answer

Factors may include: if the si

Question 4

Calculate the value of long-term debt given the following information: total debt = $320,000; debt/equity ratio = 0.80; long-term debt ratio = 0.3750.

Accepted Answer

A)  $230,000 
B)  $235,000 
C)  $240,000 
D)  $245,000 
E)  $250,000 
A)  $230,000 
B)  $235,000 
C)  $240,000 
D)  $245,000 
E)  $250,000

Question 5

A total asset turnover measure of 1.03 means that a ﬁrm has $1.03 in:

Accepted Answer

A)  Total assets for every $1 in cash. 
B)  Total assets for every $1 in total debt. 
C)  Total assets for every $1 in equity. 
D)  Sales for every $1 in total assets. 
E)  Long-term assets for every $1 in short-term assets. 
A)  Total assets for every $1 in cash. 
B)  Total assets for every $1 in total debt. 
C)  Total assets for every $1 in equity. 
D)  Sales for every $1 in total assets. 
E)  Long-term assets for every $1 in short-term assets.

Question 6

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

Accepted Answer

A)  50% 
B)  51% 
C)  52% 
D)  53% 
E)  54% 
A)  50% 
B)  51% 
C)  52% 
D)  53% 
E)  54%

Question 7

What is the net working capital turnover rate for 2015?

Accepted Answer

A)  1.16 
B)  1.25 
C)  2.28 
D)  2.34 
E)  2.87 
A)  1.16 
B)  1.25 
C)  2.28 
D)  2.34 
E)  2.87

Question 8

On a common-base year ﬁnancial statement, all accounts are expressed relative to the base:

Accepted Answer

A)  Year amount. 
B)  Amount of sales. 
C)  Amount of total assets. 
D)  Net income. 
E)  Net cash ﬂow. 
A)  Year amount. 
B)  Amount of sales. 
C)  Amount of total assets. 
D)  Net income. 
E)  Net cash ﬂow.

Question 9

Calculate Marble Comics' ROE for 2015.

Accepted Answer

A)  20.5% 
B)  22.1% 
C)  23.4% 
D)  25.6% 
E)  161.8% 
A)  20.5% 
B)  22.1% 
C)  23.4% 
D)  25.6% 
E)  161.8%

Question 10

You have the following data for the Fosberg Winery of St Catherines. What is Fosberg's return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80;
Proﬁt margin = 4.5%; Tax rate = 35%.

Accepted Answer

A)  3.6% 
B)  3.9% 
C)  5.7% 
D)  6.4% 
E)  9.3% 
A)  3.6% 
B)  3.9% 
C)  5.7% 
D)  6.4% 
E)  9.3%

Question 11

Margo's Dress Shoppe had the following values as of the end of last year and the end of this year. Which of the following are sources of cash for the year?

Accepted Answer

A)  cash and accounts receivable. 
B)  cash and accounts payable. 
C)  accounts receivable and inventory. 
D)  cash, accounts payable, and inventory. 
E)  accounts payable, accounts receivable, and inventory. 
A)  cash and accounts receivable. 
B)  cash and accounts payable. 
C)  accounts receivable and inventory. 
D)  cash, accounts payable, and inventory. 
E)  accounts payable, accounts receivable, and inventory.

Question 12

The proﬁt margin of Marble Comics Group is:

Accepted Answer

A)  3.6% 
B)  9.8% 
C)  13.1% 
D)  19.9% 
E)  22.3% 
A)  3.6% 
B)  9.8% 
C)  13.1% 
D)  19.9% 
E)  22.3%

Question 13

The sales of SportCheck have increased recently and inventory has declined slightly. A ﬁnancial analyst would expect to ﬁnd that the:

Accepted Answer

A)  Inventory turnover has increased and the days' sales in inventory has decreased. 
B)  Inventory turnover has decreased and the days' sales in inventory has decreased. 
C)  Inventory turnover has decreased and the days' sales in inventory has increased. 
D)  Inventory turnover has increased and the days' sales in inventory has increased. 
E)  Quick ratio has decreased and the current ratio has increased. 
A)  Inventory turnover has increased and the days' sales in inventory has decreased. 
B)  Inventory turnover has decreased and the days' sales in inventory has decreased. 
C)  Inventory turnover has decreased and the days' sales in inventory has increased. 
D)  Inventory turnover has increased and the days' sales in inventory has increased. 
E)  Quick ratio has decreased and the current ratio has increased.

Question 14

Common sized statements:

Accepted Answer

A)  Depict the cash ﬂows of a ﬁrm. 
B)  Are useful in making comparisons. 
C)  Reﬂect the ratio analysis of a ﬁrm. 
D)  Show the sources and uses of cash. 
E)  Reﬂect the market value of a ﬁrm. 
A)  Depict the cash ﬂows of a ﬁrm. 
B)  Are useful in making comparisons. 
C)  Reﬂect the ratio analysis of a ﬁrm. 
D)  Show the sources and uses of cash. 
E)  Reﬂect the market value of a ﬁrm.

Question 15

The ﬁnancial ratio measured as the ﬁrm's long-term debt divided by its total capitalization is:

Accepted Answer

A)  The interval measure. 
B)  The equity multiplier. 
C)  The total debt ratio. 
D)  The long-term debt ratio. 
E)  The debt-equity ratio. 
A)  The interval measure. 
B)  The equity multiplier. 
C)  The total debt ratio. 
D)  The long-term debt ratio. 
E)  The debt-equity ratio.

Question 16

The receivables turnover ratio is measured as:

Accepted Answer

A)  Sales plus accounts receivable. 
B)  Sales divided by accounts receivable. 
C)  Sales minus accounts receivable, divided by sales. 
D)  Accounts receivable times sales. 
E)  Accounts receivable divided by sales. 
A)  Sales plus accounts receivable. 
B)  Sales divided by accounts receivable. 
C)  Sales minus accounts receivable, divided by sales. 
D)  Accounts receivable times sales. 
E)  Accounts receivable divided by sales.

Question 17

A ﬁrm has a proﬁt margin of 9% on sales of $400,000. There are 10,000 shares of common stock outstanding. What is the earnings per share?

Accepted Answer

A)  $1.80 
B)  $3.60 
C)  $4.00 
D)  $36.00 
E)  $40.00 
A)  $1.80 
B)  $3.60 
C)  $4.00 
D)  $36.00 
E)  $40.00

Question 18

Calculate cash given the following information. Total current assets $57,000; supplies $4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of
Goods sold 75,000.

Accepted Answer

A)  $24,000 
B)  $22,000 
C)  $20,000 
D)  $18,000 
E)  $16,000 
A)  $24,000 
B)  $22,000 
C)  $20,000 
D)  $18,000 
E)  $16,000

Question 19

Assume Marble Comics' days' sales in inventory ratio was 120 days in 2010. By how much did it change in 2015?

Accepted Answer

A)  Increased by 11 days 
B)  Increased by 32 days 
C)  Increased by 48 days 
D)  Decreased by 22 days 
E)  Decreased by 44 days 
A)  Increased by 11 days 
B)  Increased by 32 days 
C)  Increased by 48 days 
D)  Decreased by 22 days 
E)  Decreased by 44 days

Question 20

Which one of the following sets of ratios applies most directly to shareholders?

Accepted Answer

A)  Return on assets and proﬁt margin 
B)  Quick ratio and times interest earned 
C)  Price-earnings ratio and debt-equity ratio 
D)  Market-to-book ratio and price-earnings ratio 
E)  Cash coverage ratio and times equity multiplier 
A)  Return on assets and proﬁt margin 
B)  Quick ratio and times interest earned 
C)  Price-earnings ratio and debt-equity ratio 
D)  Market-to-book ratio and price-earnings ratio 
E)  Cash coverage ratio and times equity multiplier

Exam 3: Working With Financial Statements

Which of the following statements is true?

Earnings before interest and taxes divided by the interest paid is called the:

What factors might make the comparison of the ﬁnancial statements between two ﬁrms in the same industry diﬃcult?

Calculate the value of long-term debt given the following information: total debt = $320,000; debt/equity ratio = 0.80; long-term debt ratio = 0.3750.

A total asset turnover measure of 1.03 means that a ﬁrm has $1.03 in:

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

What is the net working capital turnover rate for 2015?

On a common-base year ﬁnancial statement, all accounts are expressed relative to the base:

Calculate Marble Comics' ROE for 2015.

You have the following data for the Fosberg Winery of St Catherines. What is Fosberg's return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80; Proﬁt margin = 4.5%; Tax rate = 35%.

Margo's Dress Shoppe had the following values as of the end of last year and the end of this year. Which of the following are sources of cash for the year?

The proﬁt margin of Marble Comics Group is:

The sales of SportCheck have increased recently and inventory has declined slightly. A ﬁnancial analyst would expect to ﬁnd that the:

Common sized statements:

The ﬁnancial ratio measured as the ﬁrm's long-term debt divided by its total capitalization is:

The receivables turnover ratio is measured as:

A ﬁrm has a proﬁt margin of 9% on sales of $400,000. There are 10,000 shares of common stock outstanding. What is the earnings per share?

Calculate cash given the following information. Total current assets $57,000; supplies $4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of Goods sold 75,000.

Assume Marble Comics' days' sales in inventory ratio was 120 days in 2010. By how much did it change in 2015?

Which one of the following sets of ratios applies most directly to shareholders?

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