Question 1

Determine the value of cash equivalents given the following information: cash ratio = 2.5; cash = $1,500 ; current liabilities = $900

Accepted Answer

A)  $850 
B)  $800 
C)  $750 
D)  $700 
E)  $650 
A)  $850 
B)  $800 
C)  $750 
D)  $700 
E)  $650

Question 2

Conceptually, what does the days' sales in receivables ratio measure for a ﬁrm?

Accepted Answer

A)  The number of days it takes to generate dollar sales equal to the outstanding accounts receivable balance. 
B)  The number of days it takes on average for customers to pay their bills. 
C)  The number of days it takes for a ﬁrm to pay its bills assuming no new payables are created. 
D)  The number of times during the year a ﬁrm collects and relends its receivables. 
E)  The number of days it takes before the ﬁrm's working capital becomes negative. 
A)  The number of days it takes to generate dollar sales equal to the outstanding accounts receivable balance. 
B)  The number of days it takes on average for customers to pay their bills. 
C)  The number of days it takes for a ﬁrm to pay its bills assuming no new payables are created. 
D)  The number of times during the year a ﬁrm collects and relends its receivables. 
E)  The number of days it takes before the ﬁrm's working capital becomes negative.

Question 3

What was inventory turnover for 2015?

Accepted Answer

A)  1.38 
B)  1.42 
C)  1.48 
D)  3.15 
E)  3.38 
A)  1.38 
B)  1.42 
C)  1.48 
D)  3.15 
E)  3.38

Question 4

Ajax Corporation's total current assets are valued at $135,000 and are comprised of cash, accounts receivable and inventory. Determine the value of the cash account given the following information:
Sales = $800,000; cost of goods sold = $300,000; accounts receivable turnover = 32 times;
Inventory turnover = 10 times.

Accepted Answer

A)  $70,000 
B)  $75,000 
C)  $80,000 
D)  $85,000 
E)  $90,000 
A)  $70,000 
B)  $75,000 
C)  $80,000 
D)  $85,000 
E)  $90,000

Question 5

A common-size statement of comprehensive income is deﬁned as a ﬁnancial statement wherein all items are expressed as a percentage of:

Accepted Answer

A)  Their prior year's value. 
B)  Their projected value. 
C)  Their 5-year average value. 
D)  Total assets. 
E)  Sales. 
A)  Their prior year's value. 
B)  Their projected value. 
C)  Their 5-year average value. 
D)  Total assets. 
E)  Sales.

Question 6

Without making reference to its formula, provide a deﬁnition of accounts receivable turnover.

Accepted Answer

A ratio used to examine the ef

Question 7

An increase in long-term debt is source of cash?

Accepted Answer

A) True 
 B)False

Question 8

A Halifax ﬁrm generates net income of $530. The depreciation expense is $60 and dividends paid are $80. Accounts payable decrease by $40, accounts receivable decrease by $30, inventory Increases by $20, and net ﬁxed assets decrease by $40. What is the net cash from operating
Activity?

Accepted Answer

A)  $480 
B)  $530 
C)  $560 
D)  $580 
E)  $600 
A)  $480 
B)  $530 
C)  $560 
D)  $580 
E)  $600

Question 9

Taylor's Men's Wear has a debt-equity ratio of 55 %, sales of $587,000, net income of $63,400, and total debt of $196,000. What is the return on equity?

Accepted Answer

A)  15.80 % 
B)  17.79 % 
C)  18.03 % 
D)  19.41 % 
E)  19.58 % 
A)  15.80 % 
B)  17.79 % 
C)  18.03 % 
D)  19.41 % 
E)  19.58 %

Question 10

The total long-term debt and equity of the ﬁrm is frequently called:

Accepted Answer

A)  Total assets. 
B)  Total capitalization. 
C)  Total ﬁnancing. 
D)  Debt-equity consolidation. 
E)  Debt-equity reconciliation. 
A)  Total assets. 
B)  Total capitalization. 
C)  Total ﬁnancing. 
D)  Debt-equity consolidation. 
E)  Debt-equity reconciliation.

Question 11

The uses of cash include($ in millions):

Accepted Answer

A)  $110 from notes payable. 
B)  $1,075 from retained earnings. 
C)  $840 from ﬁxed assets. 
D)  $370 from inventory. 
E)  $70 from accounts receivable. 
A)  $110 from notes payable. 
B)  $1,075 from retained earnings. 
C)  $840 from ﬁxed assets. 
D)  $370 from inventory. 
E)  $70 from accounts receivable.

Question 12

Bandras Company has a debt-equity ratio of 0.85. Return on assets is 10.5 %. What is the return on equity?

Accepted Answer

A)  17.88% 
B)  18.35% 
C)  18.88%. 
D)  19.43% 
E)  19.85% 
A)  17.88% 
B)  18.35% 
C)  18.88%. 
D)  19.43% 
E)  19.85%

Question 13

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

Accepted Answer

A)  23.45 % 
B)  29.01 % 
C)  35.42 % 
D)  40.54 % 
E)  43.09 % 
A)  23.45 % 
B)  29.01 % 
C)  35.42 % 
D)  40.54 % 
E)  43.09 %

Question 14

Problems with ﬁnancial statement analysis include all of the following EXCEPT:

Accepted Answer

A)  Many ﬁrms are conglomerates whose combined operations don't ﬁt any neat industry classiﬁcation. 
B)  The ﬁnancial statements of ﬁrms outside US and Canada do not necessarily conform to GAAP, making it diﬃcult to compare them to US and Canadian ﬁrms. 
C)  Firms may use different accounting procedures for inventory, making it diﬃcult to compare those using standard ﬁnancial ratios. 
D)  If two ﬁrms with seasonal operations end their ﬁscal years at different times, their ﬁnancial statements may be diﬃcult to compare. 
E)  Financial statements have little value since they cannot be used to calculate a ﬁrm's tax liability. 
A)  Many ﬁrms are conglomerates whose combined operations don't ﬁt any neat industry classiﬁcation. 
B)  The ﬁnancial statements of ﬁrms outside US and Canada do not necessarily conform to GAAP, making it diﬃcult to compare them to US and Canadian ﬁrms. 
C)  Firms may use different accounting procedures for inventory, making it diﬃcult to compare those using standard ﬁnancial ratios. 
D)  If two ﬁrms with seasonal operations end their ﬁscal years at different times, their ﬁnancial statements may be diﬃcult to compare. 
E)  Financial statements have little value since they cannot be used to calculate a ﬁrm's tax liability.

Question 15

The quick ratio:

Accepted Answer

A)  Indicates the ability of a ﬁrm to meet its current obligations without disposing of any inventory. 
B)  Depicts the ability of a ﬁrm to pay off its long-term debts in a timely manner. 
C)  Compares the current cash holdings of a ﬁrm to the current liabilities. 
D)  Measures a ﬁrm's ability to generate cash from its operations. 
E)  Indicates how quickly a ﬁrm can liquidate its inventory. 
A)  Indicates the ability of a ﬁrm to meet its current obligations without disposing of any inventory. 
B)  Depicts the ability of a ﬁrm to pay off its long-term debts in a timely manner. 
C)  Compares the current cash holdings of a ﬁrm to the current liabilities. 
D)  Measures a ﬁrm's ability to generate cash from its operations. 
E)  Indicates how quickly a ﬁrm can liquidate its inventory.

Question 16

Which one of the following will increase the return on equity as computed using the Du Pont identity given that all else is held constant?

Accepted Answer

A)  A decrease in total equity 
B)  A decrease in sales 
C)  A decrease in net income 
D)  An increase in total assets 
E)  An increase in costs 
A)  A decrease in total equity 
B)  A decrease in sales 
C)  A decrease in net income 
D)  An increase in total assets 
E)  An increase in costs

Question 17

It is often said that anyone with a pencil can calculate ﬁnancial ratios, but it takes a brain to interpret
them. What kinds of things should the analyst keep in mind when evaluating the ﬁnancial
statements of a given ﬁrm?

Accepted Answer

This question is open-ended, a

Question 18

Prepare common-size statement of ﬁnancial positions for Marble Comics using the data below.
Comment on the ﬁrm's liquidity.

Accepted Answer

This is a relatively straightforward exe

Question 19

The Frasier Company has a long-term debt ratio of 0.5 and a current ratio of 1.3. Current liabilities are $900, sales are $6,000, proﬁt margin is 10%, and ROE is 19&. What is the amount of the ﬁrm's Net ﬁxed assets?

Accepted Answer

A)  $7,546 
B)  $7,046 
C)  $6,556 
D)  $6,046 
E)  $5,556 
A)  $7,546 
B)  $7,046 
C)  $6,556 
D)  $6,046 
E)  $5,556

Question 20

Use the following statement of ﬁnancial position and statement of comprehensive income     What is the net working capital to total assets ratio for Bluebird for 2015?

Accepted Answer

A)  28.17 % 
B)  34.18 % 
C)  39.27 % 
D)  46.11 % 
E)  47.15 % 
A)  28.17 % 
B)  34.18 % 
C)  39.27 % 
D)  46.11 % 
E)  47.15 %

Exam 3: Working With Financial Statements

Determine the value of cash equivalents given the following information: cash ratio = 2.5; cash = $1,500 ; current liabilities = $900

Conceptually, what does the days' sales in receivables ratio measure for a ﬁrm?

What was inventory turnover for 2015?

A common-size statement of comprehensive income is deﬁned as a ﬁnancial statement wherein all items are expressed as a percentage of:

Without making reference to its formula, provide a deﬁnition of accounts receivable turnover.

An increase in long-term debt is source of cash?

A Halifax ﬁrm generates net income of $530. The depreciation expense is $60 and dividends paid are $80. Accounts payable decrease by $40, accounts receivable decrease by $30, inventory Increases by $20, and net ﬁxed assets decrease by $40. What is the net cash from operating Activity?

Taylor's Men's Wear has a debt-equity ratio of 55 %, sales of $587,000, net income of $63,400, and total debt of $196,000. What is the return on equity?

The total long-term debt and equity of the ﬁrm is frequently called:

The uses of cash include($ in millions):

Bandras Company has a debt-equity ratio of 0.85. Return on assets is 10.5 %. What is the return on equity?

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

Problems with ﬁnancial statement analysis include all of the following EXCEPT:

The quick ratio:

Which one of the following will increase the return on equity as computed using the Du Pont identity given that all else is held constant?

It is often said that anyone with a pencil can calculate ﬁnancial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the ﬁnancial statements of a given ﬁrm?

Prepare common-size statement of ﬁnancial positions for Marble Comics using the data below. Comment on the ﬁrm's liquidity.

The Frasier Company has a long-term debt ratio of 0.5 and a current ratio of 1.3. Current liabilities are $900, sales are $6,000, proﬁt margin is 10%, and ROE is 19&. What is the amount of the ﬁrm's Net ﬁxed assets?

Use the following statement of ﬁnancial position and statement of comprehensive income What is the net working capital to total assets ratio for Bluebird for 2015?

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