Question 1

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

Accepted Answer

A ratio that examines the numb

Question 2

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 19%; total asset turnover 1.5; return on equity 37.05%.

Accepted Answer

A)  1.2 
B)  1.3 
C)  1.4 
D)  1.5 
E)  1.6 
A)  1.2 
B)  1.3 
C)  1.4 
D)  1.5 
E)  1.6

Question 3

What is the equity multiplier for 2015?

Accepted Answer

A)  0.29 
B)  0.66 
C)  1.17 
D)  1.52 
E)  2.42 
A)  0.29 
B)  0.66 
C)  1.17 
D)  1.52 
E)  2.42

Question 4

Chadwick, Inc., has 125,000 shares of stock outstanding, sales of $7.2 million, net income of $600,000, a price-earnings ratio of 22, and a book value per share of $36.30. What is the market-
To-book ratio?

Accepted Answer

A)  1.87 
B)  2.43 
C)  2.91 
D)  3.18 
E)  3.27 
A)  1.87 
B)  2.43 
C)  2.91 
D)  3.18 
E)  3.27

Question 5

Vinnie's Motors of Winnipeg has a market-to-book ratio of 3. The book value per share is $4.00. This means that a $1 increase in the book value per share will:

Accepted Answer

A)  Cause the accountants to increase the equity of the ﬁrm by an additional $2. 
B)  Increase the market price per share by $1. 
C)  Increase the market price per share by $12. 
D)  Tend to cause the market price per share to rise. 
E)  Only affect book values but not market values. 
A)  Cause the accountants to increase the equity of the ﬁrm by an additional $2. 
B)  Increase the market price per share by $1. 
C)  Increase the market price per share by $12. 
D)  Tend to cause the market price per share to rise. 
E)  Only affect book values but not market values.

Question 6

The long-term debt ratio is probably of most interest to a ﬁrm's:

Accepted Answer

A)  Credit customers. 
B)  Employees. 
C)  Suppliers. 
D)  Debt holders. 
E)  Shareholders. 
A)  Credit customers. 
B)  Employees. 
C)  Suppliers. 
D)  Debt holders. 
E)  Shareholders.

Question 7

The ﬁxed asset turnover ratio is measured as:

Accepted Answer

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

Question 8

Which one of the following measures the eﬃciency with which a ﬁrm uses it resources to generate sales?

Accepted Answer

A)  Price-earnings ratio 
B)  Return on equity 
C)  Total asset turnover 
D)  Current ratio 
E)  Return on assets 
A)  Price-earnings ratio 
B)  Return on equity 
C)  Total asset turnover 
D)  Current ratio 
E)  Return on assets

Question 9

The current ratio is measured as:

Accepted Answer

A)  Current assets minus current liabilities. 
B)  Current assets divided by current liabilities. 
C)  Current liabilities minus inventory, divided by current assets. 
D)  Cash on hand divided by current liabilities. 
E)  Current liabilities divided by current assets. 
A)  Current assets minus current liabilities. 
B)  Current assets divided by current liabilities. 
C)  Current liabilities minus inventory, divided by current assets. 
D)  Cash on hand divided by current liabilities. 
E)  Current liabilities divided by current assets.

Question 10

Marble Comics' times interest earned ratio is:

Accepted Answer

A)  0.34 
B)  1.46 
C)  1.95 
D)  2.95 
E)  4.80 
A)  0.34 
B)  1.46 
C)  1.95 
D)  2.95 
E)  4.80

Question 11

During the year, Doug's Bakery decreased its accounts receivable by $50, increased its inventory by $100, and decreased its accounts payable by $50. For these three accounts, the ﬁrm has a net:

Accepted Answer

A)  $200 use of cash. 
B)  $100 use of cash. 
C)  $0 use of cash. 
D)  $100 source of cash. 
E)  $200 source of cash. 
A)  $200 use of cash. 
B)  $100 use of cash. 
C)  $0 use of cash. 
D)  $100 source of cash. 
E)  $200 source of cash.

Question 12

Given a proﬁt margin = 10%, ROE = 20%, D/E = 1.5, and assets = $200, calculate sales.

Accepted Answer

A)  $10 
B)  $160 
C)  $250 
D)  $640 
E)  $1,000 
A)  $10 
B)  $160 
C)  $250 
D)  $640 
E)  $1,000

Question 13

Curly Industries generated net income of $980 for the year. The depreciation expense was $120 and dividends paid were $250. The accounts payable decreased by $60, accounts receivable
Decreased by $20, inventory increased by $80, and net ﬁxed assets increased by $360. What is the
Net cash ﬂow from operating activity?

Accepted Answer

A)  $940 
B)  $950 
C)  $980 
D)  $1,100 
E)  $1,140 
A)  $940 
B)  $950 
C)  $980 
D)  $1,100 
E)  $1,140

Question 14

A Toronto ﬁrm has a times interest earned ratio of 2.7 times. This means:

Accepted Answer

A)  The ﬁrm generated enough cash to cover its interest expense 2.7 times. 
B)  The ﬁrm has suﬃcient EBIT to cover its interest expense 2.7 times. 
C)  The interest expense of this ﬁrm exceeded earnings before taxes by 2.7 times. 
D)  The net income of this ﬁrm is suﬃcient to cover its interest expense 2.7 times. 
E)  The ﬁrm earned $1 in EBIT for every $2.70 it paid out in interest. 
A)  The ﬁrm generated enough cash to cover its interest expense 2.7 times. 
B)  The ﬁrm has suﬃcient EBIT to cover its interest expense 2.7 times. 
C)  The interest expense of this ﬁrm exceeded earnings before taxes by 2.7 times. 
D)  The net income of this ﬁrm is suﬃcient to cover its interest expense 2.7 times. 
E)  The ﬁrm earned $1 in EBIT for every $2.70 it paid out in interest.

Question 15

An increase in which one of the following accounts increases a ﬁrm's current ratio without affecting its quick ratio?

Accepted Answer

A)  Accounts payable 
B)  Cash 
C)  Inventory 
D)  Accounts receivable 
E)  Fixed assets 
A)  Accounts payable 
B)  Cash 
C)  Inventory 
D)  Accounts receivable 
E)  Fixed assets

Question 16

What is the times interest earned ratio for 2015?

Accepted Answer

A)  1.5 times 
B)  3.5 times 
C)  4.5 times 
D)  6.5 times 
E)  7.5 times 
A)  1.5 times 
B)  3.5 times 
C)  4.5 times 
D)  6.5 times 
E)  7.5 times

Question 17

How did Marble Comics' net working capital to total assets ratio change from 2014 to 2015?

Accepted Answer

A)  Decreased from 0.66 to 0.43 
B)  Increased from 0.54 to 0.60 
C)  Decreased from 0.17 to -0.01 
D)  Increased from 0.21 to 0.67 
E)  Increased from 0.17 to 0.89 
A)  Decreased from 0.66 to 0.43 
B)  Increased from 0.54 to 0.60 
C)  Decreased from 0.17 to -0.01 
D)  Increased from 0.21 to 0.67 
E)  Increased from 0.17 to 0.89

Question 18

What is the change in net working capital($ in millions)?

Accepted Answer

A)  -$3,655 
B)  -$3,015 
C)  $3,655 
D)  $6,670 
E)  $10,755 
A)  -$3,655 
B)  -$3,015 
C)  $3,655 
D)  $6,670 
E)  $10,755

Question 19

Calculate the current ratio given the following information: current liabilities = $40,000; sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover = 5;
Inventory turnover = 3.

Accepted Answer

A)  1.60 
B)  1.70 
C)  1.80 
D)  1.90 
E)  2.00 
A)  1.60 
B)  1.70 
C)  1.80 
D)  1.90 
E)  2.00

Question 20

Calculate depreciation expense given the following information. Interest expense $2,000; times interest earned 5; cash coverage ratio 5.5.

Accepted Answer

A)  $1,000 
B)  $1,200 
C)  $1,400 
D)  $1,600 
E)  $1,800 
A)  $1,000 
B)  $1,200 
C)  $1,400 
D)  $1,600 
E)  $1,800

Exam 3: Working With Financial Statements

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

Using the Du Pont Identity Method, calculate the equity multiplier given the following information. Proﬁt margin 19%; total asset turnover 1.5; return on equity 37.05%.

What is the equity multiplier for 2015?

Chadwick, Inc., has 125,000 shares of stock outstanding, sales of $7.2 million, net income of $600,000, a price-earnings ratio of 22, and a book value per share of $36.30. What is the market- To-book ratio?

Vinnie's Motors of Winnipeg has a market-to-book ratio of 3. The book value per share is $4.00. This means that a $1 increase in the book value per share will:

The long-term debt ratio is probably of most interest to a ﬁrm's:

The ﬁxed asset turnover ratio is measured as:

Which one of the following measures the eﬃciency with which a ﬁrm uses it resources to generate sales?

The current ratio is measured as:

Marble Comics' times interest earned ratio is:

During the year, Doug's Bakery decreased its accounts receivable by $50, increased its inventory by $100, and decreased its accounts payable by $50. For these three accounts, the ﬁrm has a net:

Given a proﬁt margin = 10%, ROE = 20%, D/E = 1.5, and assets = $200, calculate sales.

A Toronto ﬁrm has a times interest earned ratio of 2.7 times. This means:

An increase in which one of the following accounts increases a ﬁrm's current ratio without affecting its quick ratio?

What is the times interest earned ratio for 2015?

How did Marble Comics' net working capital to total assets ratio change from 2014 to 2015?

What is the change in net working capital($ in millions)?

Calculate the current ratio given the following information: current liabilities = $40,000; sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover = 5; Inventory turnover = 3.

Calculate depreciation expense given the following information. Interest expense $2,000; times interest earned 5; cash coverage ratio 5.5.

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