Question 1

On the statement of cash flows, which one of the following is considered an operating activity?

Accepted Answer

A)  Increase in net fixed assets 
B)  Decrease in accounts payable 
C)  Purchase of equipment 
D)  Dividends paid 
E)  Repayment of long-term debt 
A)  Increase in net fixed assets 
B)  Decrease in accounts payable 
C)  Purchase of equipment 
D)  Dividends paid 
E)  Repayment of long-term debt

Question 2

Lassiter Industries has annual sales of $328,000 with 8,000 shares of stock outstanding. The firm has a profit margin of 4.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?

Accepted Answer

A)  21.9 
B)  17.4 
C)  18.6 
D)  26.7 
E)  24.3 
A)  21.9 
B)  17.4 
C)  18.6 
D)  26.7 
E)  24.3

Question 3

On a common-size balance sheet all accounts for the current year are expressed as a percentage of:

Accepted Answer

A)  sales for the period. 
B)  the base year sales. 
C)  total equity for the base year. 
D)  total assets for the current year. 
E)  total assets for the base year. 
A)  sales for the period. 
B)  the base year sales. 
C)  total equity for the base year. 
D)  total assets for the current year. 
E)  total assets for the base year.

Question 4

Billings Inc. has net income of $161,000, a profit margin of 7.6 percent, and an accounts receivable balance of $127,100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables?

Accepted Answer

A)  21.90 days 
B)  27.56 days 
C)  33.18 days 
D)  35.04 days 
E)  36.19 days 
A)  21.90 days 
B)  27.56 days 
C)  33.18 days 
D)  35.04 days 
E)  36.19 days

Question 5

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

Accepted Answer

A)  financial ratios. 
B)  identities. 
C)  dimensional analysis. 
D)  scenario analysis. 
E)  solvency analysis. 
A)  financial ratios. 
B)  identities. 
C)  dimensional analysis. 
D)  scenario analysis. 
E)  solvency analysis.

Question 6

BL Industries has ending inventory of $302,800, annual sales of $2.33 million, and annual cost of goods sold of $1.41 million. On average, how long did a unit of inventory sit on the shelf before it was sold?

Accepted Answer

A)  47.43 days 
B)  22.18 days 
C)  78.38 days 
D)  61.78 days 
E)  83.13 days 
A)  47.43 days 
B)  22.18 days 
C)  78.38 days 
D)  61.78 days 
E)  83.13 days

Question 7

On a common-base year financial statement, accounts receivables for the current year will be expressed relative to which one of the following?

Accepted Answer

A)  Current year sales 
B)  Current year total assets 
C)  Base-year sales 
D)  Base-year total assets 
E)  Base-year accounts receivables 
A)  Current year sales 
B)  Current year total assets 
C)  Base-year sales 
D)  Base-year total assets 
E)  Base-year accounts receivables

Question 8

On the statement of cash flows, which one of the following is considered a financing activity?

Accepted Answer

A)  Increase in inventory 
B)  Decrease in accounts payable 
C)  Increase in net working capital 
D)  Dividends paid 
E)  Decrease in fixed assets 
A)  Increase in inventory 
B)  Decrease in accounts payable 
C)  Increase in net working capital 
D)  Dividends paid 
E)  Decrease in fixed assets

Question 9

Western Gear has net income of $12,400, a tax rate of 21 percent, and interest expense of $1,600. What is the times interest earned ratio for the year?

Accepted Answer

A)  9.63 
B)  7.75 
C)  10.81 
D)  14.97 
E)  10.97 
A)  9.63 
B)  7.75 
C)  10.81 
D)  14.97 
E)  10.97

Question 10

Big Tree Lumber has earnings per share of $1.36. The firm's earnings have been increasing at an average rate of 2.9 percent annually and are expected to continue doing so. The firm has 21,500 shares of stock outstanding at a price per share of $23.40. What is the firm's PEG ratio?

Accepted Answer

A)  2.27 
B)  11.21 
C)  4.85 
D)  3.94 
E)  5.93 
A)  2.27 
B)  11.21 
C)  4.85 
D)  3.94 
E)  5.93

Question 11

Townsend Enterprises has a PEG ratio of 5.3, net income of $49,200, a price-earnings ratio of 17.6, and a profit margin of 7.1 percent. What is the earnings growth rate?

Accepted Answer

A)  2.48 percent 
B)  1.06 percent 
C)  3.32 percent 
D)  5.20 percent 
E)  10.60 percent 
A)  2.48 percent 
B)  1.06 percent 
C)  3.32 percent 
D)  5.20 percent 
E)  10.60 percent

Question 12

Frank's Welding has net fixed assets of $36,200, total assets of $51,300, long-term debt of $22,000, and total debt of $29,700. What is the net working capital to total assets ratio?

Accepted Answer

A)  12.18 percent 
B)  16.82 percent 
C)  14.42 percent 
D)  17.79 percent 
E)  9.90 percent 
A)  12.18 percent 
B)  16.82 percent 
C)  14.42 percent 
D)  17.79 percent 
E)  9.90 percent

Question 13

Williamsburg Market is an all-equity firm that has net income of $96,200, depreciation expense of $6,300, and an increase in net working capital of $2,800. What is the amount of the net cash from operating activity?

Accepted Answer

A)  $91,300 
B)  $99,700 
C)  $93,400 
D)  $105,300 
E)  $113,700 
A)  $91,300 
B)  $99,700 
C)  $93,400 
D)  $105,300 
E)  $113,700

Question 14

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

Accepted Answer

A)  Increase in the cash ratio 
B)  Increase in the net working capital to total assets ratio 
C)  Decrease in the quick ratio 
D)  Decrease in the cash coverage ratio 
E)  Increase in the current ratio 
A)  Increase in the cash ratio 
B)  Increase in the net working capital to total assets ratio 
C)  Decrease in the quick ratio 
D)  Decrease in the cash coverage ratio 
E)  Increase in the current ratio

Question 15

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?

Accepted Answer

A)  0 
B)  0.5 
C)  1.0 
D)  1.5 
E)  2.0 
A)  0 
B)  0.5 
C)  1.0 
D)  1.5 
E)  2.0

Question 16

Oil Creek Auto has sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. What is the common-size statement value of inventory?

Accepted Answer

A)  12.22 percent 
B)  44.16 percent 
C)  16.54 percent 
D)  13.36 percent 
E)  46.74 percent 
A)  12.22 percent 
B)  44.16 percent 
C)  16.54 percent 
D)  13.36 percent 
E)  46.74 percent

Question 17

Last year, which is used as the base year, a firm had cash of $52, accounts receivable of $223, inventory of $509, and net fixed assets of $1,107. This year, the firm has cash of $61, accounts receivable of $204, inventory of $527, and net fixed assets of $1,216. What is this year's common-base-year value of inventory?

Accepted Answer

A)  0.67 
B)  0.91 
C)  0.88 
D)  1.04 
E)  1.18 
A)  0.67 
B)  0.91 
C)  0.88 
D)  1.04 
E)  1.18

Question 18

Lawn Care, Inc., has sales of $367,400, costs of $183,600, depreciation of $48,600, interest of $39,200, and a tax rate of 25 percent. The firm has total assets of $422,100, long-term debt of $102,000, net fixed assets of $264,500, and net working capital of $22,300. What is the return on equity?

Accepted Answer

A)  24.26 percent 
B)  15.38 percent 
C)  38.96 percent 
D)  29.96 percent 
E)  17.06 percent 
A)  24.26 percent 
B)  15.38 percent 
C)  38.96 percent 
D)  29.96 percent 
E)  17.06 percent

Question 19

All-State Moving had sales of $899,000 in 2017 and $967,000 in 2018. The firm's current accounts remained constant. Given this information, which one of the following statements must be true?

Accepted Answer

A)  The total asset turnover rate increased. 
B)  The days' sales in receivables increased. 
C)  The net working capital turnover rate increased. 
D)  The fixed asset turnover decreased. 
E)  The receivables turnover rate decreased. 
A)  The total asset turnover rate increased. 
B)  The days' sales in receivables increased. 
C)  The net working capital turnover rate increased. 
D)  The fixed asset turnover decreased. 
E)  The receivables turnover rate decreased.

Question 20

Duke's Garage has cash of $68, accounts receivable of $142, accounts payable of $235, and inventory of $318. What is the value of the quick ratio?

Accepted Answer

A)  2.25 
B)  0.53 
C)  0.71 
D)  0.89 
E)  1.35 
A)  2.25 
B)  0.53 
C)  0.71 
D)  0.89 
E)  1.35

Exam 3: Working with Financial Statements

On the statement of cash flows, which one of the following is considered an operating activity?

Lassiter Industries has annual sales of $328,000 with 8,000 shares of stock outstanding. The firm has a profit margin of 4.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?

On a common-size balance sheet all accounts for the current year are expressed as a percentage of:

Billings Inc. has net income of $161,000, a profit margin of 7.6 percent, and an accounts receivable balance of $127,100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables?

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

BL Industries has ending inventory of $302,800, annual sales of $2.33 million, and annual cost of goods sold of $1.41 million. On average, how long did a unit of inventory sit on the shelf before it was sold?

On a common-base year financial statement, accounts receivables for the current year will be expressed relative to which one of the following?

On the statement of cash flows, which one of the following is considered a financing activity?

Western Gear has net income of $12,400, a tax rate of 21 percent, and interest expense of $1,600. What is the times interest earned ratio for the year?

Big Tree Lumber has earnings per share of $1.36. The firm's earnings have been increasing at an average rate of 2.9 percent annually and are expected to continue doing so. The firm has 21,500 shares of stock outstanding at a price per share of $23.40. What is the firm's PEG ratio?

Townsend Enterprises has a PEG ratio of 5.3, net income of $49,200, a price-earnings ratio of 17.6, and a profit margin of 7.1 percent. What is the earnings growth rate?

Frank's Welding has net fixed assets of $36,200, total assets of $51,300, long-term debt of $22,000, and total debt of $29,700. What is the net working capital to total assets ratio?

Williamsburg Market is an all-equity firm that has net income of $96,200, depreciation expense of $6,300, and an increase in net working capital of $2,800. What is the amount of the net cash from operating activity?

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?

Oil Creek Auto has sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. What is the common-size statement value of inventory?

Lawn Care, Inc., has sales of $367,400, costs of $183,600, depreciation of $48,600, interest of $39,200, and a tax rate of 25 percent. The firm has total assets of $422,100, long-term debt of $102,000, net fixed assets of $264,500, and net working capital of $22,300. What is the return on equity?

All-State Moving had sales of $899,000 in 2017 and $967,000 in 2018. The firm's current accounts remained constant. Given this information, which one of the following statements must be true?

Duke's Garage has cash of $68, accounts receivable of $142, accounts payable of $235, and inventory of $318. What is the value of the quick ratio?

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

Leasing

Filters