Question 1

The impact of increasing financial leverage, all else remaining equal, is to cause

Accepted Answer

A)  A reduction in the return on equity 
B)  Increases the level of risk in the company 
C)  Increases the return on capital employed 
D)  A commensurate increase in operating leverage 
E)  An improvement in liquidity 
A)  A reduction in the return on equity 
B)  Increases the level of risk in the company 
C)  Increases the return on capital employed 
D)  A commensurate increase in operating leverage 
E)  An improvement in liquidity

Question 2

At the end of this year the Full Glass Company has cash of $100,000, accounts receivable of $200,000, inventory of $300,000, total property, plant, and equipment of $300,000 and total assets of $1,000,000. The corresponding figures at the end of last year were $65,000, $140,000, $225,000, $250,000 and $730,000 respectively. What is the percentage change in patents?

Accepted Answer

A)  20% 
B)  43% 
C)  50% 
D)  54% 
E)  100% 
A)  20% 
B)  43% 
C)  50% 
D)  54% 
E)  100%

Question 3

Which of the following represents the most appropriate description of breakeven analysis?

Accepted Answer

A)  An analyst prepares pro forma financial statements for the next five years. 
B)  An analyst compares financial ratios of a company over the last five years. 
C)  An analyst compares financial ratios for the current year for two companies. 
D)  An analyst prepares ratios to determine what sales are required to earn a profit. 
E)  An analyst develops ratios to determine how much the company needs to borrow. 
A)  An analyst prepares pro forma financial statements for the next five years. 
B)  An analyst compares financial ratios of a company over the last five years. 
C)  An analyst compares financial ratios for the current year for two companies. 
D)  An analyst prepares ratios to determine what sales are required to earn a profit. 
E)  An analyst develops ratios to determine how much the company needs to borrow.

Question 4

Mount Blanc's Dairy's sales inventory at the start of the previous year was valued at $310,000 and the company's ending inventory was $374,000. The cost of goods sold for that period for the company was $13,870,000. Because stocked-outs have been a problem, a new refrigerated warehouse will allow the company to hold three more days worth of inventory. Mount Blanc will then be carrying an average inventory of

Accepted Answer

A)  $342,000 
B)  $228,000 
C)  $114,000 
D)  $380,000 
E)  $456,000 
A)  $342,000 
B)  $228,000 
C)  $114,000 
D)  $380,000 
E)  $456,000

Question 5

The ________ displays several years worth of key financial indicators for comparative companies plotted on a graph.

Accepted Answer

A)  Regression line 
B)  Linear comparisons 
C)  Ratio charts 
D)  Longitudinal plots 
E)  Trend line 
A)  Regression line 
B)  Linear comparisons 
C)  Ratio charts 
D)  Longitudinal plots 
E)  Trend line

Question 6

Two companies have the same sales revenue for the year which equalled $22,550,000. Co. A has average total assets of $10,560,000 and current liabilities of $1,200,000. Co. B has average long-term liabilities of $3,750,000 in total shareholder equity of $5,610,000. When examining how well a company uses its assets

Accepted Answer

A)  Co. B. is 2.4 times more efficient than Co. A 
B)  The data provided are insufficient to make a reliable comparison 
C)  Co. A. is as efficient as Co. B 
D)  Co. B. is more efficient than Co. A. by 12% 
E)  Co. A. is 3x more efficient than Co. B 
A)  Co. B. is 2.4 times more efficient than Co. A 
B)  The data provided are insufficient to make a reliable comparison 
C)  Co. A. is as efficient as Co. B 
D)  Co. B. is more efficient than Co. A. by 12% 
E)  Co. A. is 3x more efficient than Co. B

Question 7

Which of the following ratio patterns over the past five years would predict the bankruptcy of a company?

Accepted Answer

A)  The ratios are consistently about the same over the five years. 
B)  The ratios start to get smaller over the five years. 
C)  The ratios start to get larger over the five years. 
D)  The ratios start to somewhat worse over the five years. 
E)  The ratios start to have large changes over the five years. 
A)  The ratios are consistently about the same over the five years. 
B)  The ratios start to get smaller over the five years. 
C)  The ratios start to get larger over the five years. 
D)  The ratios start to somewhat worse over the five years. 
E)  The ratios start to have large changes over the five years.

Question 8

Before undertaking ratio analysis, a prudent first step is to

Accepted Answer

A)  Select the specific ratios to be used 
B)  Determine who the target user is and their needs 
C)  Assemble the information required for the analysis 
D)  Review the economic and competitive environment 
E)  Select either a trend analysis or benchmark analysis 
A)  Select the specific ratios to be used 
B)  Determine who the target user is and their needs 
C)  Assemble the information required for the analysis 
D)  Review the economic and competitive environment 
E)  Select either a trend analysis or benchmark analysis

Question 9

Which of the following may suggest that a financial statements are unreliable?

Accepted Answer

A)  The reported profits are far less than the operating cash flow for the period. 
B)  The income tax expense is low compared to profits and the balance sheet shows a significant deferral. 
C)  Inventory valuation and revenue recognition has changed significantly. 
D)  There is an increase in Notes to the financial statements. 
E)  Modifications in general accounting policies are similar to those adopted by a large part of the industry. 
A)  The reported profits are far less than the operating cash flow for the period. 
B)  The income tax expense is low compared to profits and the balance sheet shows a significant deferral. 
C)  Inventory valuation and revenue recognition has changed significantly. 
D)  There is an increase in Notes to the financial statements. 
E)  Modifications in general accounting policies are similar to those adopted by a large part of the industry.

Question 10

Blauker Auto Sales & Service Ltd's accounts make $27,740,000 purchases on credit each year. The level of its accounts payable is $2,660,000. Due to a slowdown in car sales, Blauker would like to extend its accounts payables to 45 days. If Blauker would have to pay 7% per annum for short-term financing, how much interest will the company save in a year by extending its payment period?

Accepted Answer

A)  $16,226 
B)  $53,200 
C)  $186,200 
D)  $239,400 
E)  $1,757,880 
A)  $16,226 
B)  $53,200 
C)  $186,200 
D)  $239,400 
E)  $1,757,880

Question 11

Rafters, Inc. has year-end retained earnings of $250,000, 100,000 cumulative preferred shares each with a dividend of $.80 each and $1,000,000 common shares. If Rafters Inc. achieved a net income after tax of $330,000 for the period, what is the company's return on equity?

Accepted Answer

A)  20% 
B)  22.8% 
C)  25.5% 
D)  27.5% 
E)  30.1% 
A)  20% 
B)  22.8% 
C)  25.5% 
D)  27.5% 
E)  30.1%

Question 12

Which of the following represents the most appropriate description of horizontal analysis?

Accepted Answer

A)  An analyst prepares pro forma financial statements for the next five years. 
B)  An analyst compares financial ratios of a company over the last five years. 
C)  An analyst compares financial ratios for the current year for two companies. 
D)  An analysis prepares ratios to determine what sales are required to earn a profit. 
E)  An analyst develops ratios to determine how much the company needs to borrow. 
A)  An analyst prepares pro forma financial statements for the next five years. 
B)  An analyst compares financial ratios of a company over the last five years. 
C)  An analyst compares financial ratios for the current year for two companies. 
D)  An analysis prepares ratios to determine what sales are required to earn a profit. 
E)  An analyst develops ratios to determine how much the company needs to borrow.

Question 13

Early recognition of sales revenue is consistent with

Accepted Answer

A)  Accrual basis accounting practices 
B)  Cash based accounting practices 
C)  The accounting Matching Principal 
D)  Calendar based accounting practices 
E)  Fraudulent accounting practices 
A)  Accrual basis accounting practices 
B)  Cash based accounting practices 
C)  The accounting Matching Principal 
D)  Calendar based accounting practices 
E)  Fraudulent accounting practices

Question 14

A company had sales revenue of $665,000 and $692,000 in two successive quarters. The cost of goods sold was $226,000 and $277,000 respectively. Operating expenses in each quarter were: selling expenses of $95,000, distribution expenses of $85,000, and administration expenses of $170,000. Interest expenses were $20,000 in each of the two quarters. What was the change in operating margin?

Accepted Answer

A)  4% 
B)  14.7% 
C)  32.7% 
D)  42.5% 
E)  55.2% 
A)  4% 
B)  14.7% 
C)  32.7% 
D)  42.5% 
E)  55.2%

Question 15

The Body Store has annual credit sales of $75,372,500 in average level of accounts receivable of $5,162,500. What is the Company's average collection period for receivables?

Accepted Answer

A)  2 days 
B)  3 days 
C)  15 days 
D)  25 days 
E)  53 days 
A)  2 days 
B)  3 days 
C)  15 days 
D)  25 days 
E)  53 days

Question 16

Analysts who make recommendations on credit policies, inventory levels and sales per employee would be most interested in ratios dealing with

Accepted Answer

A)  Profitability 
B)  Efficiency 
C)  Liquidity 
D)  Financial Leverage 
E)  Investment 
A)  Profitability 
B)  Efficiency 
C)  Liquidity 
D)  Financial Leverage 
E)  Investment

Question 17

At the end of this year the Full Glass Company has cash of $100,000, accounts receivable of $200,000, inventory of $300,000, total property, plant, and equipment of $300,000 and total assets of $1,000,000. The corresponding figures at the end of last year were $65,000, $140,000, $225,000, $250,000 and $730,000 respectively. What is the vertical analysis percent the current year for accounts receivable and copyrights?

Accepted Answer

A)  19%; 7% 
B)  10%; 30% 
C)  20%; 10% 
D)  31%; 9% 
E)  7%; 30% 
A)  19%; 7% 
B)  10%; 30% 
C)  20%; 10% 
D)  31%; 9% 
E)  7%; 30%

Question 18

The ratio that is the best measure of a company's day-to-day operating performance is the

Accepted Answer

A)  Gross Profit Margin 
B)  Return on Capital Employed (ROC
E)  
C)  Return on Sales 
D)  Operating Profit Margin 
E)  Return on Equity 
A)  Gross Profit Margin 
B)  Return on Capital Employed (ROC
E)  
C)  Return on Sales 
D)  Operating Profit Margin 
E)  Return on Equity

Question 19

Rattray Interiors and Design Ltd. has four managers and six support staff who generate $2,400,000 of revenue. If the company wants to expand its business and to hire 2 design technicians to assist the partners, how much more revenue must each manager bring in to maintain their current sales revenue per employee ratio?

Accepted Answer

A)  $80,000 
B)  $120,000 
C)  $200,000 
D)  $240,000 
E)  $480,000 
A)  $80,000 
B)  $120,000 
C)  $200,000 
D)  $240,000 
E)  $480,000

Question 20

The company has 14 million common shares outstanding for market price of $18.90 each. It has 3 million preferred shares outstanding at market price of $12 on which a dividend of $1.50 was paid out. If the company has a Price/Earnings ratio of 12, what after-tax net income did the company earn?

Accepted Answer

A)  $2,646,000 
B)  $2,601,000 
C)  $17,550,000 
D)  $22,050,000 
E)  $26,550,000 
A)  $2,646,000 
B)  $2,601,000 
C)  $17,550,000 
D)  $22,050,000 
E)  $26,550,000

The impact of increasing financial leverage, all else remaining equal, is to cause

Which of the following represents the most appropriate description of breakeven analysis?

The ________ displays several years worth of key financial indicators for comparative companies plotted on a graph.

Which of the following ratio patterns over the past five years would predict the bankruptcy of a company?

Before undertaking ratio analysis, a prudent first step is to

Which of the following may suggest that a financial statements are unreliable?

Rafters, Inc. has year-end retained earnings of $250,000, 100,000 cumulative preferred shares each with a dividend of $.80 each and $1,000,000 common shares. If Rafters Inc. achieved a net income after tax of $330,000 for the period, what is the company's return on equity?

Which of the following represents the most appropriate description of horizontal analysis?

Early recognition of sales revenue is consistent with

The Body Store has annual credit sales of $75,372,500 in average level of accounts receivable of $5,162,500. What is the Company's average collection period for receivables?

Analysts who make recommendations on credit policies, inventory levels and sales per employee would be most interested in ratios dealing with

The ratio that is the best measure of a company's day-to-day operating performance is the

The company has 14 million common shares outstanding for market price of $18.90 each. It has 3 million preferred shares outstanding at market price of $12 on which a dividend of $1.50 was paid out. If the company has a Price/Earnings ratio of 12, what after-tax net income did the company earn?

Introduction to Financial Management

Accounting - the Language of Business

Financial Planning and Pro Forma Financial Statements

The Time Value of Money

Making Capital Investment Decisions

Making Capital Investment Decisions: Further Issues

Financing a Business 1: Sources of Funds

Financing a Business 2: Raising Long-Term Funds

The Cost of Capital and the Capital Structure Decision

Developing a Dividend Policy

Managing Working Capital

Measuring and Managing for Shareholder Value

Mergers, Acquisitions, and the Valuation of Shares

Filters

Exam 4: Analyzing and Interpreting Financial Statements

The impact of increasing financial leverage, all else remaining equal, is to cause

Which of the following represents the most appropriate description of breakeven analysis?

The ________ displays several years worth of key financial indicators for comparative companies plotted on a graph.

Which of the following ratio patterns over the past five years would predict the bankruptcy of a company?

Before undertaking ratio analysis, a prudent first step is to

Which of the following may suggest that a financial statements are unreliable?

Rafters, Inc. has year-end retained earnings of $250,000, 100,000 cumulative preferred shares each with a dividend of $.80 each and $1,000,000 common shares. If Rafters Inc. achieved a net income after tax of $330,000 for the period, what is the company's return on equity?

Which of the following represents the most appropriate description of horizontal analysis?

Early recognition of sales revenue is consistent with

The Body Store has annual credit sales of $75,372,500 in average level of accounts receivable of $5,162,500. What is the Company's average collection period for receivables?

Analysts who make recommendations on credit policies, inventory levels and sales per employee would be most interested in ratios dealing with

The ratio that is the best measure of a company's day-to-day operating performance is the

The company has 14 million common shares outstanding for market price of $18.90 each. It has 3 million preferred shares outstanding at market price of $12 on which a dividend of $1.50 was paid out. If the company has a Price/Earnings ratio of 12, what after-tax net income did the company earn?

Introduction to Financial Management

Accounting - the Language of Business

Financial Planning and Pro Forma Financial Statements

The Time Value of Money

Making Capital Investment Decisions

Making Capital Investment Decisions: Further Issues

Financing a Business 1: Sources of Funds

Financing a Business 2: Raising Long-Term Funds

The Cost of Capital and the Capital Structure Decision

Developing a Dividend Policy

Managing Working Capital

Measuring and Managing for Shareholder Value

Mergers, Acquisitions, and the Valuation of Shares

Filters