Question 1

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

Accepted Answer

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

Question 2

Syed's Industries has accounts receivable of $700,inventory of $1,200,sales of $4,200,and cost of goods sold of $3,500. How long does it take Syed's to both sell its inventory and then collect the payment on the sale?

Accepted Answer

A)  110 days 
B)  131 days 
C)  145 days 
D)  186 days 
E)  210 days 
A)  110 days 
B)  131 days 
C)  145 days 
D)  186 days 
E)  210 days D

Question 3

The _______ breaks down return on equity into three component parts.

Accepted Answer

A)  Du Pont identity 
B)  return on assets 
C)  statement of cash flows 
D)  asset turnover ratio 
E)  equity multiplier 
A)  Du Pont identity 
B)  return on assets 
C)  statement of cash flows 
D)  asset turnover ratio 
E)  equity multiplier A

Question 4

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 5

A firm has sales of $1,200,net income of $200,net fixed assets of $500,and current assets of $300. The firm has $200 in inventory. What is the common-size statement value of inventory?

Accepted Answer

A)  10.0% 
B)  16.67% 
C)  25.0% 
D)  40.0% 
E)  67.67% 
A)  10.0% 
B)  16.67% 
C)  25.0% 
D)  40.0% 
E)  67.67%

Question 6

The financial ratio measured as earnings before interest and taxes,divided by interest expense is the:

Accepted Answer

A)  cash coverage ratio. 
B)  debt-equity ratio. 
C)  times interest earned ratio. 
D)  gross margin. 
E)  total debt ratio. 
A)  cash coverage ratio. 
B)  debt-equity ratio. 
C)  times interest earned ratio. 
D)  gross margin. 
E)  total debt ratio.

Question 7

From a cash flow position,which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Accepted Answer

A)  times interest earned ratio 
B)  cash coverage ratio 
C)  cash ratio 
D)  quick ratio 
E)  Interval measure 
A)  times interest earned ratio 
B)  cash coverage ratio 
C)  cash ratio 
D)  quick ratio 
E)  Interval measure

Question 8

Robert Morris Associates publishes peer group financial information for a host of industries,yet the numbers typically only appear in common-size form. Why not report average dollar amounts instead?

Accepted Answer

The common-size numbers are inherently m

Question 9

A firm's market capitalization is equal to:

Accepted Answer

A)  total book value of assets less book value of debt. 
B)  par value of common equity. 
C)  firm's stock price multiplied by number of shares outstanding. 
D)  firm's stock price multiplied by the number of shares authorized. 
E)  the maximum value an acquirer would pay for a firm in an acquisition. 
A)  total book value of assets less book value of debt. 
B)  par value of common equity. 
C)  firm's stock price multiplied by number of shares outstanding. 
D)  firm's stock price multiplied by the number of shares authorized. 
E)  the maximum value an acquirer would pay for a firm in an acquisition.

Question 10

A firm has a debt-equity ratio of .40. What is the total debt ratio?

Accepted Answer

A)  .29 
B)  .33 
C)  .67 
D)  1.40 
E)  1.50 
A)  .29 
B)  .33 
C)  .67 
D)  1.40 
E)  1.50

Question 11

The debt-equity ratio is measured as total:

Accepted Answer

A)  equity minus total debt. 
B)  equity divided by total debt. 
C)  debt divided by total equity. 
D)  debt plus total equity. 
E)  debt minus total assets, divided by total equity. 
A)  equity minus total debt. 
B)  equity divided by total debt. 
C)  debt divided by total equity. 
D)  debt plus total equity. 
E)  debt minus total assets, divided by total equity.

Question 12

Suppose you calculated the following ratio for a firm: The sum of the compensation paid to the owners,directors,and managers,divided by total sales. Which class of financial ratios should this be included in and why?
 Who might be interested in such a ratio?

Accepted Answer

This doesn't fit well into any of the fi

Question 13

Suppose a firm calculates its external funding needs and finds that it is negative. What are the firm's options in this case?

Accepted Answer

With a negative external financing need,

Question 14

Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios.

Accepted Answer

A)  asset management 
B)  long-term solvency 
C)  short-term solvency 
D)  profitability 
E)  market value 
A)  asset management 
B)  long-term solvency 
C)  short-term solvency 
D)  profitability 
E)  market value

Question 15

The financial ratio measured as net income divided by total equity is known as the firm's:

Accepted Answer

A)  profit margin. 
B)  return on assets. 
C)  return on equity. 
D)  asset turnover. 
E)  earnings before interest and taxes. 
A)  profit margin. 
B)  return on assets. 
C)  return on equity. 
D)  asset turnover. 
E)  earnings before interest and taxes.

Question 16

A firm's sustainable growth rate in sales directly depends on its:

Accepted Answer

A)  debt to equity ratio. 
B)  profit margin. 
C)  dividend policy. 
D)  asset efficiency. 
E)  All of 
A)  debt to equity ratio. 
B)  profit margin. 
C)  dividend policy. 
D)  asset efficiency. 
E)  All of

Question 17

In 2011,how many days on average did it take Bayside to sell its inventory?

Accepted Answer

A)  126.1 days 
B)  127.9 days 
C)  153.8 days 
D)  176.5 days 
E)  178.9 days 
A)  126.1 days 
B)  127.9 days 
C)  153.8 days 
D)  176.5 days 
E)  178.9 days

Question 18

BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant. As a result,given all else constant,the:

Accepted Answer

A)  return on equity will increase. 
B)  return on assets will decrease. 
C)  profit margin will decline. 
D)  equity multiplier will decrease. 
E)  price-earnings ratio will increasE. 
A)  return on equity will increase. 
B)  return on assets will decrease. 
C)  profit margin will decline. 
D)  equity multiplier will decrease. 
E)  price-earnings ratio will increasE.

Question 19

Marcie's Mercantile wants to maintain its current dividend policy,which is a payout ratio of 40%. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements,the maximum rate at which Marcie's can grow is equal to:

Accepted Answer

A)  40% of the internal rate of growth. 
B)  60% of the internal rate of growth. 
C)  the internal rate of growth. 
D)  the sustainable rate of growth. 
E)  60% of the sustainable rate of growth. 
A)  40% of the internal rate of growth. 
B)  60% of the internal rate of growth. 
C)  the internal rate of growth. 
D)  the sustainable rate of growth. 
E)  60% of the sustainable rate of growth.

Question 20

Frederico's has a profit margin of 6%,a return on assets of 8%,and an equity multiplier of 1.4. What is the return on equity?

Accepted Answer

A)  6.7% 
B)  8.4% 
C)  11.2% 
D)  14.6% 
E)  19.6% 
A)  6.7% 
B)  8.4% 
C)  11.2% 
D)  14.6% 
E)  19.6%

Exam 3: Financial Statements Analysis and Financial Models

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

Syed's Industries has accounts receivable of $700,inventory of $1,200,sales of $4,200,and cost of goods sold of $3,500. How long does it take Syed's to both sell its inventory and then collect the payment on the sale?

The _______ breaks down return on equity into three component parts.

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

A firm has sales of $1,200,net income of $200,net fixed assets of $500,and current assets of $300. The firm has $200 in inventory. What is the common-size statement value of inventory?

The financial ratio measured as earnings before interest and taxes,divided by interest expense is the:

From a cash flow position,which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Robert Morris Associates publishes peer group financial information for a host of industries,yet the numbers typically only appear in common-size form. Why not report average dollar amounts instead?

A firm's market capitalization is equal to:

A firm has a debt-equity ratio of .40. What is the total debt ratio?

The debt-equity ratio is measured as total:

Suppose you calculated the following ratio for a firm: The sum of the compensation paid to the owners,directors,and managers,divided by total sales. Which class of financial ratios should this be included in and why? Who might be interested in such a ratio?

Suppose a firm calculates its external funding needs and finds that it is negative. What are the firm's options in this case?

Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios.

The financial ratio measured as net income divided by total equity is known as the firm's:

A firm's sustainable growth rate in sales directly depends on its:

In 2011,how many days on average did it take Bayside to sell its inventory?

BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant. As a result,given all else constant,the:

Marcie's Mercantile wants to maintain its current dividend policy,which is a payout ratio of 40%. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements,the maximum rate at which Marcie's can grow is equal to:

Frederico's has a profit margin of 6%,a return on assets of 8%,and an equity multiplier of 1.4. What is the return on equity?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: The Arbitrage Pricing Theory

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers, Acquisitions, and Divestitures

Financial Distress

International Corporate Finance

Filters