Mt. Prevost Machine Corp. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 4,000,000 \\ \text { Cost of goods sold } & 3,040,000 \\ \text { Gross profit } & 960,000 \\ \text { Selling and administrative expenses } & 430,000 \\ \text { Operating profit } & 530,000 \\ \text { Interest expense } & 160,000 \\ \text { Income before tax } & 370,000 \\ \text { Tax expense } & 148,000 \\ \text { Net income } & \$ 222,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & 2000 \\ \text { Cash } & \$ 60,000 & \$ 50,000 \\ \text { Aceounts receivable } & 550,000 & 500,000 \\ \text { Inventory } & 690,000 & 620,000 \\ \text { Total current assets } & 1,300,000 & 1,170,000 \\ \text { Fixed assets } & 1,300,000 & 1,230,000 \\ \text { Total assets } & 2,600,000 & 2,400,000 \\ \text { Aceounts payable } & & \\ \text { Bank loan } & 270,000 & 250,000 \\ \text { Total current liabilities } & 580,000 & 500,000 \\ \text { Bonds payable } & 850,000 & 750,000 \\ \text { Total liabilities } & 900,000 & 1,000,000 \\ \text { Common stock (25,000 shares) } & 1,750,000 & 1,750,000 \\ \text { Retained earnings } & 250,000 & 250,000 \\ \text { Total liabilities \& equity } & 600,000 & 400,000 \\ \hline \end{array} \end{array}$ -Refer to the financial statements of Mt.Prevost Machine Corp.The firm's return on equity ratio for 2001 is _______.

A) 0.1235 B) 0.2960 C) 2.9400 D) 11.260 E) none of these A) 0.1235 B) 0.2960 C) 2.9400 D) 11.260 E) none of these B

Lake Somenos Furniture Co. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 8,000,000 \\ \text { Cost of goods sold } & 5,260,000 \\ \text { Gross profit } & 2,740,000 \\ \text { Selling and administrative expenses } & 1,500,000 \\ \text { Operating profit } & 1,240,000 \\ \text { Interest expenses } & 140,000 \\ \text { Income before tax } & 1,100,000 \\ \text { Tax expense } & 440,000 \\ \text { Net ineome } & \$ 660,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & {2000} \\ \text { Cash } & \$ 200,000 & \$ 50,000 \\ \text { Accounts receivable } & 1,200,000 & 950,000 \\ \text { Inventory } & 1.840,000 & 1,500,000 \\ \text { Total current assets } & 3,240,000 & 2,500,000 \\ \text { Fixed assets } & 3,200,000 & 3,000,000 \\ \hline \text { Total assets } & \$ 6,440,000 & \$ 5,500,000 \\ \text { Accounts payable } & 800,000 & 720,000 \\ \text { Bank loan } & 600,000 & 100,000 \\ \hline \text { Total current liabilities } & 1,400,000 & 820,000 \\ \text { Bonds payable } & 900,000 & 1,000,000 \\ \text { Total liabilities } & 2,300,000 & 1,820,000 \\ \text { Common stock(130,000 shares) } & 300,000 & 300,000 \\ \text { Retained earnings } & 3,840,000 & 3,380,000 \\ \text { Total liabilities \& equity } & \$ 6,440,000 & \$ 5,500,000 \end{array} \end{array}$ -Refer to the financial statements of Lake Somenos Furniture Co.The firm's fixed asset turnover ratio for 2001 is ____.

A) 1.04 B) 0.63 C) 1.97 D) 2.58 E) none of these A) 1.04 B) 0.63 C) 1.97 D) 2.58 E) none of these D

Lake Somenos Furniture Co. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 8,000,000 \\ \text { Cost of goods sold } & 5,260,000 \\ \text { Gross profit } & 2,740,000 \\ \text { Selling and administrative expenses } & 1,500,000 \\ \text { Operating profit } & 1,240,000 \\ \text { Interest expenses } & 140,000 \\ \text { Income before tax } & 1,100,000 \\ \text { Tax expense } & 440,000 \\ \text { Net ineome } & \$ 660,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & {2000} \\ \text { Cash } & \$ 200,000 & \$ 50,000 \\ \text { Accounts receivable } & 1,200,000 & 950,000 \\ \text { Inventory } & 1.840,000 & 1,500,000 \\ \text { Total current assets } & 3,240,000 & 2,500,000 \\ \text { Fixed assets } & 3,200,000 & 3,000,000 \\ \hline \text { Total assets } & \$ 6,440,000 & \$ 5,500,000 \\ \text { Accounts payable } & 800,000 & 720,000 \\ \text { Bank loan } & 600,000 & 100,000 \\ \hline \text { Total current liabilities } & 1,400,000 & 820,000 \\ \text { Bonds payable } & 900,000 & 1,000,000 \\ \text { Total liabilities } & 2,300,000 & 1,820,000 \\ \text { Common stock(130,000 shares) } & 300,000 & 300,000 \\ \text { Retained earnings } & 3,840,000 & 3,380,000 \\ \text { Total liabilities \& equity } & \$ 6,440,000 & \$ 5,500,000 \end{array} \end{array}$ -Refer to the financial statements of Lake Somenos Furniture Co.The firm's return on equity ratio for 2001 is ____.

A) 0.24% B) 1.63% C) 4.00% D) 15.00% E) 16.9% A) 0.24% B) 1.63% C) 4.00% D) 15.00% E) 16.9%

Lake Somenos Furniture Co. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 8,000,000 \\ \text { Cost of goods sold } & 5,260,000 \\ \text { Gross profit } & 2,740,000 \\ \text { Selling and administrative expenses } & 1,500,000 \\ \text { Operating profit } & 1,240,000 \\ \text { Interest expenses } & 140,000 \\ \text { Income before tax } & 1,100,000 \\ \text { Tax expense } & 440,000 \\ \text { Net ineome } & \$ 660,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & {2000} \\ \text { Cash } & \$ 200,000 & \$ 50,000 \\ \text { Accounts receivable } & 1,200,000 & 950,000 \\ \text { Inventory } & 1.840,000 & 1,500,000 \\ \text { Total current assets } & 3,240,000 & 2,500,000 \\ \text { Fixed assets } & 3,200,000 & 3,000,000 \\ \hline \text { Total assets } & \$ 6,440,000 & \$ 5,500,000 \\ \text { Accounts payable } & 800,000 & 720,000 \\ \text { Bank loan } & 600,000 & 100,000 \\ \hline \text { Total current liabilities } & 1,400,000 & 820,000 \\ \text { Bonds payable } & 900,000 & 1,000,000 \\ \text { Total liabilities } & 2,300,000 & 1,820,000 \\ \text { Common stock(130,000 shares) } & 300,000 & 300,000 \\ \text { Retained earnings } & 3,840,000 & 3,380,000 \\ \text { Total liabilities \& equity } & \$ 6,440,000 & \$ 5,500,000 \end{array} \end{array}$ -Refer to the financial statements of Lake Somenos Furniture Co.The firm's times interest earned ratio for 2001 is ____.

A) 0.72 B) 1.71 C) 2.00 D) 8.86 E) none of these A) 0.72 B) 1.71 C) 2.00 D) 8.86 E) none of these

Mt. Prevost Machine Corp. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 4,000,000 \\ \text { Cost of goods sold } & 3,040,000 \\ \text { Gross profit } & 960,000 \\ \text { Selling and administrative expenses } & 430,000 \\ \text { Operating profit } & 530,000 \\ \text { Interest expense } & 160,000 \\ \text { Income before tax } & 370,000 \\ \text { Tax expense } & 148,000 \\ \text { Net income } & \$ 222,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & 2000 \\ \text { Cash } & \$ 60,000 & \$ 50,000 \\ \text { Aceounts receivable } & 550,000 & 500,000 \\ \text { Inventory } & 690,000 & 620,000 \\ \text { Total current assets } & 1,300,000 & 1,170,000 \\ \text { Fixed assets } & 1,300,000 & 1,230,000 \\ \text { Total assets } & 2,600,000 & 2,400,000 \\ \text { Aceounts payable } & & \\ \text { Bank loan } & 270,000 & 250,000 \\ \text { Total current liabilities } & 580,000 & 500,000 \\ \text { Bonds payable } & 850,000 & 750,000 \\ \text { Total liabilities } & 900,000 & 1,000,000 \\ \text { Common stock (25,000 shares) } & 1,750,000 & 1,750,000 \\ \text { Retained earnings } & 250,000 & 250,000 \\ \text { Total liabilities \& equity } & 600,000 & 400,000 \\ \hline \end{array} \end{array}$ -Refer to the financial statements of Mt.Prevost Machine Corp.The firm's leverage ratio for 2001 is ________.

A) 0.72 B) 1.53 C) 3.06 D) 47.90 E) none of these A) 0.72 B) 1.53 C) 3.06 D) 47.90 E) none of these

Lake Somenos Furniture Co. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 8,000,000 \\ \text { Cost of goods sold } & 5,260,000 \\ \text { Gross profit } & 2,740,000 \\ \text { Selling and administrative expenses } & 1,500,000 \\ \text { Operating profit } & 1,240,000 \\ \text { Interest expenses } & 140,000 \\ \text { Income before tax } & 1,100,000 \\ \text { Tax expense } & 440,000 \\ \text { Net ineome } & \$ 660,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & {2000} \\ \text { Cash } & \$ 200,000 & \$ 50,000 \\ \text { Accounts receivable } & 1,200,000 & 950,000 \\ \text { Inventory } & 1.840,000 & 1,500,000 \\ \text { Total current assets } & 3,240,000 & 2,500,000 \\ \text { Fixed assets } & 3,200,000 & 3,000,000 \\ \hline \text { Total assets } & \$ 6,440,000 & \$ 5,500,000 \\ \text { Accounts payable } & 800,000 & 720,000 \\ \text { Bank loan } & 600,000 & 100,000 \\ \hline \text { Total current liabilities } & 1,400,000 & 820,000 \\ \text { Bonds payable } & 900,000 & 1,000,000 \\ \text { Total liabilities } & 2,300,000 & 1,820,000 \\ \text { Common stock(130,000 shares) } & 300,000 & 300,000 \\ \text { Retained earnings } & 3,840,000 & 3,380,000 \\ \text { Total liabilities \& equity } & \$ 6,440,000 & \$ 5,500,000 \end{array} \end{array}$ -Refer to the financial statements of Lake Somenos Furniture Co.The firm's asset turnover ratio for 2001 is ____.

A) 1.34 B) 1.63 C) 1.96 D) 2.58 E) none of these A) 1.34 B) 1.63 C) 1.96 D) 2.58 E) none of these

Mt. Prevost Machine Corp. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 4,000,000 \\ \text { Cost of goods sold } & 3,040,000 \\ \text { Gross profit } & 960,000 \\ \text { Selling and administrative expenses } & 430,000 \\ \text { Operating profit } & 530,000 \\ \text { Interest expense } & 160,000 \\ \text { Income before tax } & 370,000 \\ \text { Tax expense } & 148,000 \\ \text { Net income } & \$ 222,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & 2000 \\ \text { Cash } & \$ 60,000 & \$ 50,000 \\ \text { Aceounts receivable } & 550,000 & 500,000 \\ \text { Inventory } & 690,000 & 620,000 \\ \text { Total current assets } & 1,300,000 & 1,170,000 \\ \text { Fixed assets } & 1,300,000 & 1,230,000 \\ \text { Total assets } & 2,600,000 & 2,400,000 \\ \text { Aceounts payable } & & \\ \text { Bank loan } & 270,000 & 250,000 \\ \text { Total current liabilities } & 580,000 & 500,000 \\ \text { Bonds payable } & 850,000 & 750,000 \\ \text { Total liabilities } & 900,000 & 1,000,000 \\ \text { Common stock (25,000 shares) } & 1,750,000 & 1,750,000 \\ \text { Retained earnings } & 250,000 & 250,000 \\ \text { Total liabilities \& equity } & 600,000 & 400,000 \\ \hline \end{array} \end{array}$ -Refer to the financial statements of Mt.Prevost Machine Corp.The firm's market to book value for 2001 is ____.

A) 0.1325 B) 0.2960 C) 2.9400 D) 11.260 E) none of these A) 0.1325 B) 0.2960 C) 2.9400 D) 11.260 E) none of these

Lake Somenos Furniture Co. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 8,000,000 \\ \text { Cost of goods sold } & 5,260,000 \\ \text { Gross profit } & 2,740,000 \\ \text { Selling and administrative expenses } & 1,500,000 \\ \text { Operating profit } & 1,240,000 \\ \text { Interest expenses } & 140,000 \\ \text { Income before tax } & 1,100,000 \\ \text { Tax expense } & 440,000 \\ \text { Net ineome } & \$ 660,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & {2000} \\ \text { Cash } & \$ 200,000 & \$ 50,000 \\ \text { Accounts receivable } & 1,200,000 & 950,000 \\ \text { Inventory } & 1.840,000 & 1,500,000 \\ \text { Total current assets } & 3,240,000 & 2,500,000 \\ \text { Fixed assets } & 3,200,000 & 3,000,000 \\ \hline \text { Total assets } & \$ 6,440,000 & \$ 5,500,000 \\ \text { Accounts payable } & 800,000 & 720,000 \\ \text { Bank loan } & 600,000 & 100,000 \\ \hline \text { Total current liabilities } & 1,400,000 & 820,000 \\ \text { Bonds payable } & 900,000 & 1,000,000 \\ \text { Total liabilities } & 2,300,000 & 1,820,000 \\ \text { Common stock(130,000 shares) } & 300,000 & 300,000 \\ \text { Retained earnings } & 3,840,000 & 3,380,000 \\ \text { Total liabilities \& equity } & \$ 6,440,000 & \$ 5,500,000 \end{array} \end{array}$ -Refer to the financial statements of Alderwood Vineyards,Inc.The firm's inventory turnover ratio for 2001 is _________.

A) 1.04 B) 1.63 C) 1.96 D) 2.58 E) 4.42 A) 1.04 B) 1.63 C) 1.96 D) 2.58 E) 4.42

Lake Somenos Furniture Co. Income Statement (2001) $ \begin{array}{lr}\text { Sales } & \$ 8,000,000 \\ \text { Cost of goods sold } & 5,260,000 \\ \text { Gross profit } & 2,740,000 \\ \text { Selling and administrative expenses } & 1,500,000 \\ \text { Operating profit } & 1,240,000 \\ \text { Interest expenses } & 140,000 \\ \text { Income before tax } & 1,100,000 \\ \text { Tax expense } & 440,000 \\ \text { Net ineome } & \$ 660,000\end{array} $ $\begin{array}{l} \text { Balance Sheet }\\ \begin{array}{lrr} & 2001 & {2000} \\ \text { Cash } & \$ 200,000 & \$ 50,000 \\ \text { Accounts receivable } & 1,200,000 & 950,000 \\ \text { Inventory } & 1.840,000 & 1,500,000 \\ \text { Total current assets } & 3,240,000 & 2,500,000 \\ \text { Fixed assets } & 3,200,000 & 3,000,000 \\ \hline \text { Total assets } & \$ 6,440,000 & \$ 5,500,000 \\ \text { Accounts payable } & 800,000 & 720,000 \\ \text { Bank loan } & 600,000 & 100,000 \\ \hline \text { Total current liabilities } & 1,400,000 & 820,000 \\ \text { Bonds payable } & 900,000 & 1,000,000 \\ \text { Total liabilities } & 2,300,000 & 1,820,000 \\ \text { Common stock(130,000 shares) } & 300,000 & 300,000 \\ \text { Retained earnings } & 3,840,000 & 3,380,000 \\ \text { Total liabilities \& equity } & \$ 6,440,000 & \$ 5,500,000 \end{array} \end{array}$ -Refer to the financial statements of Lake Somenos Furniture Co.The firm's return on sales ratio for 2001 is _____ percent.

A) 0.2 B) 1.6 C) 4.0 D) 15.0 E) 15.5 A) 0.2 B) 1.6 C) 4.0 D) 15.0 E) 15.5

Exam 16: Option Valuation

Mt. Prevost Machine Corp. Income Statement (2001) Sales \ 4,000,000 Cost of goods sold 3,040,000 Gross profit 960,000 Selling and administrative expenses 430,000 Operating profit 530,000 Interest expense 160,000 Income before tax 370,000 Tax expense 148,000 Net income \ 222,000 Balance Sheet 2001 2000 Cash \ 60,000 \ 50,000 Aceounts receivable 550,000 500,000 Inventory 690,000 620,000 Total current assets 1,300,000 1,170,000 Fixed assets 1,300,000 1,230,000 Total assets 2,600,000 2,400,000 Aceounts payable Bank loan 270,000 250,000 Total current liabilities 580,000 500,000 Bonds payable 850,000 750,000 Total liabilities 900,000 1,000,000 Common stock (25,000 shares) 1,750,000 1,750,000 Retained earnings 250,000 250,000 Total liabilities \& equity 600,000 400,000 -Refer to the financial statements of Mt.Prevost Machine Corp.The firm's return on equity ratio for 2001 is _______.

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

B

Lake Somenos Furniture Co. Income Statement (2001) Sales \ 8,000,000 Cost of goods sold 5,260,000 Gross profit 2,740,000 Selling and administrative expenses 1,500,000 Operating profit 1,240,000 Interest expenses 140,000 Income before tax 1,100,000 Tax expense 440,000 Net ineome \ 660,000 Balance Sheet 2001 2000 Cash \ 200,000 \ 50,000 Accounts receivable 1,200,000 950,000 Inventory 1.840,000 1,500,000 Total current assets 3,240,000 2,500,000 Fixed assets 3,200,000 3,000,000 Total assets \ 6,440,000 \ 5,500,000 Accounts payable 800,000 720,000 Bank loan 600,000 100,000 Total current liabilities 1,400,000 820,000 Bonds payable 900,000 1,000,000 Total liabilities 2,300,000 1,820,000 Common stock(130,000 shares) 300,000 300,000 Retained earnings 3,840,000 3,380,000 Total liabilities \& equity \ 6,440,000 \ 5,500,000 -Refer to the financial statements of Lake Somenos Furniture Co.The firm's fixed asset turnover ratio for 2001 is ____.

Free

(Multiple Choice)

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Question 2

Correct Answer:

Verified

D

Return on total assets is a function of ______.

Free

(Multiple Choice)

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Question 3

Correct Answer:

Verified

C

Fundamental analysis uses _________.

(Multiple Choice)

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Question 4

If a firm's ratio of (total liabilities/total assets)is higher than the industry average while the total capitalization of the firm's stockholders' equity)is lower than the industry average,the most likely assumption is that the firm _______.

(Multiple Choice)

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Question 5

Lake Somenos Furniture Co. Income Statement (2001) Sales \ 8,000,000 Cost of goods sold 5,260,000 Gross profit 2,740,000 Selling and administrative expenses 1,500,000 Operating profit 1,240,000 Interest expenses 140,000 Income before tax 1,100,000 Tax expense 440,000 Net ineome \ 660,000 Balance Sheet 2001 2000 Cash \ 200,000 \ 50,000 Accounts receivable 1,200,000 950,000 Inventory 1.840,000 1,500,000 Total current assets 3,240,000 2,500,000 Fixed assets 3,200,000 3,000,000 Total assets \ 6,440,000 \ 5,500,000 Accounts payable 800,000 720,000 Bank loan 600,000 100,000 Total current liabilities 1,400,000 820,000 Bonds payable 900,000 1,000,000 Total liabilities 2,300,000 1,820,000 Common stock(130,000 shares) 300,000 300,000 Retained earnings 3,840,000 3,380,000 Total liabilities \& equity \ 6,440,000 \ 5,500,000 -Refer to the financial statements of Lake Somenos Furniture Co.The firm's return on equity ratio for 2001 is ____.

(Multiple Choice)

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Question 6

Lake Somenos Furniture Co. Income Statement (2001) Sales \ 8,000,000 Cost of goods sold 5,260,000 Gross profit 2,740,000 Selling and administrative expenses 1,500,000 Operating profit 1,240,000 Interest expenses 140,000 Income before tax 1,100,000 Tax expense 440,000 Net ineome \ 660,000 Balance Sheet 2001 2000 Cash \ 200,000 \ 50,000 Accounts receivable 1,200,000 950,000 Inventory 1.840,000 1,500,000 Total current assets 3,240,000 2,500,000 Fixed assets 3,200,000 3,000,000 Total assets \ 6,440,000 \ 5,500,000 Accounts payable 800,000 720,000 Bank loan 600,000 100,000 Total current liabilities 1,400,000 820,000 Bonds payable 900,000 1,000,000 Total liabilities 2,300,000 1,820,000 Common stock(130,000 shares) 300,000 300,000 Retained earnings 3,840,000 3,380,000 Total liabilities \& equity \ 6,440,000 \ 5,500,000 -Refer to the financial statements of Lake Somenos Furniture Co.The firm's times interest earned ratio for 2001 is ____.

(Multiple Choice)

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Question 7

One reason that capital markets are not truly global is

(Multiple Choice)

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Question 8

Many different debt,or financial leverage,ratios are reported.Explain the relationship between total assets/equity and debt/equity.

(Essay)

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Question 9

A firm has a higher asset turnover ratio than the industry average,which implies

(Multiple Choice)

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Question 10

Mt. Prevost Machine Corp. Income Statement (2001) Sales \ 4,000,000 Cost of goods sold 3,040,000 Gross profit 960,000 Selling and administrative expenses 430,000 Operating profit 530,000 Interest expense 160,000 Income before tax 370,000 Tax expense 148,000 Net income \ 222,000 Balance Sheet 2001 2000 Cash \ 60,000 \ 50,000 Aceounts receivable 550,000 500,000 Inventory 690,000 620,000 Total current assets 1,300,000 1,170,000 Fixed assets 1,300,000 1,230,000 Total assets 2,600,000 2,400,000 Aceounts payable Bank loan 270,000 250,000 Total current liabilities 580,000 500,000 Bonds payable 850,000 750,000 Total liabilities 900,000 1,000,000 Common stock (25,000 shares) 1,750,000 1,750,000 Retained earnings 250,000 250,000 Total liabilities \& equity 600,000 400,000 -Refer to the financial statements of Mt.Prevost Machine Corp.The firm's leverage ratio for 2001 is ________.

(Multiple Choice)

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Question 11

A firm has a (net profit/pretax profit ratio)of 0.625,a leverage ratio of 1.2,a (pretax profit/EBIT)of 0.9,an ROE of 17.82%,a current ratio of 8,and a return on sales ratio of 8%.The firm's asset turnover is ________.

(Multiple Choice)

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Question 12

Which of the following ratios gives information on the amount of profits reinvested in the firm over the years:

(Multiple Choice)

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Question 13

During periods of inflation,the use of FIFO (rather than LIFO)as the method of accounting for inventories causes _______.

(Multiple Choice)

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Question 14

What best explains why a firm's ratio of (long term debt/total capital is lower than the industry average,while the ratio of (income before interest and taxes/debt interest charges)is lower than the industry average.

(Multiple Choice)

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Question 15

Lake Somenos Furniture Co. Income Statement (2001) Sales \ 8,000,000 Cost of goods sold 5,260,000 Gross profit 2,740,000 Selling and administrative expenses 1,500,000 Operating profit 1,240,000 Interest expenses 140,000 Income before tax 1,100,000 Tax expense 440,000 Net ineome \ 660,000 Balance Sheet 2001 2000 Cash \ 200,000 \ 50,000 Accounts receivable 1,200,000 950,000 Inventory 1.840,000 1,500,000 Total current assets 3,240,000 2,500,000 Fixed assets 3,200,000 3,000,000 Total assets \ 6,440,000 \ 5,500,000 Accounts payable 800,000 720,000 Bank loan 600,000 100,000 Total current liabilities 1,400,000 820,000 Bonds payable 900,000 1,000,000 Total liabilities 2,300,000 1,820,000 Common stock(130,000 shares) 300,000 300,000 Retained earnings 3,840,000 3,380,000 Total liabilities \& equity \ 6,440,000 \ 5,500,000 -Refer to the financial statements of Lake Somenos Furniture Co.The firm's asset turnover ratio for 2001 is ____.

(Multiple Choice)

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Question 16

Mt. Prevost Machine Corp. Income Statement (2001) Sales \ 4,000,000 Cost of goods sold 3,040,000 Gross profit 960,000 Selling and administrative expenses 430,000 Operating profit 530,000 Interest expense 160,000 Income before tax 370,000 Tax expense 148,000 Net income \ 222,000 Balance Sheet 2001 2000 Cash \ 60,000 \ 50,000 Aceounts receivable 550,000 500,000 Inventory 690,000 620,000 Total current assets 1,300,000 1,170,000 Fixed assets 1,300,000 1,230,000 Total assets 2,600,000 2,400,000 Aceounts payable Bank loan 270,000 250,000 Total current liabilities 580,000 500,000 Bonds payable 850,000 750,000 Total liabilities 900,000 1,000,000 Common stock (25,000 shares) 1,750,000 1,750,000 Retained earnings 250,000 250,000 Total liabilities \& equity 600,000 400,000 -Refer to the financial statements of Mt.Prevost Machine Corp.The firm's market to book value for 2001 is ____.

(Multiple Choice)

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Question 17

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to income,and the level of interest expense reported tends to income.

(Multiple Choice)

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Question 18

Lake Somenos Furniture Co. Income Statement (2001) Sales \ 8,000,000 Cost of goods sold 5,260,000 Gross profit 2,740,000 Selling and administrative expenses 1,500,000 Operating profit 1,240,000 Interest expenses 140,000 Income before tax 1,100,000 Tax expense 440,000 Net ineome \ 660,000 Balance Sheet 2001 2000 Cash \ 200,000 \ 50,000 Accounts receivable 1,200,000 950,000 Inventory 1.840,000 1,500,000 Total current assets 3,240,000 2,500,000 Fixed assets 3,200,000 3,000,000 Total assets \ 6,440,000 \ 5,500,000 Accounts payable 800,000 720,000 Bank loan 600,000 100,000 Total current liabilities 1,400,000 820,000 Bonds payable 900,000 1,000,000 Total liabilities 2,300,000 1,820,000 Common stock(130,000 shares) 300,000 300,000 Retained earnings 3,840,000 3,380,000 Total liabilities \& equity \ 6,440,000 \ 5,500,000 -Refer to the financial statements of Alderwood Vineyards,Inc.The firm's inventory turnover ratio for 2001 is _________.

(Multiple Choice)

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(27)

Question 19

Lake Somenos Furniture Co. Income Statement (2001) Sales \ 8,000,000 Cost of goods sold 5,260,000 Gross profit 2,740,000 Selling and administrative expenses 1,500,000 Operating profit 1,240,000 Interest expenses 140,000 Income before tax 1,100,000 Tax expense 440,000 Net ineome \ 660,000 Balance Sheet 2001 2000 Cash \ 200,000 \ 50,000 Accounts receivable 1,200,000 950,000 Inventory 1.840,000 1,500,000 Total current assets 3,240,000 2,500,000 Fixed assets 3,200,000 3,000,000 Total assets \ 6,440,000 \ 5,500,000 Accounts payable 800,000 720,000 Bank loan 600,000 100,000 Total current liabilities 1,400,000 820,000 Bonds payable 900,000 1,000,000 Total liabilities 2,300,000 1,820,000 Common stock(130,000 shares) 300,000 300,000 Retained earnings 3,840,000 3,380,000 Total liabilities \& equity \ 6,440,000 \ 5,500,000 -Refer to the financial statements of Lake Somenos Furniture Co.The firm's return on sales ratio for 2001 is _____ percent.

(Multiple Choice)

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Question 20

Return on total assets is a function of ______.

Fundamental analysis uses _________.

If a firm's ratio of (total liabilities/total assets)is higher than the industry average while the total capitalization of the firm's stockholders' equity)is lower than the industry average,the most likely assumption is that the firm _______.

One reason that capital markets are not truly global is

Many different debt,or financial leverage,ratios are reported.Explain the relationship between total assets/equity and debt/equity.

A firm has a higher asset turnover ratio than the industry average,which implies

A firm has a (net profit/pretax profit ratio)of 0.625,a leverage ratio of 1.2,a (pretax profit/EBIT)of 0.9,an ROE of 17.82%,a current ratio of 8,and a return on sales ratio of 8%.The firm's asset turnover is ________.

Which of the following ratios gives information on the amount of profits reinvested in the firm over the years:

During periods of inflation,the use of FIFO (rather than LIFO)as the method of accounting for inventories causes _______.

What best explains why a firm's ratio of (long term debt/total capital is lower than the industry average,while the ratio of (income before interest and taxes/debt interest charges)is lower than the industry average.

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to income,and the level of interest expense reported tends to income.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

Filters

Exam 16: Option Valuation

Return on total assets is a function of ______.

Fundamental analysis uses _________.

If a firm's ratio of (total liabilities/total assets)is higher than the industry average while the total capitalization of the firm's stockholders' equity)is lower than the industry average,the most likely assumption is that the firm _______.

One reason that capital markets are not truly global is

Many different debt,or financial leverage,ratios are reported.Explain the relationship between total assets/equity and debt/equity.

A firm has a higher asset turnover ratio than the industry average,which implies

A firm has a (net profit/pretax profit ratio)of 0.625,a leverage ratio of 1.2,a (pretax profit/EBIT)of 0.9,an ROE of 17.82%,a current ratio of 8,and a return on sales ratio of 8%.The firm's asset turnover is ________.

Which of the following ratios gives information on the amount of profits reinvested in the firm over the years:

During periods of inflation,the use of FIFO (rather than LIFO)as the method of accounting for inventories causes _______.

What best explains why a firm's ratio of (long term debt/total capital is lower than the industry average,while the ratio of (income before interest and taxes/debt interest charges)is lower than the industry average.

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to __________ income,and the level of interest expense reported tends to __________ income.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

Filters

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to income,and the level of interest expense reported tends to income.