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 P/E ratio for 2001 is _________.

A) 7.88 B) 1.63 C) 4.74 D) 15.00 E) none of these A) 7.88 B) 1.63 C) 4.74 D) 15.00 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 average collection period for 2001 is ____.

A) 59.31 B) 49.05 C) 61.31 D) 62.31 E) none of these A) 59.31 B) 49.05 C) 61.31 D) 62.31 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 fixed asset turnover ratio for 2001 is ____.

A) 1.60 B) 3.16 C) 3.31 D) 4.64 E) none of these A) 1.60 B) 3.16 C) 3.31 D) 4.64 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 fixed asset turnover ratio for 2001 is _________.

A) 1.20 B) 0.63 C) 1.97 D) 2.58 E) none of these A) 1.20 B) 0.63 C) 1.97 D) 2.58 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 leverage ratio for 2001 is _________.

A) 1.56 B) 1.62 C) 0.64 D) 2.00 E) 2.17 A) 1.56 B) 1.62 C) 0.64 D) 2.00 E) 2.17

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 quick ratio for 2001 is ____.

A) 0.78 B) 1.71 C) 1.00 D) 2.07 E) none of these A) 0.78 B) 1.71 C) 1.00 D) 2.07 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 inventory turnover ratio for 2001 is ____.

A) 1.04 B) 1.63 C) 1.96 D) 2.58 E) 3.15 A) 1.04 B) 1.63 C) 1.96 D) 2.58 E) 3.15

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 asset turnover ratio for 2001 is ____.

A) 1.60 B) 3.16 C) 3.31 D) 4.64 E) none of these A) 1.60 B) 3.16 C) 3.31 D) 4.64 E) none of these

Exam 16: Option Valuation

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 P/E ratio for 2001 is _________.

(Multiple Choice)

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(45)

Question 61

Suppose that Pop's Cycles,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Pop's has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Pop's Net Profit will be __ and its ROE will be _.

(Multiple Choice)

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(29)

Question 62

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 average collection period for 2001 is ____.

(Multiple Choice)

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(36)

Question 63

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 fixed asset turnover ratio for 2001 is ____.

(Multiple Choice)

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(32)

Question 64

In an increasingly globalized investment environment,comparability problems become even greater.Discuss some of the problems for the investor who wishes to have an internationally diversified portfolio.

(Essay)

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(39)

Question 65

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 fixed asset turnover ratio for 2001 is _________.

(Multiple Choice)

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Question 66

__________ a snapshot of the financial condition of the firm at a particular time.

(Multiple Choice)

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Question 67

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 leverage ratio for 2001 is _________.

(Multiple Choice)

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(24)

Question 68

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 quick ratio for 2001 is ____.

(Multiple Choice)

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(46)

Question 69

A firm has an ROA of 14%,a debt/equity ratio of 0.8,a tax rate of 35%,and the interest rate on the debt is 10%.The firm's ROE is ________.

(Multiple Choice)

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(31)

Question 70

TRS Company has a ratio of (total debt/total assets)that is above the industry average,and a ratio of (long term debt/equity)that is below the industry average.These ratios suggest that the firm ________.

(Multiple Choice)

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(45)

Question 71

__________ of the cash flow generated by the firm's operations,investments and financial activities.

(Multiple Choice)

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(36)

Question 72

A measure of asset utilization is _______.

(Multiple Choice)

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(38)

Question 73

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 inventory turnover ratio for 2001 is ____.

(Multiple Choice)

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(40)

Question 74

Proceeds from a company's sale of stock to the public are included in ______.

(Multiple Choice)

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(37)

Question 75

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 asset turnover ratio for 2001 is ____.

(Multiple Choice)

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(33)

Question 76

Which of the financial statements recognizes only transactions in which cash changes hands?

(Multiple Choice)

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Question 77

Return on total assets is the product of _____.

(Multiple Choice)

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(41)

Question 78

If a firm has a positive tax rate,a positive ROA,and the interest rate on debt is the same as ROA,then ROA will be _______.

(Multiple Choice)

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(34)

Question 79

Common size financial statements make it easier to compare firms __________.

(Multiple Choice)

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(46)

Question 80

Suppose that Pop's Cycles,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Pop's has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Pop's Net Profit will be __ and its ROE will be _.

In an increasingly globalized investment environment,comparability problems become even greater.Discuss some of the problems for the investor who wishes to have an internationally diversified portfolio.

__________ a snapshot of the financial condition of the firm at a particular time.

A firm has an ROA of 14%,a debt/equity ratio of 0.8,a tax rate of 35%,and the interest rate on the debt is 10%.The firm's ROE is ________.

TRS Company has a ratio of (total debt/total assets)that is above the industry average,and a ratio of (long term debt/equity)that is below the industry average.These ratios suggest that the firm ________.

__________ of the cash flow generated by the firm's operations,investments and financial activities.

A measure of asset utilization is _______.

Proceeds from a company's sale of stock to the public are included in ______.

Which of the financial statements recognizes only transactions in which cash changes hands?

Return on total assets is the product of _____.

If a firm has a positive tax rate,a positive ROA,and the interest rate on debt is the same as ROA,then ROA will be _______.

Common size financial statements make it easier to compare firms __________.

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

Suppose that Pop's Cycles,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Pop's has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Pop's Net Profit will be ________ and its ROE will be _______.

In an increasingly globalized investment environment,comparability problems become even greater.Discuss some of the problems for the investor who wishes to have an internationally diversified portfolio.

__________ a snapshot of the financial condition of the firm at a particular time.

A firm has an ROA of 14%,a debt/equity ratio of 0.8,a tax rate of 35%,and the interest rate on the debt is 10%.The firm's ROE is ________.

TRS Company has a ratio of (total debt/total assets)that is above the industry average,and a ratio of (long term debt/equity)that is below the industry average.These ratios suggest that the firm ________.

__________ of the cash flow generated by the firm's operations,investments and financial activities.

A measure of asset utilization is _______.

Proceeds from a company's sale of stock to the public are included in ______.

Which of the financial statements recognizes only transactions in which cash changes hands?

Return on total assets is the product of _____.

If a firm has a positive tax rate,a positive ROA,and the interest rate on debt is the same as ROA,then ROA will be _______.

Common size financial statements make it easier to compare firms __________.

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

Suppose that Pop's Cycles,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Pop's has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Pop's Net Profit will be __ and its ROE will be _.