Question 1

The return on equity can be calculated as

Accepted Answer

A) Profit margin × 1 / Total asset turnover × Equity multiplier 
B) Return on assets × Profit margin 
C) Profit margin × Capital intensity ratio × Debt-equity ratio 
D) Profit margin × 1 / Equity multiplier × (1 + Debt-equity ratio) 
E) Return on assets × (1 + Debt-equity ratio) 
A) Profit margin × 1 / Total asset turnover × Equity multiplier 
B) Return on assets × Profit margin 
C) Profit margin × Capital intensity ratio × Debt-equity ratio 
D) Profit margin × 1 / Equity multiplier × (1 + Debt-equity ratio) 
E) Return on assets × (1 + Debt-equity ratio)

Question 2

Enterprise value is computed as

Accepted Answer

A) Price per share × Shares outstanding - Cash 
B) Market capitalization + Market value of interest-bearing debt - Cash 
C) Market capitalization - Market value of interest-bearing debt 
D) Price per share × Number of shares outstanding 
E) Market capitalization + Market value of all debt - Cash 
A) Price per share × Shares outstanding - Cash 
B) Market capitalization + Market value of interest-bearing debt - Cash 
C) Market capitalization - Market value of interest-bearing debt 
D) Price per share × Number of shares outstanding 
E) Market capitalization + Market value of all debt - Cash

Question 3

If Textile Cloth stockholders want to know how much net profit the firm is making on a percentage basis on their investment in that firm,the shareholders should refer to the

Accepted Answer

A) profit margin. 
B) return on assets. 
C) return on equity. 
D) equity multiplier. 
E) EV multiple. 
A) profit margin. 
B) return on assets. 
C) return on equity. 
D) equity multiplier. 
E) EV multiple.

Question 4

Jensen's Boats has sales of $416,800,cost of goods sold of $234,600,depreciation of $41,200,and selling and general costs of $37,900.The firm has a loan balance of $92,400 with an interest rate of 6.7 percent.What is the value of EBITDA?

Accepted Answer

A) $103,100 
B) $121,600 
C) $144,300 
D) $185,500 
E) $162,900 
A) $103,100 
B) $121,600 
C) $144,300 
D) $185,500 
E) $162,900

Question 5

Marcel's has a debt-equity ratio of 0.32,a capital intensity ratio of 1.02,and a profit margin of 6.7 percent.What is the return on equity?

Accepted Answer

A) 8.67% 
B) 7.89% 
C) 13.13% 
D) 14.57% 
E) 12.47% 
A) 8.67% 
B) 7.89% 
C) 13.13% 
D) 14.57% 
E) 12.47%

Question 6

A firm has sales of $215,600,costs of $124,800,interest paid of $3,600,and depreciation of $11,400.The tax rate is 34 percent.What is the value of the cash coverage ratio?

Accepted Answer

A) 24.22 times 
B) 17.06 times 
C) 21.06 times 
D) 25.22 times 
E) 16.47 times 
A) 24.22 times 
B) 17.06 times 
C) 21.06 times 
D) 25.22 times 
E) 16.47 times

Question 7

Patti's has net income of $87,300,a price-earnings ratio of 11.8,and earnings per share of $1.13.How many shares of stock are outstanding?

Accepted Answer

A) 6,547 shares 
B) 38,690 shares 
C) 77,257 shares 
D) 93,590 shares 
E) 8,750 shares 
A) 6,547 shares 
B) 38,690 shares 
C) 77,257 shares 
D) 93,590 shares 
E) 8,750 shares

Question 8

If a non-dividend-paying firm bases its growth assumptions on the sustainable rate of growth and shows positive net income,then the pro forma statement must reflect

Accepted Answer

A) an increase in fixed assets irrespective of the firm's current operating capacity. 
B) an increase in both sales and the debt-equity ratio. 
C) both an increase in the total asset turnover and in the equity multiplier. 
D) a constant debt-equity ratio and an increase in retained earnings. 
E) increases in fixed assets,the debt-equity ratio,and the number of shares outstanding. 
A) an increase in fixed assets irrespective of the firm's current operating capacity. 
B) an increase in both sales and the debt-equity ratio. 
C) both an increase in the total asset turnover and in the equity multiplier. 
D) a constant debt-equity ratio and an increase in retained earnings. 
E) increases in fixed assets,the debt-equity ratio,and the number of shares outstanding.

Question 9

A decrease in which one of the following accounts increases a firm's current ratio as well as its quick ratio?

Accepted Answer

A) Accounts payable 
B) Cash 
C) Accounts receivable 
D) Inventory 
E) Fixed assets 
A) Accounts payable 
B) Cash 
C) Accounts receivable 
D) Inventory 
E) Fixed assets

Question 10

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) Debt-equity ratio 
A) Times interest earned ratio 
B) Cash coverage ratio 
C) Cash ratio 
D) Quick ratio 
E) Debt-equity ratio

Question 11

Which ratio calculates the amount of sales generated by each $1 of debt and equity invested in the firm?

Accepted Answer

A) Total asset turnover 
B) Return on equity 
C) Return on assets 
D) Equity multiplier 
E) DuPont identity 
A) Total asset turnover 
B) Return on equity 
C) Return on assets 
D) Equity multiplier 
E) DuPont identity

Question 12

Rossiter's currently has total assets of $203,000,long-term debt of $78,400,and current liabilities of $36,700.The dividend payout ratio is 25 percent and the profit margin is 5.8 percent.Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity.What is the external financing need if the current sales of $185,000 are projected to increase by 5 percent?

Accepted Answer

A) $182.40 
B) -$54.82 
C) $162.09 
D) $387.40 
E) -$134.88 
A) $182.40 
B) -$54.82 
C) $162.09 
D) $387.40 
E) -$134.88

Question 13

A firm has total debt of $2,200 and a debt-equity ratio of 0.32.What is the value of the total assets?

Accepted Answer

A) $2,904 
B) $4,675 
C) $9,075 
D) $6,875 
E) $7,225 
A) $2,904 
B) $4,675 
C) $9,075 
D) $6,875 
E) $7,225

Question 14

Firms with high enterprise value multiples are most apt to have

Accepted Answer

A) high growth opportunities. 
B) low market-to-book ratios. 
C) low profit margins. 
D) low inventory turnover rates. 
E) a low price-earnings ratio. 
A) high growth opportunities. 
B) low market-to-book ratios. 
C) low profit margins. 
D) low inventory turnover rates. 
E) a low price-earnings ratio.

Question 15

Which portion of the DuPont identity measures the financial leverage employed by a firm?

Accepted Answer

A) Both the profit margin and the equity multiplier 
B) Equity multiplier 
C) Total asset turnover 
D) Both the capital intensity ratio and the total asset turnover 
E) Both the capital intensity ratio and the debt-equity ratio 
A) Both the profit margin and the equity multiplier 
B) Equity multiplier 
C) Total asset turnover 
D) Both the capital intensity ratio and the total asset turnover 
E) Both the capital intensity ratio and the debt-equity ratio

Question 16

If a firm decreases its operating costs,all else constant,then

Accepted Answer

A) the profit margin increases while the cash coverage ratio decreases. 
B) the return on assets increases while the return on equity decreases. 
C) both the return on assets and the return on equity increase. 
D) both the profit margin and the equity multiplier increase. 
E) the total asset turnover rate decreases while the profit margin increases. 
A) the profit margin increases while the cash coverage ratio decreases. 
B) the return on assets increases while the return on equity decreases. 
C) both the return on assets and the return on equity increase. 
D) both the profit margin and the equity multiplier increase. 
E) the total asset turnover rate decreases while the profit margin increases.

Question 17

A firm has a debt-equity ratio of 0.36.What is the total debt ratio?

Accepted Answer

A) 0.26 
B) 0.29 
C) 0.67 
D) 0.71 
E) 0.74 
A) 0.26 
B) 0.29 
C) 0.67 
D) 0.71 
E) 0.74

Question 18

Ratio analysis works best when evaluating the financial statements of two firms

Accepted Answer

A) in the same industry but located in different countries. 
B) of differing sizes in the same industry. 
C) with one being in a single line of business while the other is a conglomerate. 
D) of the same size in differing industries. 
E) when both are conglomerates with varying lines of business. 
A) in the same industry but located in different countries. 
B) of differing sizes in the same industry. 
C) with one being in a single line of business while the other is a conglomerate. 
D) of the same size in differing industries. 
E) when both are conglomerates with varying lines of business.

Question 19

When creating pro forma statements,the changes in the liabilities and owners' equity sections depend primarily on the firm's

Accepted Answer

A) financing policies. 
B) interest rates and financing policies. 
C) dividend and financing policies. 
D) retained earnings policies. 
E) rate of sales growth. 
A) financing policies. 
B) interest rates and financing policies. 
C) dividend and financing policies. 
D) retained earnings policies. 
E) rate of sales growth.

Question 20

Financial planning,when properly executed

Accepted Answer

A) helps ensure that adequate financing is in place to support the desired level of growth. 
B) ensures that the primary goals of senior management are fully achieved. 
C) reduces the necessity of daily management oversight of the business operations. 
D) ignores the normal restraints encountered by a firm. 
E) eliminates the need to plan more than 1 year in advance. 
A) helps ensure that adequate financing is in place to support the desired level of growth. 
B) ensures that the primary goals of senior management are fully achieved. 
C) reduces the necessity of daily management oversight of the business operations. 
D) ignores the normal restraints encountered by a firm. 
E) eliminates the need to plan more than 1 year in advance.

The return on equity can be calculated as

Enterprise value is computed as

If Textile Cloth stockholders want to know how much net profit the firm is making on a percentage basis on their investment in that firm,the shareholders should refer to the

Jensen's Boats has sales of $416,800,cost of goods sold of $234,600,depreciation of $41,200,and selling and general costs of $37,900.The firm has a loan balance of $92,400 with an interest rate of 6.7 percent.What is the value of EBITDA?

Marcel's has a debt-equity ratio of 0.32,a capital intensity ratio of 1.02,and a profit margin of 6.7 percent.What is the return on equity?

A firm has sales of $215,600,costs of $124,800,interest paid of $3,600,and depreciation of $11,400.The tax rate is 34 percent.What is the value of the cash coverage ratio?

Patti's has net income of $87,300,a price-earnings ratio of 11.8,and earnings per share of $1.13.How many shares of stock are outstanding?

If a non-dividend-paying firm bases its growth assumptions on the sustainable rate of growth and shows positive net income,then the pro forma statement must reflect

A decrease in which one of the following accounts increases a firm's current ratio as well as its quick ratio?

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

Which ratio calculates the amount of sales generated by each $1 of debt and equity invested in the firm?

A firm has total debt of $2,200 and a debt-equity ratio of 0.32.What is the value of the total assets?

Firms with high enterprise value multiples are most apt to have

Which portion of the DuPont identity measures the financial leverage employed by a firm?

If a firm decreases its operating costs,all else constant,then

A firm has a debt-equity ratio of 0.36.What is the total debt ratio?

Ratio analysis works best when evaluating the financial statements of two firms

When creating pro forma statements,the changes in the liabilities and owners' equity sections depend primarily on the firm's

Financial planning,when properly executed

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 3: Financial Statements Analysis and Financial Models

The return on equity can be calculated as

Enterprise value is computed as

If Textile Cloth stockholders want to know how much net profit the firm is making on a percentage basis on their investment in that firm,the shareholders should refer to the

Jensen's Boats has sales of $416,800,cost of goods sold of $234,600,depreciation of $41,200,and selling and general costs of $37,900.The firm has a loan balance of $92,400 with an interest rate of 6.7 percent.What is the value of EBITDA?

Marcel's has a debt-equity ratio of 0.32,a capital intensity ratio of 1.02,and a profit margin of 6.7 percent.What is the return on equity?

A firm has sales of $215,600,costs of $124,800,interest paid of $3,600,and depreciation of $11,400.The tax rate is 34 percent.What is the value of the cash coverage ratio?

Patti's has net income of $87,300,a price-earnings ratio of 11.8,and earnings per share of $1.13.How many shares of stock are outstanding?

If a non-dividend-paying firm bases its growth assumptions on the sustainable rate of growth and shows positive net income,then the pro forma statement must reflect

A decrease in which one of the following accounts increases a firm's current ratio as well as its quick ratio?

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

Which ratio calculates the amount of sales generated by each $1 of debt and equity invested in the firm?

A firm has total debt of $2,200 and a debt-equity ratio of 0.32.What is the value of the total assets?

Firms with high enterprise value multiples are most apt to have

Which portion of the DuPont identity measures the financial leverage employed by a firm?

If a firm decreases its operating costs,all else constant,then

A firm has a debt-equity ratio of 0.36.What is the total debt ratio?

Ratio analysis works best when evaluating the financial statements of two firms

When creating pro forma statements,the changes in the liabilities and owners' equity sections depend primarily on the firm's

Financial planning,when properly executed

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters