Question 1

Which of the following is correct for a firm with EPS of $2.00 per share and a 45% payout ratio?

Accepted Answer

A)  45% of earnings will be plowed back into the firm. 
B)  Dividends will equal $1.10 per share. 
C)  Book value per share of equity will increase by $1.10. 
D)  Retained earnings will be unchanged. 
A)  45% of earnings will be plowed back into the firm. 
B)  Dividends will equal $1.10 per share. 
C)  Book value per share of equity will increase by $1.10. 
D)  Retained earnings will be unchanged. C

Question 2

Which of the following is not likely to cause a reduction in the NWC turnover ratio?

Accepted Answer

A)  Sales have decreased. 
B)  Average payables have increased. 
C)  Average inventory has been higher. 
D)  The firm's cash balance is greater. 
A)  Sales have decreased. 
B)  Average payables have increased. 
C)  Average inventory has been higher. 
D)  The firm's cash balance is greater. B

Question 3

What must happen to asset turnover to leave ROE unchanged from its original 16% level if the profit margin is reduced from 8% to 6% and the leverage ratio increases from 1.2 to 1.6? Asset turnover must:

Accepted Answer

A)  remain constant. 
B)  increase from 1.46 to 2.33. 
C)  decrease from 14.58 to 2.33. 
D)  increase from 4.76 to 9.60. 
A)  remain constant. 
B)  increase from 1.46 to 2.33. 
C)  decrease from 14.58 to 2.33. 
D)  increase from 4.76 to 9.60. A

Question 4

How would you interpret an inventory turnover ratio of 10.7?

Accepted Answer

A)  It takes 50 days on average to collect receivables. 
B)  Inventory is converted into sales every 50 days. 
C)  The firm has sufficient inventories to maintain sales for 34.1 days. 
D)  Assets are converted into sales every 50 days. 
A)  It takes 50 days on average to collect receivables. 
B)  Inventory is converted into sales every 50 days. 
C)  The firm has sufficient inventories to maintain sales for 34.1 days. 
D)  Assets are converted into sales every 50 days.

Question 5

What are some potential pitfalls of ratio analysis based on accounting data?

Accepted Answer

Financial ratio analysis will rarely be

Question 6

The net working capital of a firm will decrease when accrued wages are paid with cash.

Accepted Answer

A) True 
 B)False

Question 7

The board of directors is dissatisfied with last year's ROE of 15%.If the profit margin and asset turnover ratio remain unchanged at 8% and 1.25,respectively,by how much must the leverage ratio (i.e.,assets/equity)increase to achieve 20% ROE?

Accepted Answer

A)  Leverage ratio must increase by .5. 
B)  Leverage ratio must increase by 5. 
C)  Leverage ratio must increase by 16.67%. 
D)  Leverage ratio must increase by 33.3%. 
A)  Leverage ratio must increase by .5. 
B)  Leverage ratio must increase by 5. 
C)  Leverage ratio must increase by 16.67%. 
D)  Leverage ratio must increase by 33.3%.

Question 8

__________ are those expected to be turned into cash in the near future,while __________ are those expected to be fulfilled in the near future,and the difference between the two is __________.

Accepted Answer

A)  Current assets; current liabilities; shareholders' equity. 
B)  Current assets; current liabilities; net working capital. 
C)  Fixed assets; current liabilities; net working capital. 
D)  Liquid assets; liquid liabilities; shareholders' equity. 
A)  Current assets; current liabilities; shareholders' equity. 
B)  Current assets; current liabilities; net working capital. 
C)  Fixed assets; current liabilities; net working capital. 
D)  Liquid assets; liquid liabilities; shareholders' equity.

Question 9

A sign that a firm is efficient is a:

Accepted Answer

A)  high average collection period. 
B)  high day's sales in inventories. 
C)  low asset turnover. 
D)  high inventory turnover. 
A)  high average collection period. 
B)  high day's sales in inventories. 
C)  low asset turnover. 
D)  high inventory turnover.

Question 10

Return on assets and return on equity are both profitability ratios.

Accepted Answer

A) True 
 B)False

Question 11

In the past year,TVG had revenues of $3 million,cost of goods sold of $2.5 million,and depreciation expense of $200,000.The firm has a single issue of debt outstanding with face value of $l million,market value of $.92 million,and a coupon rate of 8%.What is the firm's times interest earned ratio?

Accepted Answer

The answer of In the past year,TVG had revenues of...

Question 12

The income statement of a firm shows the value of its assets and liabilities over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 13

The inventory turnover ratio compares:

Accepted Answer

A)  current assets to average inventory. 
B)  cost of goods sold to average inventory. 
C)  average receivables to average inventory. 
D)  average assets to average inventory. 
A)  current assets to average inventory. 
B)  cost of goods sold to average inventory. 
C)  average receivables to average inventory. 
D)  average assets to average inventory.

Question 14

Net working capital to total assets and current ratio are both liquidity ratios.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following changes will provide an increase (if only in the short-run)in a firm's ROE?

Accepted Answer

A)  An increase in total assets 
B)  An increase in the dividend payout ratio 
C)  An increase in equity 
D)  An increase in tax rates 
A)  An increase in total assets 
B)  An increase in the dividend payout ratio 
C)  An increase in equity 
D)  An increase in tax rates

Question 16

Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT? The firm:

Accepted Answer

A)  will have a net loss. 
B)  will have no income-tax liability. 
C)  needs to lower its interest expense. 
D)  can still have a positive net income. 
A)  will have a net loss. 
B)  will have no income-tax liability. 
C)  needs to lower its interest expense. 
D)  can still have a positive net income.

Question 17

What is the inventory turnover ratio for ABC Corp.if cost of goods sold equals $5,000,current ratio equals 3.0,quick ratio equals 1.5,and the firm has $1,800 in current assets?

Accepted Answer

A)  2.78 times 
B)  4.17 times 
C)  5.56 times 
D)  8.33 times 
A)  2.78 times 
B)  4.17 times 
C)  5.56 times 
D)  8.33 times

Question 18

Which of the following will allow your firm to achieve its targeted 16% ROA with an asset turnover of 2.5?

Accepted Answer

A)  A leverage ratio of .0667 
B)  A P/E ratio of 14 
C)  A profit margin of 15% 
D)  A profit margin of 6.4% 
A)  A leverage ratio of .0667 
B)  A P/E ratio of 14 
C)  A profit margin of 15% 
D)  A profit margin of 6.4%

Question 19

A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

Accepted Answer

A)  Current ratio will increase to 5.0. 
B)  Net working capital will increase to $500,000. 
C)  Current ratio will decrease. 
D)  Net working capital will not change. 
A)  Current ratio will increase to 5.0. 
B)  Net working capital will increase to $500,000. 
C)  Current ratio will decrease. 
D)  Net working capital will not change.

Question 20

How do measures such as market value added and economic value added help assess the firm's performance?

Accepted Answer

The ratio of the market value of the fir

Exam 4: Measuring Corporate Performance

Which of the following is correct for a firm with EPS of $2.00 per share and a 45% payout ratio?

Which of the following is not likely to cause a reduction in the NWC turnover ratio?

What must happen to asset turnover to leave ROE unchanged from its original 16% level if the profit margin is reduced from 8% to 6% and the leverage ratio increases from 1.2 to 1.6? Asset turnover must:

How would you interpret an inventory turnover ratio of 10.7?

What are some potential pitfalls of ratio analysis based on accounting data?

The net working capital of a firm will decrease when accrued wages are paid with cash.

The board of directors is dissatisfied with last year's ROE of 15%.If the profit margin and asset turnover ratio remain unchanged at 8% and 1.25,respectively,by how much must the leverage ratio (i.e.,assets/equity)increase to achieve 20% ROE?

__________ are those expected to be turned into cash in the near future,while __________ are those expected to be fulfilled in the near future,and the difference between the two is __________.

A sign that a firm is efficient is a:

Return on assets and return on equity are both profitability ratios.

In the past year,TVG had revenues of $3 million,cost of goods sold of $2.5 million,and depreciation expense of $200,000.The firm has a single issue of debt outstanding with face value of $l million,market value of $.92 million,and a coupon rate of 8%.What is the firm's times interest earned ratio?

The income statement of a firm shows the value of its assets and liabilities over a specified period of time.

The inventory turnover ratio compares:

Net working capital to total assets and current ratio are both liquidity ratios.

Which of the following changes will provide an increase (if only in the short-run)in a firm's ROE?

Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT? The firm:

What is the inventory turnover ratio for ABC Corp.if cost of goods sold equals $5,000,current ratio equals 3.0,quick ratio equals 1.5,and the firm has $1,800 in current assets?

Which of the following will allow your firm to achieve its targeted 16% ROA with an asset turnover of 2.5?

A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

How do measures such as market value added and economic value added help assess the firm's performance?

Goals and Governance of the Corporation

Financial Markets and Institutions

Accounting and Finance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk,Return,and the Opportunity Cost of Capital

Risk,Return,and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters

are those expected to be turned into cash in the near future,while are those expected to be fulfilled in the near future,and the difference between the two is __.