Question 1

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-The profit margin for 2012 is:

Accepted Answer

A)  -94% 
B)  -57% 
C)  13% 
D)  31% 
E)  None of the above. 
A)  -94% 
B)  -57% 
C)  13% 
D)  31% 
E)  None of the above. A

Question 2

The financial statements for Limited Brands, Inc. follow (fiscal years ending January):
    
-Use Limited Brands,Inc.'s financial statements,above,to answer the following question.Use the company's operating profit as an approximation of its EBIT,and assume a 40% tax rate for your calculations.What percentage decline in earnings before interest and taxes could Limited Brands have sustained in fiscal years 2006 and 2007 before failing to cover:
a)Interest and principal repayment requirements;
b)Interest,principal and common dividend payments?

Accepted Answer

(Note that principal payment in year t equals current portion of long-term debt in year t-1.)

Question 3

Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

Accepted Answer

A)  current ratio 
B)  debt-to-equity 
C)  retention 
D)  asset turnover 
E)  return on assets 
A)  current ratio 
B)  debt-to-equity 
C)  retention 
D)  asset turnover 
E)  return on assets D

Question 4

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

Accepted Answer

A)  asset turnover and control 
B)  financial leverage 
C)  coverage 
D)  profitability 
E)  None of the above. 
A)  asset turnover and control 
B)  financial leverage 
C)  coverage 
D)  profitability 
E)  None of the above.

Question 5

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-The gross margin for 2012 is:

Accepted Answer

A)  -94% 
B)  13% 
C)  26% 
D)  31% 
E)  None of the above. 
A)  -94% 
B)  13% 
C)  26% 
D)  31% 
E)  None of the above.

Question 6

Which one of the following statements does NOT describe a problem with using ROE as a performance measure?

Accepted Answer

A)  ROE measures return on accounting book value, and this problem is not solved by using market value. 
B)  ROE is a forward-looking, one-period measure, while business decisions span the past and present. 
C)  ROE measures only return, while financial decisions involve balancing risk against return. 
D)  None of these describe problems with ROE. 
E)  All of these describe problems with ROE. 
A)  ROE measures return on accounting book value, and this problem is not solved by using market value. 
B)  ROE is a forward-looking, one-period measure, while business decisions span the past and present. 
C)  ROE measures only return, while financial decisions involve balancing risk against return. 
D)  None of these describe problems with ROE. 
E)  All of these describe problems with ROE.

Question 7

The financial statements for Limited Brands, Inc. follow (fiscal years ending January):
    
-Use Limited Brands,Inc.'s financial statements,above,to answer the following question.Use the company's operating profit as an approximation of its EBIT,and assume a 40% tax rate for your calculations.For the fiscal years ending in January of 2006 and 2007,calculate:
a)Limited Brands' total liabilities-to-equity ratio;
b)Times interest earned ratio; and
c)Times burden covered.

Accepted Answer

The answer of The financial statements for Limited Brands, Inc....

Question 8

On a common-size balance sheet,all accounts are expressed as a percentage of:

Accepted Answer

A)  sales for the period. 
B)  the base year sales. 
C)  total equity for the base year. 
D)  total assets for the current year. 
E)  total assets for the base year. 
A)  sales for the period. 
B)  the base year sales. 
C)  total equity for the base year. 
D)  total assets for the current year. 
E)  total assets for the base year.

Question 9

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-Assume a 365-day year for your calculations.The inventory turnover,based on cost of goods sold,at the end of 2012 is:

Accepted Answer

A)  5.2 
B)  24.3 
C)  28.8 
D)  35.7 
E)  None of the above. 
A)  5.2 
B)  24.3 
C)  28.8 
D)  35.7 
E)  None of the above.

Question 10

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-Which of the following statements best describes how the company's short-term liquidity changed from 2011 to 2012?

Accepted Answer

A)  Link's short-run liquidity has improved modestly. 
B)  Link's short-run liquidity has deteriorated very little, but from a low initial base. 
C)  Link's short-run liquidity has improved considerably, but from a low initial base. 
D)  Link's short-run liquidity has deteriorated considerably, but from a high initial base. 
E)  None of the above. 
A)  Link's short-run liquidity has improved modestly. 
B)  Link's short-run liquidity has deteriorated very little, but from a low initial base. 
C)  Link's short-run liquidity has improved considerably, but from a low initial base. 
D)  Link's short-run liquidity has deteriorated considerably, but from a high initial base. 
E)  None of the above.

Question 11

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-Assume a 365-day year for your calculations.The payables period in days,based on cost of goods sold,at the end of 2012 is:

Accepted Answer

A)  5.2 
B)  24.3 
C)  28.8 
D)  35.7 
E)  None of the above. 
A)  5.2 
B)  24.3 
C)  28.8 
D)  35.7 
E)  None of the above.

Question 12

The most popular yardstick of financial performance among investors and senior managers is the:

Accepted Answer

A)  profit margin. 
B)  return on equity. 
C)  return on assets. 
D)  times burden covered ratio. 
E)  earnings yield.
F) None of the above. 
A)  profit margin. 
B)  return on equity. 
C)  return on assets. 
D)  times burden covered ratio. 
E)  earnings yield.
F) None of the above.

Question 13

Ptarmigan Travelers had sales of $420,000 in 2010 and $480,000 in 2011.The firm's current accounts remained constant.Given this information,which one of the following statements must be true?

Accepted Answer

A)  The total asset turnover rate increased. 
B)  The days' sales in receivables increased. 
C)  The inventory turnover rate increased. 
D)  The fixed asset turnover decreased. 
E)  The collection period decreased. 
A)  The total asset turnover rate increased. 
B)  The days' sales in receivables increased. 
C)  The inventory turnover rate increased. 
D)  The fixed asset turnover decreased. 
E)  The collection period decreased.

Question 14

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-The current ratio at the end of 2012 is:

Accepted Answer

A)  10.21 
B)  2.31 
C)  2.76 
D)  10.30 
E)  None of the above. 
A)  10.21 
B)  2.31 
C)  2.76 
D)  10.30 
E)  None of the above.

Question 15

Selected financial data for Link, Inc. follows: ($ in thousands)
  
-Assume a 365-day year for your calculations.The collection period in days,based on sales,at the end of 2012 is:

Accepted Answer

A)  24.3 
B)  219.6 
C)  35.7 
D)  28.8 
E)  None of the above. 
A)  24.3 
B)  219.6 
C)  35.7 
D)  28.8 
E)  None of the above.

Question 16

The financial statements for Limited Brands, Inc. follow (fiscal years ending January):
    
-Use Limited Brands,Inc.'s financial statements,above,to prepare common-size financial statements for Limited Brands,Inc.for 2006 - 2007.

Accepted Answer

The answer of The financial statements for Limited Brands, Inc....

Question 17

Assume you are a banker who has loaned money to a firm,but that firm is now facing increased competition and reduced cash flows.Which one of the following ratios would you most closely monitor to evaluate the firm's ability to repay its loan?

Accepted Answer

A)  current ratio 
B)  debt-to-equity ratio 
C)  times interest earned ratio 
D)  times burden covered ratio 
E)  None of the above. 
A)  current ratio 
B)  debt-to-equity ratio 
C)  times interest earned ratio 
D)  times burden covered ratio 
E)  None of the above.

Question 18

Which of these ratios,or levers of performance,are the determinants of ROE?
I.profit margin
II.financial leverage
III.times interest earned
IV.asset turnover

Accepted Answer

A)  I and IV only 
B)  II and IV only 
C)  I, II, and IV only 
D)  I, II, and III only 
E)  I, III, and IV only
F) I, II, III, and IV 
A)  I and IV only 
B)  II and IV only 
C)  I, II, and IV only 
D)  I, II, and III only 
E)  I, III, and IV only
F) I, II, III, and IV

Question 19

Breakers Bay Inc.has succeeded in increasing the amount of goods it sells while holding the amount of inventory on hand at a constant level.Assume that both the cost per unit and the selling price per unit also remained constant.All else held constant,how will this accomplishment be reflected in the firm's financial ratios?

Accepted Answer

A)  decrease in the fixed asset turnover rate 
B)  decrease in the financial leverage ratio 
C)  increase in the inventory turnover rate 
D)  increase in the day's sales in inventory 
E)  no change in the total asset turnover rate 
A)  decrease in the fixed asset turnover rate 
B)  decrease in the financial leverage ratio 
C)  increase in the inventory turnover rate 
D)  increase in the day's sales in inventory 
E)  no change in the total asset turnover rate

Question 20

Answer the questions below based on the following information.Taxes are 35% and all dollars are in millions.
   a)Calculate each company's ROE,ROA,and ROIC.
b)Why is Runrun's ROE so much higher than Suunto's?
 Does this mean Runrun is a better company?
 Why or why not?
c)Why is Suunto's ROA higher than Runrun's?
 What does this tell you about the two companies?
d)How do the two companies' ROICs compare?
 What does this suggest about the two companies?

Accepted Answer

a. @#IMG-DLM& b.Runrun's higher ROE is a natural r

Selected financial data for Link, Inc. follows: ($ in thousands) -The profit margin for 2012 is:

Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

Selected financial data for Link, Inc. follows: ($ in thousands) -The gross margin for 2012 is:

Which one of the following statements does NOT describe a problem with using ROE as a performance measure?

On a common-size balance sheet,all accounts are expressed as a percentage of:

Selected financial data for Link, Inc. follows: ($ in thousands) -Assume a 365-day year for your calculations.The inventory turnover,based on cost of goods sold,at the end of 2012 is:

Selected financial data for Link, Inc. follows: ($ in thousands) -Which of the following statements best describes how the company's short-term liquidity changed from 2011 to 2012?

Selected financial data for Link, Inc. follows: ($ in thousands) -Assume a 365-day year for your calculations.The payables period in days,based on cost of goods sold,at the end of 2012 is:

The most popular yardstick of financial performance among investors and senior managers is the:

Ptarmigan Travelers had sales of $420,000 in 2010 and $480,000 in 2011.The firm's current accounts remained constant.Given this information,which one of the following statements must be true?

Selected financial data for Link, Inc. follows: ($ in thousands) -The current ratio at the end of 2012 is:

Selected financial data for Link, Inc. follows: ($ in thousands) -Assume a 365-day year for your calculations.The collection period in days,based on sales,at the end of 2012 is:

The financial statements for Limited Brands, Inc. follow (fiscal years ending January): -Use Limited Brands,Inc.'s financial statements,above,to prepare common-size financial statements for Limited Brands,Inc.for 2006 - 2007.

Assume you are a banker who has loaned money to a firm,but that firm is now facing increased competition and reduced cash flows.Which one of the following ratios would you most closely monitor to evaluate the firm's ability to repay its loan?

Which of these ratios,or levers of performance,are the determinants of ROE? I.profit margin II.financial leverage III.times interest earned IV.asset turnover

Interpreting Financial Statements

Financial Forecasting

Managing Growth

Financial Instruments and Markets

The Financing Decision

Discounted Cash Flow Techniques

Risk Analysis in Investment Decisions

Business Valuation and Corporate Restructuring

Filters

Exam 2: Evaluating Financial Performance

Selected financial data for Link, Inc. follows: ($ in thousands) -The profit margin for 2012 is:

Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

Selected financial data for Link, Inc. follows: ($ in thousands) -The gross margin for 2012 is:

Which one of the following statements does NOT describe a problem with using ROE as a performance measure?

On a common-size balance sheet,all accounts are expressed as a percentage of:

Selected financial data for Link, Inc. follows: ($ in thousands) -Assume a 365-day year for your calculations.The inventory turnover,based on cost of goods sold,at the end of 2012 is:

Selected financial data for Link, Inc. follows: ($ in thousands) -Which of the following statements best describes how the company's short-term liquidity changed from 2011 to 2012?

Selected financial data for Link, Inc. follows: ($ in thousands) -Assume a 365-day year for your calculations.The payables period in days,based on cost of goods sold,at the end of 2012 is:

The most popular yardstick of financial performance among investors and senior managers is the:

Ptarmigan Travelers had sales of $420,000 in 2010 and $480,000 in 2011.The firm's current accounts remained constant.Given this information,which one of the following statements must be true?

Selected financial data for Link, Inc. follows: ($ in thousands) -The current ratio at the end of 2012 is:

Selected financial data for Link, Inc. follows: ($ in thousands) -Assume a 365-day year for your calculations.The collection period in days,based on sales,at the end of 2012 is:

The financial statements for Limited Brands, Inc. follow (fiscal years ending January): -Use Limited Brands,Inc.'s financial statements,above,to prepare common-size financial statements for Limited Brands,Inc.for 2006 - 2007.

Assume you are a banker who has loaned money to a firm,but that firm is now facing increased competition and reduced cash flows.Which one of the following ratios would you most closely monitor to evaluate the firm's ability to repay its loan?

Which of these ratios,or levers of performance,are the determinants of ROE? I.profit margin II.financial leverage III.times interest earned IV.asset turnover

Interpreting Financial Statements

Financial Forecasting

Managing Growth

Financial Instruments and Markets

The Financing Decision

Discounted Cash Flow Techniques

Risk Analysis in Investment Decisions

Business Valuation and Corporate Restructuring

Filters