Question 1

How does accounts receivable affect the statement of cash flows for 2012?

Accepted Answer

A) a use of $4,218 of cash as an investment activity 
B) a source of $807 of cash as an operating activity 
C) a use of $4,218 of cash as a financing activity 
D) a source of $807 of cash as an investment activity 
E) a use of $807 of cash as an operating activity 
A) a use of $4,218 of cash as an investment activity 
B) a source of $807 of cash as an operating activity 
C) a use of $4,218 of cash as a financing activity 
D) a source of $807 of cash as an investment activity 
E) a use of $807 of cash as an operating activity

Question 2

Relationships determined from a firm's financial information and used for comparison purposes are known as:

Accepted Answer

A) financial ratios. 
B) identities. 
C) dimensional analysis. 
D) scenario analysis. 
E) solvency analysis. 
A) financial ratios. 
B) identities. 
C) dimensional analysis. 
D) scenario analysis. 
E) solvency analysis.

Question 3

What is debt-equity ratio? (Use 2012 values)

Accepted Answer

A) 0.52 
B) 0.87 
C) 0.94 
D) 1.01 
E) 1.06 
A) 0.52 
B) 0.87 
C) 0.94 
D) 1.01 
E) 1.06

Question 4

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

Accepted Answer

A) increase in the cash ratio 
B) increase in the net working capital to total assets ratio 
C) decrease in the quick ratio 
D) decrease in the cash coverage ratio 
E) increase in the current ratio 
A) increase in the cash ratio 
B) increase in the net working capital to total assets ratio 
C) decrease in the quick ratio 
D) decrease in the cash coverage ratio 
E) increase in the current ratio

Question 5

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

Accepted Answer

A) volatile market prices 
B) negative earnings 
C) positive PEG ratios 
D) a negative Tobin's Q 
E) increasing sales 
A) volatile market prices 
B) negative earnings 
C) positive PEG ratios 
D) a negative Tobin's Q 
E) increasing sales

Question 6

A firm has a debt-equity ratio of 0.42. What is the total debt ratio?

Accepted Answer

A) 0.30 
B) 0.36 
C) 0.44 
D) 1.58 
E) 2.38 
A) 0.30 
B) 0.36 
C) 0.44 
D) 1.58 
E) 2.38

Question 7

How many dollars of sales are being generated from every dollar of net fixed assets? (Use 2012 values.)

Accepted Answer

A) $0.88 
B) $1.87 
C) $2.33 
D) $2.59 
E) $3.09 
A) $0.88 
B) $1.87 
C) $2.33 
D) $2.59 
E) $3.09

Question 8

A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

Accepted Answer

A) equity multiplier 
B) total asset turnover 
C) profit margin 
D) return on assets 
E) return on equity 
A) equity multiplier 
B) total asset turnover 
C) profit margin 
D) return on assets 
E) return on equity

Question 9

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

Accepted Answer

A) accounts payable 
B) cash 
C) inventory 
D) accounts receivable 
E) fixed assets 
A) accounts payable 
B) cash 
C) inventory 
D) accounts receivable 
E) fixed assets

Question 10

A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio?

Accepted Answer

A) 12.14 
B) 15.24 
C) 17.27 
D) 23.41 
E) 24.56 
A) 12.14 
B) 15.24 
C) 17.27 
D) 23.41 
E) 24.56

Question 11

What is the equity multiplier for 2012?

Accepted Answer

A) 1.67 
B) 1.72 
C) 1.88 
D) 1.93 
E) 2.03 
A) 1.67 
B) 1.72 
C) 1.88 
D) 1.93 
E) 2.03

Question 12

On the Statement of Cash Flows, which of the following are considered financing activities?
I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid

Accepted Answer

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

Question 13

Wise's Corner Grocer had the following current account values. What effect did the change in net working capital have on the firm's cash flows for 2012?

Accepted Answer

A) net use of cash of $37 
B) net use of cash of $83 
C) net source of cash of $83 
D) net source of cash of $111 
E) net source of cash of $135 
A) net use of cash of $37 
B) net use of cash of $83 
C) net source of cash of $83 
D) net source of cash of $111 
E) net source of cash of $135

Question 14

Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?

Accepted Answer

A) 0.89 
B) 1.13 
C) 1.47 
D) 1.89 
E) 2.13 
A) 0.89 
B) 1.13 
C) 1.47 
D) 1.89 
E) 2.13

Question 15

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Accepted Answer

A) return on equity 
B) return on assets 
C) profit margin 
D) equity multiplier 
E) price-earnings ratio 
A) return on equity 
B) return on assets 
C) profit margin 
D) equity multiplier 
E) price-earnings ratio

Question 16

Activities of a firm which require the spending of cash are known as:

Accepted Answer

A) sources of cash. 
B) uses of cash. 
C) cash collections. 
D) cash receipts. 
E) cash on hand. 
A) sources of cash. 
B) uses of cash. 
C) cash collections. 
D) cash receipts. 
E) cash on hand.

Question 17

On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?

Accepted Answer

A) current year sales 
B) current year total assets 
C) base-year sales 
D) base-year total assets 
E) base-year accounts receivables 
A) current year sales 
B) current year total assets 
C) base-year sales 
D) base-year total assets 
E) base-year accounts receivables

Question 18

Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?

Accepted Answer

A) 0.31 
B) 0.53 
C) 0.71 
D) 1.04 
E) 1.07 
A) 0.31 
B) 0.53 
C) 0.71 
D) 1.04 
E) 1.07

Question 19

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio?

Accepted Answer

A) 0.97 
B) 1.01 
C) 1.08 
D) 1.15 
E) 1.22 
A) 0.97 
B) 1.01 
C) 1.08 
D) 1.15 
E) 1.22

Question 20

Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income?

Accepted Answer

A) $105,616 
B) $148,309 
C) $157,136 
D) $161,008 
E) $164,909 
A) $105,616 
B) $148,309 
C) $157,136 
D) $161,008 
E) $164,909

Exam 3: Working With Financial Statements

How does accounts receivable affect the statement of cash flows for 2012?

Relationships determined from a firm's financial information and used for comparison purposes are known as:

What is debt-equity ratio? (Use 2012 values)

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

A firm has a debt-equity ratio of 0.42. What is the total debt ratio?

How many dollars of sales are being generated from every dollar of net fixed assets? (Use 2012 values.)

A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio?

What is the equity multiplier for 2012?

On the Statement of Cash Flows, which of the following are considered financing activities? I. increase in long-term debt II. decrease in accounts payable III. interest paid IV. dividends paid

Wise's Corner Grocer had the following current account values. What effect did the change in net working capital have on the firm's cash flows for 2012?

Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Activities of a firm which require the spending of cash are known as:

On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?

Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio?

Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income?

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Risk Management: An Introduction to Financial Engineering

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters