Question 1

Which one of the following accurately describes the three parts of the Du Pont identity?

Accepted Answer

A) operating efficiency, equity multiplier, and profitability ratio 
B) financial leverage, operating efficiency, and profitability ratio 
C) equity multiplier, profit margin, and total asset turnover 
D) debt-equity ratio, capital intensity ratio, and profit margin 
E) return on assets, profit margin, and equity multiplier 
A) operating efficiency, equity multiplier, and profitability ratio 
B) financial leverage, operating efficiency, and profitability ratio 
C) equity multiplier, profit margin, and total asset turnover 
D) debt-equity ratio, capital intensity ratio, and profit margin 
E) return on assets, profit margin, and equity multiplier C

Question 2

The most acceptable method of evaluating the financial statements of a firm is to compare the firm's current:

Accepted Answer

A) financial ratios to the firm's historical ratios. 
B) financial statements to the financial statements of similar firms operating in other countries. 
C) financial ratios to the average ratios of all firms located within the same geographic area. 
D) financial statements to those of larger firms in unrelated industries. 
E) financial statements to the projections that were created based on Tobin's Q. 
A) financial ratios to the firm's historical ratios. 
B) financial statements to the financial statements of similar firms operating in other countries. 
C) financial ratios to the average ratios of all firms located within the same geographic area. 
D) financial statements to those of larger firms in unrelated industries. 
E) financial statements to the projections that were created based on Tobin's Q. A

Question 3

A firm has a debt-equity ratio of 57 percent,a total asset turnover of 1.12,and a profit margin of 4.9 percent.The total equity is $511,640.What is the amount of the net income?

Accepted Answer

A) $28,079 
B) $35,143 
C) $44,084 
D) $47,601 
E) $52,418 
A) $28,079 
B) $35,143 
C) $44,084 
D) $47,601 
E) $52,418 C

Question 4

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 5

Which one of the following is a use of cash?

Accepted Answer

A) increase in notes payable 
B) decrease in inventory 
C) increase in long-term debt 
D) decrease in accounts receivables 
E) decrease in common stock 
A) increase in notes payable 
B) decrease in inventory 
C) increase in long-term debt 
D) decrease in accounts receivables 
E) decrease in common stock

Question 6

A supplier,who requires payment within ten days,should be most concerned with which one of the following ratios when granting credit?

Accepted Answer

A) current 
B) cash 
C) debt-equity 
D) quick 
E) total debt 
A) current 
B) cash 
C) debt-equity 
D) quick 
E) total debt

Question 7

If a firm has a debt-equity ratio of 1.0,then its total debt ratio must be which one of the following?

Accepted Answer

A) 0.0 
B) 0.5 
C) 1.0 
D) 1.5 
E) 2.0 
A) 0.0 
B) 0.5 
C) 1.0 
D) 1.5 
E) 2.0

Question 8

Ratios that measure a firm's financial leverage are known as _____ ratios.

Accepted Answer

A) asset management 
B) long-term solvency 
C) short-term solvency 
D) profitability 
E) book value 
A) asset management 
B) long-term solvency 
C) short-term solvency 
D) profitability 
E) book value

Question 9

Canine Supply has sales of $2,200,total assets of $1,400,and a debt-equity ratio of 0.5.Its return on equity is 15 percent.What is the net income?

Accepted Answer

A) $128.16 
B) $131.41 
C) $132.09 
D) $136.67 
E) $140.00 
A) $128.16 
B) $131.41 
C) $132.09 
D) $136.67 
E) $140.00

Question 10

Assume a firm has a positive cash balance which is increasing annually.Why then is it important to analyze a statement of cash flows?

Accepted Answer

It is possible that the increase in the

Question 11

The Flower Shoppe has accounts receivable of $3,506,inventory of $4,407,sales of $218,640,and cost of goods sold of $169,290.How many days does it take the firm to sell its inventory and collect the payment on the sale assuming that all sales are on credit?

Accepted Answer

A) 14.67 days 
B) 15.35 days 
C) 16.23 days 
D) 17.18 days 
E) 17.47 days 
A) 14.67 days 
B) 15.35 days 
C) 16.23 days 
D) 17.18 days 
E) 17.47 days

Question 12

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 13

Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a chosen point in time?

Accepted Answer

A) statement of standardization 
B) statement of cash flows 
C) common-base year statement 
D) common-size statement 
E) base reconciliation statement 
A) statement of standardization 
B) statement of cash flows 
C) common-base year statement 
D) common-size statement 
E) base reconciliation statement

Question 14

What value does the PEG ratio provide to financial analysts?

Accepted Answer

The PEG ratio divides the PE ratio by th

Question 15

Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding.The firm has a profit margin of 6 percent and a price-sales ratio of 1.20.What is the firm's price-earnings ratio?

Accepted Answer

A) 14 
B) 16 
C) 18 
D) 20 
E) 22 
A) 14 
B) 16 
C) 18 
D) 20 
E) 22

Question 16

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

Question 17

Dee's has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91.Sam's has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88.Both companies have similar operations.Based on this information,Dee's must be doing which one of the following?

Accepted Answer

A) utilizing its fixed assets more efficiently than Sam's 
B) utilizing its total assets more efficiently than Sam's 
C) generating $1 in sales for every $1.12 in net fixed assets 
D) generating $1.12 in net income for every $1 in net fixed assets 
E) maintaining the same level of current assets as Sam's 
A) utilizing its fixed assets more efficiently than Sam's 
B) utilizing its total assets more efficiently than Sam's 
C) generating $1 in sales for every $1.12 in net fixed assets 
D) generating $1.12 in net income for every $1 in net fixed assets 
E) maintaining the same level of current assets as Sam's

Question 18

High Mountain Foods has an equity multiplier of 1.55,a total asset turnover of 1.3,and a profit margin of 7.5 percent.What is the return on equity?

Accepted Answer

A) 8.94 percent 
B) 10.87 percent 
C) 12.69 percent 
D) 14.38 percent 
E) 15.11 percent 
A) 8.94 percent 
B) 10.87 percent 
C) 12.69 percent 
D) 14.38 percent 
E) 15.11 percent

Question 19

A firm has total assets of $310,100 and net fixed assets of $168,500.The average daily operating costs are $2,980.What is the value of the interval measure?

Accepted Answer

A) 31.47 days 
B) 47.52 days 
C) 56.22 days 
D) 68.05 days 
E) 104.62 days 
A) 31.47 days 
B) 47.52 days 
C) 56.22 days 
D) 68.05 days 
E) 104.62 days

Question 20

Dandelion Fields has a Tobin's Q of .96.The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000.The firm has 20,000 shares of stock outstanding and a book value per share of $2.09.What is the market to book ratio?

Accepted Answer

A) 2.75 times 
B) 3.18 times 
C) 3.54 times 
D) 4.01 times 
E) 4.20 times 
A) 2.75 times 
B) 3.18 times 
C) 3.54 times 
D) 4.01 times 
E) 4.20 times

Exam 3: Working With Financial Statements

Which one of the following accurately describes the three parts of the Du Pont identity?

The most acceptable method of evaluating the financial statements of a firm is to compare the firm's current:

A firm has a debt-equity ratio of 57 percent,a total asset turnover of 1.12,and a profit margin of 4.9 percent.The total equity is $511,640.What is the amount of the net income?

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?

Which one of the following is a use of cash?

A supplier,who requires payment within ten days,should be most concerned with which one of the following ratios when granting credit?

If a firm has a debt-equity ratio of 1.0,then its total debt ratio must be which one of the following?

Ratios that measure a firm's financial leverage are known as _____ ratios.

Canine Supply has sales of $2,200,total assets of $1,400,and a debt-equity ratio of 0.5.Its return on equity is 15 percent.What is the net income?

Assume a firm has a positive cash balance which is increasing annually.Why then is it important to analyze a statement of cash flows?

The Flower Shoppe has accounts receivable of $3,506,inventory of $4,407,sales of $218,640,and cost of goods sold of $169,290.How many days does it take the firm to sell its inventory and collect the payment on the sale assuming that all sales are on credit?

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

Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a chosen point in time?

What value does the PEG ratio provide to financial analysts?

Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding.The firm has a profit margin of 6 percent and a price-sales ratio of 1.20.What is the firm's price-earnings 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?

Dee's has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91.Sam's has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88.Both companies have similar operations.Based on this information,Dee's must be doing which one of the following?

High Mountain Foods has an equity multiplier of 1.55,a total asset turnover of 1.3,and a profit margin of 7.5 percent.What is the return on equity?

A firm has total assets of $310,100 and net fixed assets of $168,500.The average daily operating costs are $2,980.What is the value of the interval measure?

Dandelion Fields has a Tobin's Q of .96.The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000.The firm has 20,000 shares of stock outstanding and a book value per share of $2.09.What is the market to book ratio?

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 Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

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