Question 1

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 2

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent.What is the return on equity?

Accepted Answer

A) 26 percent 
B) 50 percent 
C) 65 percent 
D) 84 percent 
E) 135 percent 
A) 26 percent 
B) 50 percent 
C) 65 percent 
D) 84 percent 
E) 135 percent

Question 3

Tobin's Q relates the market value of a firm's assets to which one of the following?

Accepted Answer

A) initial cost of creating the firm 
B) current book value of the firm 
C) average asset value of similar firms 
D) average market value of similar firms 
E) today's cost to duplicate those assets 
A) initial cost of creating the firm 
B) current book value of the firm 
C) average asset value of similar firms 
D) average market value of similar firms 
E) today's cost to duplicate those assets

Question 4

The U.S.government coding system that classifies a firm by the nature of its business operations is known as the:

Accepted Answer

A) NASDAQ 100. 
B) Standard & Poor's 500. 
C) Standard Industrial Classification code. 
D) Governmental ID code. 
E) Government Engineered Coding System. 
A) NASDAQ 100. 
B) Standard & Poor's 500. 
C) Standard Industrial Classification code. 
D) Governmental ID code. 
E) Government Engineered Coding System.

Question 5

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 6

You need to analyze a firm's performance in relation to its peers.You can do this either by comparing the firms' balance sheets and income statements or by comparing the firms' ratios.If you only had time to use one means of comparison which method would you use and why?

Accepted Answer

Firms generally are sized differently ma

Question 7

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

Question 8

Townsend Enterprises has a PEG ratio of 5.3,net income of $49,200,a price-earnings ratio of 17.6,and a profit margin of 7.1 percent.What is the earnings growth rate?

Accepted Answer

A) 0.33 percent 
B) 1.06 percent 
C) 3.32 percent 
D) 5.30 percent 
E) 10.60 percent 
A) 0.33 percent 
B) 1.06 percent 
C) 3.32 percent 
D) 5.30 percent 
E) 10.60 percent

Question 9

Oscar's Dog House has a profit margin of 5.6 percent,a return on assets of 12.5 percent,and an equity multiplier of 1.49.What is the return on equity?

Accepted Answer

A) 17.14 percent 
B) 18.63 percent 
C) 19.67 percent 
D) 21.69 percent 
E) 22.30 percent 
A) 17.14 percent 
B) 18.63 percent 
C) 19.67 percent 
D) 21.69 percent 
E) 22.30 percent

Question 10

Beach Wear has current liabilities of $350,000,a quick ratio of 1.65,inventory turnover of 3.2,and a current ratio of 2.9.What is the cost of goods sold?

Accepted Answer

A) $980,000 
B) $1,060,000 
C) $1,200,000 
D) $1,400,000 
E) $1,560,000 
A) $980,000 
B) $1,060,000 
C) $1,200,000 
D) $1,400,000 
E) $1,560,000

Question 11

A firm has total debt of $4,850 and a debt-equity ratio of 0.57.What is the value of the total assets?

Accepted Answer

A) $6,128.05 
B) $7,253.40 
C) $9,571.95 
D) $11,034.00 
E) $13,358.77 
A) $6,128.05 
B) $7,253.40 
C) $9,571.95 
D) $11,034.00 
E) $13,358.77

Question 12

Which one of the following is a source of cash?

Accepted Answer

A) repurchase of common stock 
B) acquisition of debt 
C) purchase of inventory 
D) payment to a supplier 
E) granting credit to a customer 
A) repurchase of common stock 
B) acquisition of debt 
C) purchase of inventory 
D) payment to a supplier 
E) granting credit to a customer

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

The Home Supply Co.has a current accounts receivable balance of $280,000.Credit sales for the year just ended were $1,830,000.How many days on average did it take for credit customers to pay off their accounts during this past year?

Accepted Answer

A) 54.29 days 
B) 55.01 days 
C) 55.50 days 
D) 55.85 days 
E) 61.00 days 
A) 54.29 days 
B) 55.01 days 
C) 55.50 days 
D) 55.85 days 
E) 61.00 days

Question 15

Reliable Cars has sales of $807,200,total assets of $1,105,100,and a profit margin of 9.68 percent.The firm has a total debt ratio of 78 percent.What is the return on equity?

Accepted Answer

A) 13.09 percent 
B) 16.67 percent 
C) 17.68 percent 
D) 28.56 percent 
E) 32.14 percent 
A) 13.09 percent 
B) 16.67 percent 
C) 17.68 percent 
D) 28.56 percent 
E) 32.14 percent

Question 16

According to the Statement of Cash Flows,an increase in interest expense will _____ the cash flow from _____ activities.

Accepted Answer

A) decrease; operating 
B) decrease; financing 
C) increase; operating 
D) increase; financing 
E) increase; investment 
A) decrease; operating 
B) decrease; financing 
C) increase; operating 
D) increase; financing 
E) increase; investment

Question 17

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 18

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 19

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 20

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

Exam 3: Working With Financial Statements

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

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent.What is the return on equity?

Tobin's Q relates the market value of a firm's assets to which one of the following?

The U.S.government coding system that classifies a firm by the nature of its business operations is known as the:

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?

You need to analyze a firm's performance in relation to its peers.You can do this either by comparing the firms' balance sheets and income statements or by comparing the firms' ratios.If you only had time to use one means of comparison which method would you use and why?

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?

Townsend Enterprises has a PEG ratio of 5.3,net income of $49,200,a price-earnings ratio of 17.6,and a profit margin of 7.1 percent.What is the earnings growth rate?

Oscar's Dog House has a profit margin of 5.6 percent,a return on assets of 12.5 percent,and an equity multiplier of 1.49.What is the return on equity?

Beach Wear has current liabilities of $350,000,a quick ratio of 1.65,inventory turnover of 3.2,and a current ratio of 2.9.What is the cost of goods sold?

A firm has total debt of $4,850 and a debt-equity ratio of 0.57.What is the value of the total assets?

Which one of the following is a source of cash?

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?

The Home Supply Co.has a current accounts receivable balance of $280,000.Credit sales for the year just ended were $1,830,000.How many days on average did it take for credit customers to pay off their accounts during this past year?

Reliable Cars has sales of $807,200,total assets of $1,105,100,and a profit margin of 9.68 percent.The firm has a total debt ratio of 78 percent.What is the return on equity?

According to the Statement of Cash Flows,an increase in interest expense will _____ the cash flow from _____ activities.

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

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?

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?

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

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

Filters

According to the Statement of Cash Flows,an increase in interest expense will _ the cash flow from _ activities.