Question 1

Which one of the following is a source of cash?

Accepted Answer

A) increase in accounts receivable 
B) decrease in notes payable 
C) decrease in common stock 
D) increase in accounts payable 
E) increase in inventory 
A) increase in accounts receivable 
B) decrease in notes payable 
C) decrease in common stock 
D) increase in accounts payable 
E) increase in inventory

Question 2

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

Question 3

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 4

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 5

Shareholders probably have the most interest in which one of the following sets of ratios?

Accepted Answer

A) return on assets and profit margin 
B) long-term debt and times interest earned 
C) price-earnings and debt-equity 
D) market-to-book and times interest earned 
E) return on equity and price-earnings 
A) return on assets and profit margin 
B) long-term debt and times interest earned 
C) price-earnings and debt-equity 
D) market-to-book and times interest earned 
E) return on equity and price-earnings

Question 6

Al's Sport Store has sales of $897,400,costs of goods sold of $628,300,inventory of $208,400,and accounts receivable of $74,100.How many days,on average,does it take the firm to sell its inventory assuming that all sales are on credit?

Accepted Answer

A) 74.19 days 
B) 84.76 days 
C) 121.07 days 
D) 138.46 days 
E) 151.21 days 
A) 74.19 days 
B) 84.76 days 
C) 121.07 days 
D) 138.46 days 
E) 151.21 days

Question 7

Last year,which is used as the base year,a firm had cash of $52,accounts receivable of $218,inventory of $509,and net fixed assets of $1,107.This year,the firm has cash of $61,accounts receivable of $198,inventory of $527,and net fixed assets of $1,216.What is the common-base year value of accounts receivable?

Accepted Answer

A) 0.08 
B) 0.10 
C) 0.88 
D) 0.91 
E) 1.18 
A) 0.08 
B) 0.10 
C) 0.88 
D) 0.91 
E) 1.18

Question 8

A firm has sales of $3,200,net income of $390,total assets of $4,500,and total equity of $2,750.Interest expense is $50.What is the common-size statement value of the interest expense?

Accepted Answer

A) 0.89 percent 
B) 1.56 percent 
C) 3.69 percent 
D) 10.26 percent 
E) 14.55 percent 
A) 0.89 percent 
B) 1.56 percent 
C) 3.69 percent 
D) 10.26 percent 
E) 14.55 percent

Question 9

Which one of the following statements is correct?

Accepted Answer

A) Book values should always be given precedence over market values. 
B) Financial statements are frequently used as the basis for performance evaluations. 
C) Historical information provides no value to someone who is predicting future performance. 
D) Potential lenders place little value on financial statement information. 
E) Reviewing financial information over time has very limited value. 
A) Book values should always be given precedence over market values. 
B) Financial statements are frequently used as the basis for performance evaluations. 
C) Historical information provides no value to someone who is predicting future performance. 
D) Potential lenders place little value on financial statement information. 
E) Reviewing financial information over time has very limited value.

Question 10

The Purple Martin has annual sales of $687,400,total debt of $210,000,total equity of $365,000,and a profit margin of 4.80 percent.What is the return on assets?

Accepted Answer

A) 5.74 percent 
B) 6.48 percent 
C) 7.02 percent 
D) 7.78 percent 
E) 9.79 percent 
A) 5.74 percent 
B) 6.48 percent 
C) 7.02 percent 
D) 7.78 percent 
E) 9.79 percent

Question 11

Which of the following can be used to compute the return on equity?
I.Profit margin × Return on assets
II.Return on assets × Equity multiplier
III.Net income/Total equity
IV.Return on assets × Total asset turnover

Accepted Answer

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

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

Coulter Supply has a total debt ratio of 0.52.What is the equity multiplier?

Accepted Answer

A) 0.89 
B) 1.13 
C) 1.47 
D) 2.08 
E) 2.13 
A) 0.89 
B) 1.13 
C) 1.47 
D) 2.08 
E) 2.13

Question 14

The formula which breaks down the return on equity into three component parts is referred to as which one of the following?

Accepted Answer

A) equity equation 
B) profitability determinant 
C) SIC formula 
D) Du Pont identity 
E) equity performance formula 
A) equity equation 
B) profitability determinant 
C) SIC formula 
D) Du Pont identity 
E) equity performance formula

Question 15

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 16

A firm generated net income of $862.The depreciation expense was $47 and dividends were paid in the amount of $25.Accounts payables decreased by $13,accounts receivables increased by $28,inventory decreased by $14,and net fixed assets decreased by $8.There was no interest expense.What was the net cash flow from operating activity?

Accepted Answer

A) $776 
B) $802 
C) $882 
D) $922 
E) $930 
A) $776 
B) $802 
C) $882 
D) $922 
E) $930

Exam 3: Working With Financial Statements

Which one of the following is a source of cash?

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

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

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?

Shareholders probably have the most interest in which one of the following sets of ratios?

Al's Sport Store has sales of $897,400,costs of goods sold of $628,300,inventory of $208,400,and accounts receivable of $74,100.How many days,on average,does it take the firm to sell its inventory assuming that all sales are on credit?

A firm has sales of $3,200,net income of $390,total assets of $4,500,and total equity of $2,750.Interest expense is $50.What is the common-size statement value of the interest expense?

Which one of the following statements is correct?

The Purple Martin has annual sales of $687,400,total debt of $210,000,total equity of $365,000,and a profit margin of 4.80 percent.What is the return on assets?

Which of the following can be used to compute the return on equity? I.Profit margin × Return on assets II.Return on assets × Equity multiplier III.Net income/Total equity IV.Return on assets × Total asset turnover

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

Coulter Supply has a total debt ratio of 0.52.What is the equity multiplier?

The formula which breaks down the return on equity into three component parts is referred to as 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?

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