Question 1

Earnings per share is equal to:

Accepted Answer

A) net income divided by the total number of shares outstanding. 
B) net income divided by the par value of the ordinary equity. 
C) gross income multiplied by the par value of the ordinary equity. 
D) operating income divided by the par value of the ordinary equity. 
E) net income divided by total shareholders' equity. 
A) net income divided by the total number of shares outstanding. 
B) net income divided by the par value of the ordinary equity. 
C) gross income multiplied by the par value of the ordinary equity. 
D) operating income divided by the par value of the ordinary equity. 
E) net income divided by total shareholders' equity.

Question 2

Peggy Grey's Cookies has net income of €360.The firm pays out 40% of the net income to its shareholders as dividends.During the year,the company sold €80 worth of ordinary equity.What is the cash flow to shareholders?

Accepted Answer

A) €64 
B) €136 
C) €144 
D) €224 
E) €296 
A) €64 
B) €136 
C) €144 
D) €224 
E) €296

Question 3

Noncash items refer to:

Accepted Answer

A) the credit sales of a firm. 
B) the trade payables of a firm. 
C) the costs incurred for the purchase of intangible non-current assets. 
D) expenses charged against revenues that do not directly affect cash flow. 
E) all accounts on the statement of financial position other than cash on hand. 
A) the credit sales of a firm. 
B) the trade payables of a firm. 
C) the costs incurred for the purchase of intangible non-current assets. 
D) expenses charged against revenues that do not directly affect cash flow. 
E) all accounts on the statement of financial position other than cash on hand.

Question 4

The financial statement summarizing a firm's accounting performance over a period of time is the:

Accepted Answer

A) income statement. 
B) statement of financial position. 
C) statement of cash flows. 
D) tax reconciliation statement. 
E) shareholders' equity sheet. 
A) income statement. 
B) statement of financial position. 
C) statement of cash flows. 
D) tax reconciliation statement. 
E) shareholders' equity sheet.

Question 5

Nabors plc
2010 Income Statement
( $ £ $ in millions)
$\begin{array}{|l|c|}
\hline \text { Net sales } & £ 9,610 \
\hline \text { Less: Cost of goods sold } & 6,310 \
\hline \text { Less: Depreciation } & 1,370 \
\hline \text { Eamings before interest and taxes } & 1,930 \
\hline \text { Less: Interest paid } & 630 \
\hline \text { Taxable Income } & £ 1,300 \
\hline \text { Less: Taxes } & 455 \
\hline \text { Net income } & £ \quad 845 \
\hline
\end{array}$

Nabors ple
2009 and 2010 Statement of financial positions 
( $ £ $ in millions)
$\begin{array}{|l|l|l|l|l|l|}
\hline & 2009 &2010 & & 2009 & 2010 \
\hline \text { Cash } & £, 310 & £ 405 & \text { Trade payables } & £ 2,720 & £ 2,570 \
\hline \text { Accounts rec. } & 2,640 & 3,055 & \text { Notes payable } & 100 & 0 \
\hline \text { Inventory } & 3,275 & \underline{3,850} & \text { Total } & £ 2,820 & £ 2,570 \
\hline \text { Total } & £ 6,225 & £ 7,310 & \text { Non-current liabilities } & 7,875 & 8,100 \
\hline \text { Net non-current assets } & 10,960 & 10,670 & \text { Ordinary equity } & 5,000 & 5,250 \
\hline & & & \text { Retained eamings } & \underline{1,490} & 2,060 \
\hline \text { Total Assets } & £ 17,185 & £ 17,980 & \text { Total liab.\& equity } & £ 17,185 & £ 17,890 \
\hline
\end{array}$
-What is the amount of the net capital spending for 2010?

Accepted Answer

A) -£290 
B) £795 
C) £1,080 
D) £1,660 
E) £2,165 
A) -£290 
B) £795 
C) £1,080 
D) £1,660 
E) £2,165

Question 6

Assets are listed on the statement of financial position in order of:

Accepted Answer

A) decreasing liquidity. 
B) decreasing size. 
C) increasing size. 
D) relative life. 
E) None of the above. 
A) decreasing liquidity. 
B) decreasing size. 
C) increasing size. 
D) relative life. 
E) None of the above.

Question 7

Nabors plc
2010 Income Statement
( $ £ $ in millions)
$\begin{array}{|l|c|}
\hline \text { Net sales } & £ 9,610 \
\hline \text { Less: Cost of goods sold } & 6,310 \
\hline \text { Less: Depreciation } & 1,370 \
\hline \text { Eamings before interest and taxes } & 1,930 \
\hline \text { Less: Interest paid } & 630 \
\hline \text { Taxable Income } & £ 1,300 \
\hline \text { Less: Taxes } & 455 \
\hline \text { Net income } & £ \quad 845 \
\hline
\end{array}$

Nabors ple
2009 and 2010 Statement of financial positions 
( $ £ $ in millions)
$\begin{array}{|l|l|l|l|l|l|}
\hline & 2009 &2010 & & 2009 & 2010 \
\hline \text { Cash } & £, 310 & £ 405 & \text { Trade payables } & £ 2,720 & £ 2,570 \
\hline \text { Accounts rec. } & 2,640 & 3,055 & \text { Notes payable } & 100 & 0 \
\hline \text { Inventory } & 3,275 & \underline{3,850} & \text { Total } & £ 2,820 & £ 2,570 \
\hline \text { Total } & £ 6,225 & £ 7,310 & \text { Non-current liabilities } & 7,875 & 8,100 \
\hline \text { Net non-current assets } & 10,960 & 10,670 & \text { Ordinary equity } & 5,000 & 5,250 \
\hline & & & \text { Retained eamings } & \underline{1,490} & 2,060 \
\hline \text { Total Assets } & £ 17,185 & £ 17,980 & \text { Total liab.\& equity } & £ 17,185 & £ 17,890 \
\hline
\end{array}$
-What is the amount of net new borrowing for 2010?

Accepted Answer

A) -£225 
B) -£25 
C) £0 
D) £25 
E) £225 
A) -£225 
B) -£25 
C) £0 
D) £25 
E) £225

Question 8

Your _____ tax rate measures the total taxes you pay divided by your taxable income.

Accepted Answer

A) deductible 
B) residual 
C) total 
D) average 
E) marginal 
A) deductible 
B) residual 
C) total 
D) average 
E) marginal

Question 9

Dividends per share:

Accepted Answer

A) increase as the net income increases as long as the number of shares outstanding remains constant. 
B) decrease as the number of shares outstanding decrease,all else constant. 
C) are inversely related to the earnings per share. 
D) are based upon the dividend requirements established by International Accounting Standards. 
E) are equal to the amount of net income distributed to shareholders divided by the number of shares outstanding. 
A) increase as the net income increases as long as the number of shares outstanding remains constant. 
B) decrease as the number of shares outstanding decrease,all else constant. 
C) are inversely related to the earnings per share. 
D) are based upon the dividend requirements established by International Accounting Standards. 
E) are equal to the amount of net income distributed to shareholders divided by the number of shares outstanding.

Question 10

Dividends per share is equal to dividends paid:

Accepted Answer

A) divided by the par value of ordinary equity. 
B) divided by the total number of shares outstanding. 
C) divided by total shareholders' equity. 
D) multiplied by the par value of the ordinary equity. 
E) multiplied by the total number of shares outstanding. 
A) divided by the par value of ordinary equity. 
B) divided by the total number of shares outstanding. 
C) divided by total shareholders' equity. 
D) multiplied by the par value of the ordinary equity. 
E) multiplied by the total number of shares outstanding.

Question 11

Nabors plc
2010 Income Statement
( $ £ $ in millions)
$\begin{array}{|l|c|}
\hline \text { Net sales } & £ 9,610 \
\hline \text { Less: Cost of goods sold } & 6,310 \
\hline \text { Less: Depreciation } & 1,370 \
\hline \text { Eamings before interest and taxes } & 1,930 \
\hline \text { Less: Interest paid } & 630 \
\hline \text { Taxable Income } & £ 1,300 \
\hline \text { Less: Taxes } & 455 \
\hline \text { Net income } & £ \quad 845 \
\hline
\end{array}$

Nabors ple
2009 and 2010 Statement of financial positions 
( $ £ $ in millions)
$\begin{array}{|l|l|l|l|l|l|}
\hline & 2009 &2010 & & 2009 & 2010 \
\hline \text { Cash } & £, 310 & £ 405 & \text { Trade payables } & £ 2,720 & £ 2,570 \
\hline \text { Accounts rec. } & 2,640 & 3,055 & \text { Notes payable } & 100 & 0 \
\hline \text { Inventory } & 3,275 & \underline{3,850} & \text { Total } & £ 2,820 & £ 2,570 \
\hline \text { Total } & £ 6,225 & £ 7,310 & \text { Non-current liabilities } & 7,875 & 8,100 \
\hline \text { Net non-current assets } & 10,960 & 10,670 & \text { Ordinary equity } & 5,000 & 5,250 \
\hline & & & \text { Retained eamings } & \underline{1,490} & 2,060 \
\hline \text { Total Assets } & £ 17,185 & £ 17,980 & \text { Total liab.\& equity } & £ 17,185 & £ 17,890 \
\hline
\end{array}$
-What is the change in the net working capital from 2009 to 2010?

Accepted Answer

A) £1,235 
B) £1,035 
C) £1,335 
D) £3,405 
E) £4,740 
A) £1,235 
B) £1,035 
C) £1,335 
D) £3,405 
E) £4,740

Question 12

Which one of the following statements concerning liquidity is correct?

Accepted Answer

A) If you sold an asset today,it is a liquid asset. 
B) If you can sell an asset next year at a price equal to its actual value,the asset is highly liquid. 
C) Trademarks and patents are highly liquid. 
D) The less liquidity a firm has,the lower the probability the firm will encounter financial difficulties. 
E) Statement of financial position accounts are listed in order of decreasing liquidity. 
A) If you sold an asset today,it is a liquid asset. 
B) If you can sell an asset next year at a price equal to its actual value,the asset is highly liquid. 
C) Trademarks and patents are highly liquid. 
D) The less liquidity a firm has,the lower the probability the firm will encounter financial difficulties. 
E) Statement of financial position accounts are listed in order of decreasing liquidity.

Question 13

Cost of goods sold$\quad\quad\quad\quad\quad£ 3,210$

Interest$\quad\quad\quad\quad\quad\quad\quad\quad\quad£ 215$

Dividends$\quad\quad\quad\quad\quad\quad\quad\quad£ 160$

Depreciation$\quad\quad\quad\quad\quad\quad\quad£ 375$

Change in retained earnings$\quad\quad£ 360$

Tax rate$\quad\quad\quad\quad\quad\quad\quad\quad\quad35 \%$
-What is the operating cash flow for 2010?

Accepted Answer

A) £520 
B) £800 
C) £1,015 
D) £1,110 
E) £1,390 
A) £520 
B) £800 
C) £1,015 
D) £1,110 
E) £1,390

Question 14

Nabors plc
2010 Income Statement
( $ £ $ in millions)
$\begin{array}{|l|c|}
\hline \text { Net sales } & £ 9,610 \
\hline \text { Less: Cost of goods sold } & 6,310 \
\hline \text { Less: Depreciation } & 1,370 \
\hline \text { Eamings before interest and taxes } & 1,930 \
\hline \text { Less: Interest paid } & 630 \
\hline \text { Taxable Income } & £ 1,300 \
\hline \text { Less: Taxes } & 455 \
\hline \text { Net income } & £ \quad 845 \
\hline
\end{array}$

Nabors ple
2009 and 2010 Statement of financial positions 
( $ £ $ in millions)
$\begin{array}{|l|l|l|l|l|l|}
\hline & 2009 &2010 & & 2009 & 2010 \
\hline \text { Cash } & £, 310 & £ 405 & \text { Trade payables } & £ 2,720 & £ 2,570 \
\hline \text { Accounts rec. } & 2,640 & 3,055 & \text { Notes payable } & 100 & 0 \
\hline \text { Inventory } & 3,275 & \underline{3,850} & \text { Total } & £ 2,820 & £ 2,570 \
\hline \text { Total } & £ 6,225 & £ 7,310 & \text { Non-current liabilities } & 7,875 & 8,100 \
\hline \text { Net non-current assets } & 10,960 & 10,670 & \text { Ordinary equity } & 5,000 & 5,250 \
\hline & & & \text { Retained eamings } & \underline{1,490} & 2,060 \
\hline \text { Total Assets } & £ 17,185 & £ 17,980 & \text { Total liab.\& equity } & £ 17,185 & £ 17,890 \
\hline
\end{array}$
-What is the cash flow to creditors for 2010?

Accepted Answer

A) -£405 
B) -£225 
C) £225 
D) £405 
E) £630 
A) -£405 
B) -£225 
C) £225 
D) £405 
E) £630

Question 15

Which equality is the basis for the statement of financial position?

Accepted Answer

A) Non-current Assets = Shareholder's Equity + Current Assets 
B) Assets = Liabilities + Shareholder's Equity 
C) Assets = Current Non-current liabilities + Retained Earnings 
D) Non-current Assets = Liabilities + Shareholder's Equity 
E) None of the above. 
A) Non-current Assets = Shareholder's Equity + Current Assets 
B) Assets = Liabilities + Shareholder's Equity 
C) Assets = Current Non-current liabilities + Retained Earnings 
D) Non-current Assets = Liabilities + Shareholder's Equity 
E) None of the above.

Question 16

Given the tax rates as shown,what is the average tax rate for a firm with taxable income of €126,500?
$$\begin{array} { | l | l | } 
\hline \text { Taxuble Inctane } & \text { Tw Rate } \
\hline \text { €0 - 50,000 } & 15 \% \
\hline 50,001 - 75,000 & 25 \% \
\hline 75,001 - 100,000 & 34 \% \
\hline 100,001 - 335,000 & 39 \% \
\hline
\end{array}$$

Accepted Answer

A) 21.38% 
B) 23.88% 
C) 25.76% 
D) 34.64% 
E) 39.00% 
A) 21.38% 
B) 23.88% 
C) 25.76% 
D) 34.64% 
E) 39.00%

Question 17

_____ refers to the difference between a firm's current assets and its current liabilities.

Accepted Answer

A) Operating cash flow 
B) Capital spending 
C) Net working capital 
D) Cash flow from assets 
E) Cash flow to creditors 
A) Operating cash flow 
B) Capital spending 
C) Net working capital 
D) Cash flow from assets 
E) Cash flow to creditors

Question 18

The total assets are €900,the non-current assets are €600,non-current liabilities is €500,and short-term ebt is €200.What is the amount of net working capital?

Accepted Answer

A) €0 
B) €100 
C) €200 
D) €300 
E) €400 
A) €0 
B) €100 
C) €200 
D) €300 
E) €400

Question 19

Knickerdoodles NV.
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline { 2009 }\quad\quad\quad\quad\quad\underline { 2010 }$

-What is the net working capital for 2010?

Accepted Answer

A) €345 
B) €405 
C) €805 
D) €812 
E) €1,005 
A) €345 
B) €405 
C) €805 
D) €812 
E) €1,005

Question 20

An increase in total assets:

Accepted Answer

A) means that net working capital is also increasing. 
B) requires an investment in non-current assets. 
C) means that shareholders' equity must also increase. 
D) must be offset by an equal increase in liabilities and shareholders' equity. 
E) can only occur when a firm has positive net income. 
A) means that net working capital is also increasing. 
B) requires an investment in non-current assets. 
C) means that shareholders' equity must also increase. 
D) must be offset by an equal increase in liabilities and shareholders' equity. 
E) can only occur when a firm has positive net income.

Exam 3: Financial Statement Analysis and Long-Term Planning

Earnings per share is equal to:

Peggy Grey's Cookies has net income of €360.The firm pays out 40% of the net income to its shareholders as dividends.During the year,the company sold €80 worth of ordinary equity.What is the cash flow to shareholders?

Noncash items refer to:

The financial statement summarizing a firm's accounting performance over a period of time is the:

Assets are listed on the statement of financial position in order of:

Your _____ tax rate measures the total taxes you pay divided by your taxable income.

Dividends per share:

Dividends per share is equal to dividends paid:

Which one of the following statements concerning liquidity is correct?

Which equality is the basis for the statement of financial position?

Given the tax rates as shown,what is the average tax rate for a firm with taxable income of €126,500? Taxuble Inctane Tw Rate 0 - 50,000 15\% 50,001-75,000 25\% 75,001-100,000 34\% 100,001-335,000 39\%

_____ refers to the difference between a firm's current assets and its current liabilities.

The total assets are €900,the non-current assets are €600,non-current liabilities is €500,and short-term ebt is €200.What is the amount of net working capital?

Knickerdoodles NV. 2009‾2010‾\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline { 2009 }\quad\quad\quad\quad\quad\underline { 2010 }2009​2010​ -What is the net working capital for 2010?

An increase in total assets:

Introduction to Corporate Finance

Corporate Governance

Discounted Cash Flow Valuation

How to Value Bonds and Shares

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Factor Models and the Arbitrage Pricing Theory

Risk, cost of Capital, and Capital Budgeting

Corporate Financing Decisions and Efficient Capital Markets

Long-Term Financing: An Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividend and Other Payouts

Equity Financing

Debt Financing

Leasing and Off-Balance-Sheet Financing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Financial Risk Management With Derivatives

Short-Term Finance and Planning

Cash Management

Credit Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

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