Question 1

Which one of the following provides information on a firm's assets and liabilities as of a particular date?

Accepted Answer

A)  cash flow statement 
B)  pro-forma income statement 
C)  income statement 
D)  tax return 
E)  balance sheet 
A)  cash flow statement 
B)  pro-forma income statement 
C)  income statement 
D)  tax return 
E)  balance sheet

Question 2

A firm has sales of $750,000 and cost of goods sold of $415,000. The firm expects sales to increase by 6 percent next year. What is the gross profit amount expected to be next year if the firm uses the percentage of sales approach when compiling pro forma statements?

Accepted Answer

A)  $235,100 
B)  $255,000 
C)  $335,000 
D)  $355,100 
E)  $536,100 
A)  $235,100 
B)  $255,000 
C)  $335,000 
D)  $355,100 
E)  $536,100

Question 3

Which of the following affect the earnings per share?
I. decrease in interest expense
II. share repurchase
III. increase in tax rates
IV. preferred stock dividend

Accepted Answer

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

Question 4

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?

Accepted Answer

A)  affect the price of the firm's securities 
B)  cause great embarrassment to the firm 
C)  cause one or more of the senior executives of the firm to resign 
D)  cause the SEC to halt the trading of the firm's securities should that information become public 
E)  affect the manner in which the firm presents its financial information 
A)  affect the price of the firm's securities 
B)  cause great embarrassment to the firm 
C)  cause one or more of the senior executives of the firm to resign 
D)  cause the SEC to halt the trading of the firm's securities should that information become public 
E)  affect the manner in which the firm presents its financial information

Question 5

A firm has current sales of $32,000. Projected sales for next year are $35,520. The percentage of sales approach is used for pro forma purposes. All balance sheet accounts, except long-term debt and common stock, change according to that approach. The expected increase in retained earnings is $2,200. What is the projected external financing need given the following current account values?

Accepted Answer

A)  -$3,532 
B)  -$1,969 
C)  -$1,390 
D)  $231 
E)  $1,341 
A)  -$3,532 
B)  -$1,969 
C)  -$1,390 
D)  $231 
E)  $1,341

Question 6

Bay Marina, Inc. has net income of $50,500 and has 25,000 shares of stock outstanding. Similar firms have a price-earnings ratio of 20. Given this, what should the market price of Bay Marina, Inc. stock be per share?

Accepted Answer

A)  $38.91 
B)  $39.29 
C)  $40.40 
D)  $43.91 
E)  $45.54 
A)  $38.91 
B)  $39.29 
C)  $40.40 
D)  $43.91 
E)  $45.54

Question 7

Which one of the following will increase the investment cash flow?

Accepted Answer

A)  purchase of an investment 
B)  issuing new shares of stock 
C)  repaying a bond issue 
D)  sale of a building 
E)  payment of interest on a bond issue 
A)  purchase of an investment 
B)  issuing new shares of stock 
C)  repaying a bond issue 
D)  sale of a building 
E)  payment of interest on a bond issue

Question 8

Wholesale Grocer's has total assets of $580,000 and total liabilities of $375,000. Net sales for the year are $547,000 and the profit margin is 14 percent. What is the return on equity?

Accepted Answer

A)  10.6 percent 
B)  23.3 percent 
C)  31.2 percent 
D)  37.4 percent 
E)  44.6 percent 
A)  10.6 percent 
B)  23.3 percent 
C)  31.2 percent 
D)  37.4 percent 
E)  44.6 percent

Question 9

Healthy Supplements, Inc. paid $6,300 in interest and $4,300 in dividends for the year. The firm also issued $12,000 worth of new equity securities. What is the amount of the financing cash flow?

Accepted Answer

A)  $2,500 
B)  $5,200 
C)  $6,800 
D)  $7,700 
E)  $14,300 
A)  $2,500 
B)  $5,200 
C)  $6,800 
D)  $7,700 
E)  $14,300

Question 10

Which one of the following is an ownership interest in a firm?

Accepted Answer

A)  asset 
B)  expense 
C)  net income 
D)  liability 
E)  equity 
A)  asset 
B)  expense 
C)  net income 
D)  liability 
E)  equity

Question 11

Which one of the following is equal to net income expressed as a percentage of total assets?

Accepted Answer

A)  return on equity 
B)  return on the balance sheet 
C)  operating yield 
D)  net yield 
E)  return on assets 
A)  return on equity 
B)  return on the balance sheet 
C)  operating yield 
D)  net yield 
E)  return on assets

Question 12

Stephen's Auto recently purchased Auto Express for $9.8 million. Auto Express had a market value of $9.5 million at the time of acquisition. The additional $0.3 million that Stephen's Auto paid for Auto Express will be treated on Stephen's Auto's balance sheet as which type of account?

Accepted Answer

A)  patent 
B)  depreciation 
C)  licenses 
D)  goodwill 
E)  acquisition expense 
A)  patent 
B)  depreciation 
C)  licenses 
D)  goodwill 
E)  acquisition expense

Question 13

Smith's Corner Market had annual sales of $425,300 and total assets of $366,000. What is the return on assets if the profit margin is 11 percent?

Accepted Answer

A)  8.2 percent 
B)  9.8 percent 
C)  10.6 percent 
D)  11.0 percent 
E)  12.8 percent 
A)  8.2 percent 
B)  9.8 percent 
C)  10.6 percent 
D)  11.0 percent 
E)  12.8 percent

Question 14

Handy Man Services, Inc. has net income of $525,000. What is the addition to retained earnings if the dividend payout ratio is 40 percent?

Accepted Answer

A)  $123,253 
B)  $157,250 
C)  $183,750 
D)  $221,813 
E)  $315,000 
A)  $123,253 
B)  $157,250 
C)  $183,750 
D)  $221,813 
E)  $315,000

Question 15

Green Recycling, Inc. has 150,000 shares of stock outstanding. The firm has total assets of $568,000 and total liabilities of $415,000. The firm's stock is selling for $31 a share. What is the price-book ratio?

Accepted Answer

A)  22.3 
B)  26.5 
C)  27.5 
D)  30.4 
E)  37.8 
A)  22.3 
B)  26.5 
C)  27.5 
D)  30.4 
E)  37.8

Question 16

Gold Jewelry, Inc. has annual sales of $4.5 million and a gross profit margin of 55 percent. The operating expenses are $540,750 and depreciation is $170,300. Interest expense is $95,000 and the tax rate is 35 percent. What is the net income?

Accepted Answer

A)  $1,002,980 
B)  $1,084,818 
C)  $1,356,220 
D)  $1,589,200 
E)  $2,385,000 
A)  $1,002,980 
B)  $1,084,818 
C)  $1,356,220 
D)  $1,589,200 
E)  $2,385,000

Question 17

What is the financing cash flow, given the following information?

Accepted Answer

A)  -$210 
B)  -$160 
C)  -$110 
D)  -$60 
E)  -$50 
A)  -$210 
B)  -$160 
C)  -$110 
D)  -$60 
E)  -$50

Question 18

A firm has $3,800 of cash, equipment worth $46,300, inventory of $36,300, a building worth $130,500, and $19,600 of accounts receivable. What is the value of the total fixed assets?

Accepted Answer

A)  $176,800 
B)  $203,500 
C)  $196,400 
D)  $223,100 
E)  $226,900 
A)  $176,800 
B)  $203,500 
C)  $196,400 
D)  $223,100 
E)  $226,900

Question 19

A firm has the following account balances for this year. Sales for the year are $420,000. Projected sales for next year are $441,000. The percentage of sales approach is used for pro forma purposes. All balance sheet accounts, except long-term debt and common stock, change according to that approach. The firm plans to decrease the long-term debt balance by $23,500 next year. Retained earnings is expected to increase by $5,400 next year. What is the projected external financing need?

Accepted Answer

A)  -$14,150 
B)  -$6,850 
C)  $32,850 
D)  $36,000 
E)  $56,350 
A)  -$14,150 
B)  -$6,850 
C)  $32,850 
D)  $36,000 
E)  $56,350

Question 20

A firm has net income of $18,000 and a book value per share of $2.10. The firm has 30,000 shares of stock outstanding and a price-earnings ratio of 15.9. What is the price-book ratio?

Accepted Answer

A)  1.7 
B)  2.4 
C)  2.7 
D)  4.5 
E)  5.1 
A)  1.7 
B)  2.4 
C)  2.7 
D)  4.5 
E)  5.1

Which one of the following provides information on a firm's assets and liabilities as of a particular date?

A firm has sales of $750,000 and cost of goods sold of $415,000. The firm expects sales to increase by 6 percent next year. What is the gross profit amount expected to be next year if the firm uses the percentage of sales approach when compiling pro forma statements?

Which of the following affect the earnings per share? I. decrease in interest expense II. share repurchase III. increase in tax rates IV. preferred stock dividend

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?

Bay Marina, Inc. has net income of $50,500 and has 25,000 shares of stock outstanding. Similar firms have a price-earnings ratio of 20. Given this, what should the market price of Bay Marina, Inc. stock be per share?

Which one of the following will increase the investment cash flow?

Wholesale Grocer's has total assets of $580,000 and total liabilities of $375,000. Net sales for the year are $547,000 and the profit margin is 14 percent. What is the return on equity?

Healthy Supplements, Inc. paid $6,300 in interest and $4,300 in dividends for the year. The firm also issued $12,000 worth of new equity securities. What is the amount of the financing cash flow?

Which one of the following is an ownership interest in a firm?

Which one of the following is equal to net income expressed as a percentage of total assets?

Stephen's Auto recently purchased Auto Express for $9.8 million. Auto Express had a market value of $9.5 million at the time of acquisition. The additional $0.3 million that Stephen's Auto paid for Auto Express will be treated on Stephen's Auto's balance sheet as which type of account?

Smith's Corner Market had annual sales of $425,300 and total assets of $366,000. What is the return on assets if the profit margin is 11 percent?

Handy Man Services, Inc. has net income of $525,000. What is the addition to retained earnings if the dividend payout ratio is 40 percent?

Green Recycling, Inc. has 150,000 shares of stock outstanding. The firm has total assets of $568,000 and total liabilities of $415,000. The firm's stock is selling for $31 a share. What is the price-book ratio?

Gold Jewelry, Inc. has annual sales of $4.5 million and a gross profit margin of 55 percent. The operating expenses are $540,750 and depreciation is $170,300. Interest expense is $95,000 and the tax rate is 35 percent. What is the net income?

What is the financing cash flow, given the following information?

A firm has $3,800 of cash, equipment worth $46,300, inventory of $36,300, a building worth $130,500, and $19,600 of accounts receivable. What is the value of the total fixed assets?

A firm has net income of $18,000 and a book value per share of $2.10. The firm has 30,000 shares of stock outstanding and a price-earnings ratio of 15.9. What is the price-book ratio?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Corporate Bonds

Government Bonds

Mortgage-Backed Securities

Filters

Exam 17: Projecting Cash Flow and Earnings

Which one of the following provides information on a firm's assets and liabilities as of a particular date?

A firm has sales of $750,000 and cost of goods sold of $415,000. The firm expects sales to increase by 6 percent next year. What is the gross profit amount expected to be next year if the firm uses the percentage of sales approach when compiling pro forma statements?

Which of the following affect the earnings per share? I. decrease in interest expense II. share repurchase III. increase in tax rates IV. preferred stock dividend

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?

Bay Marina, Inc. has net income of $50,500 and has 25,000 shares of stock outstanding. Similar firms have a price-earnings ratio of 20. Given this, what should the market price of Bay Marina, Inc. stock be per share?

Which one of the following will increase the investment cash flow?

Wholesale Grocer's has total assets of $580,000 and total liabilities of $375,000. Net sales for the year are $547,000 and the profit margin is 14 percent. What is the return on equity?

Healthy Supplements, Inc. paid $6,300 in interest and $4,300 in dividends for the year. The firm also issued $12,000 worth of new equity securities. What is the amount of the financing cash flow?

Which one of the following is an ownership interest in a firm?

Which one of the following is equal to net income expressed as a percentage of total assets?

Stephen's Auto recently purchased Auto Express for $9.8 million. Auto Express had a market value of $9.5 million at the time of acquisition. The additional $0.3 million that Stephen's Auto paid for Auto Express will be treated on Stephen's Auto's balance sheet as which type of account?

Smith's Corner Market had annual sales of $425,300 and total assets of $366,000. What is the return on assets if the profit margin is 11 percent?

Handy Man Services, Inc. has net income of $525,000. What is the addition to retained earnings if the dividend payout ratio is 40 percent?

Green Recycling, Inc. has 150,000 shares of stock outstanding. The firm has total assets of $568,000 and total liabilities of $415,000. The firm's stock is selling for $31 a share. What is the price-book ratio?

Gold Jewelry, Inc. has annual sales of $4.5 million and a gross profit margin of 55 percent. The operating expenses are $540,750 and depreciation is $170,300. Interest expense is $95,000 and the tax rate is 35 percent. What is the net income?

What is the financing cash flow, given the following information?

A firm has $3,800 of cash, equipment worth $46,300, inventory of $36,300, a building worth $130,500, and $19,600 of accounts receivable. What is the value of the total fixed assets?

A firm has net income of $18,000 and a book value per share of $2.10. The firm has 30,000 shares of stock outstanding and a price-earnings ratio of 15.9. What is the price-book ratio?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Corporate Bonds

Government Bonds

Mortgage-Backed Securities

Filters