Question 1

The statement of financial position is also known as the:

Accepted Answer

A)  balance sheet. 
B)  income statement. 
C)  statement of cash flows. 
D)  statement of stockholder's equity. 
A)  balance sheet. 
B)  income statement. 
C)  statement of cash flows. 
D)  statement of stockholder's equity.

Question 2

Which of the following is NOT a reason why cash flow may not equal net income?

Accepted Answer

A)  Amortization is added in when calculating net income. 
B)  Changes in inventory will change cash flows but not income. 
C)  Capital expenditures are not recorded on the income statement. 
D)  Depreciation is deducted when calculating net income. 
A)  Amortization is added in when calculating net income. 
B)  Changes in inventory will change cash flows but not income. 
C)  Capital expenditures are not recorded on the income statement. 
D)  Depreciation is deducted when calculating net income.

Question 3

Which of the following is NOT a section on the cash flow statement?

Accepted Answer

A)  Income generating activities 
B)  Investing activities 
C)  Operating activities 
D)  Financing activities 
A)  Income generating activities 
B)  Investing activities 
C)  Operating activities 
D)  Financing activities

Question 4

Use the table for the question(s) below.
Consider the following balance sheet:
    
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.Its Debt-to-Enterprise Value Ratio in 2009 is closest to:

Accepted Answer

A)  0.696 
B)  0.37 
C)  0.255 
D)  0.654 
A)  0.696 
B)  0.37 
C)  0.255 
D)  0.654

Question 5

Use the information for the question(s) below.
In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million.
-The statement of financial performance is also known as the:

Accepted Answer

A)  balance sheet. 
B)  income statement. 
C)  statement of cash flows. 
D)  statement of stockholder's equity. 
A)  balance sheet. 
B)  income statement. 
C)  statement of cash flows. 
D)  statement of stockholder's equity.

Question 6

The inventory days ratio measures:

Accepted Answer

A)  the average length of time it takes a company to sell its inventory. 
B)  the average length of time it takes the company's suppliers to deliver its inventory. 
C)  the level of sales required to keep a company's average inventory on the books. 
D)  the percentage change in inventory over the past year. 
A)  the average length of time it takes a company to sell its inventory. 
B)  the average length of time it takes the company's suppliers to deliver its inventory. 
C)  the level of sales required to keep a company's average inventory on the books. 
D)  the percentage change in inventory over the past year.

Question 7

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
Net Income $15 million
Interest Expense $2 million
-If ECE's return on assets (ROA)is 12%,then ECE's net income is:

Accepted Answer

A)  $6 million 
B)  $12 million 
C)  $22 million 
D)  $36 million 
A)  $6 million 
B)  $12 million 
C)  $22 million 
D)  $36 million

Question 8

Gross profit is calculated as:

Accepted Answer

A)  Total sales - cost of sales - selling, general and administrative expenses - depreciation and amortization 
B)  Total sales - cost of sales - selling, general and administrative expenses 
C)  Total sales - cost of sales 
D)  None of the above 
A)  Total sales - cost of sales - selling, general and administrative expenses - depreciation and amortization 
B)  Total sales - cost of sales - selling, general and administrative expenses 
C)  Total sales - cost of sales 
D)  None of the above

Question 9

Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2008.

Accepted Answer

ROE = NI/shareholder equity = 10.2/63.6

Question 10

The Sarbanes-Oxley Act (SOX)overhauled incentives and the independence in the auditing process by:

Accepted Answer

A)  requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B)  imposing large compliance costs on small companies. 
C)  requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D)  putting strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from a firm that it audits. 
A)  requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B)  imposing large compliance costs on small companies. 
C)  requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D)  putting strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from a firm that it audits.

Question 11

What is the role of an auditor in financial statement analysis?

Accepted Answer

Key points:
1.To ensure that the annual

Question 12

Use the tables for the question(s) below.
Consider the following financial information:
      
-For the year ending December 31,2009 Luther's cash flow from financing activities is:

Accepted Answer

Cash flow from financing:
- dividends pa

Question 13

Use the table for the question(s) below.
Consider the following income statement and other information:
  
-Luther's Net Profit Margin for the year ending December 31,2008 is closest to:

Accepted Answer

A)  1.8% 
B)  2.7% 
C)  5.4% 
D)  16.7% 
A)  1.8% 
B)  2.7% 
C)  5.4% 
D)  16.7%

Question 14

Use the table for the question(s) below.
Consider the following balance sheet:
    
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its book value Debt -Equity Ratio for 2009 is closest to:

Accepted Answer

A)  2.29 
B)  0.31 
C)  1.89 
D)  0.37 
A)  2.29 
B)  0.31 
C)  1.89 
D)  0.37

Question 15

The firm's assets and liabilities at a given point in time are reported on the firm's:

Accepted Answer

A)  income statement or statement of financial performance. 
B)  income statement or statement of financial position. 
C)  balance sheet or statement of financial performance. 
D)  balance sheet or statement of financial position. 
A)  income statement or statement of financial performance. 
B)  income statement or statement of financial position. 
C)  balance sheet or statement of financial performance. 
D)  balance sheet or statement of financial position.

Question 16

Which of the following statements regarding the balance sheet is INCORRECT?

Accepted Answer

A)  The balance sheet provides a snapshots of the firm's financial position at a given point in time. 
B)  The balance sheet lists the firm's assets and liabilities. 
C)  The balance sheet reports stockholders' equity on the right hand side. 
D)  The balance sheet reports liabilities on the left hand side. 
A)  The balance sheet provides a snapshots of the firm's financial position at a given point in time. 
B)  The balance sheet lists the firm's assets and liabilities. 
C)  The balance sheet reports stockholders' equity on the right hand side. 
D)  The balance sheet reports liabilities on the left hand side.

Question 17

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago.This reduction in value results in:

Accepted Answer

A)  an impairment charge. 
B)  depreciation expense. 
C)  an operating expense. 
D)  goodwill. 
A)  an impairment charge. 
B)  depreciation expense. 
C)  an operating expense. 
D)  goodwill.

Question 18

Which of the following statements regarding net income transferred to retained earnings is correct?

Accepted Answer

A)  Net income = net income transferred to retained earnings - dividends 
B)  Net income transferred to retain earnings = net income + dividends 
C)  Net income = net income transferred to retain earnings + dividends 
D)  Net income transferred to retain earnings - net income = dividends 
A)  Net income = net income transferred to retained earnings - dividends 
B)  Net income transferred to retain earnings = net income + dividends 
C)  Net income = net income transferred to retain earnings + dividends 
D)  Net income transferred to retain earnings - net income = dividends

Question 19

Use the table for the question(s) below.
Consider the following balance sheet:
    
-What is Luther's net working capital in 2008?

Accepted Answer

A)  $12 million 
B)  $27 million 
C)  $39 million 
D)  $63.6 million 
A)  $12 million 
B)  $27 million 
C)  $39 million 
D)  $63.6 million

Question 20

The Sarbanes-Oxley Act (SOX)was passed by Congress in 2002,in response to:

Accepted Answer

A)  financial scandals, including WorldCom and Enron. 
B)  financial scandals, including Bernie Madoff and AIG. 
C)  financial scandals, including General Motors and Chrysler. 
D)  the Troubled Asset Relief Program (TARP). 
A)  financial scandals, including WorldCom and Enron. 
B)  financial scandals, including Bernie Madoff and AIG. 
C)  financial scandals, including General Motors and Chrysler. 
D)  the Troubled Asset Relief Program (TARP).

The statement of financial position is also known as the:

Which of the following is NOT a reason why cash flow may not equal net income?

Which of the following is NOT a section on the cash flow statement?

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.Its Debt-to-Enterprise Value Ratio in 2009 is closest to:

The inventory days ratio measures:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million Net Income $15 million Interest Expense $2 million -If ECE's return on assets (ROA)is 12%,then ECE's net income is:

Gross profit is calculated as:

Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2008.

The Sarbanes-Oxley Act (SOX)overhauled incentives and the independence in the auditing process by:

What is the role of an auditor in financial statement analysis?

Use the tables for the question(s) below. Consider the following financial information: -For the year ending December 31,2009 Luther's cash flow from financing activities is:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's Net Profit Margin for the year ending December 31,2008 is closest to:

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its book value Debt -Equity Ratio for 2009 is closest to:

The firm's assets and liabilities at a given point in time are reported on the firm's:

Which of the following statements regarding the balance sheet is INCORRECT?

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago.This reduction in value results in:

Which of the following statements regarding net income transferred to retained earnings is correct?

Use the table for the question(s) below. Consider the following balance sheet: -What is Luther's net working capital in 2008?

The Sarbanes-Oxley Act (SOX)was passed by Congress in 2002,in response to:

The Corporation

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

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Exam 2: Introduction to Financial Statement Analysis

The statement of financial position is also known as the:

Which of the following is NOT a reason why cash flow may not equal net income?

Which of the following is NOT a section on the cash flow statement?

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.Its Debt-to-Enterprise Value Ratio in 2009 is closest to:

The inventory days ratio measures:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million Net Income $15 million Interest Expense $2 million -If ECE's return on assets (ROA)is 12%,then ECE's net income is:

Gross profit is calculated as:

Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2008.

The Sarbanes-Oxley Act (SOX)overhauled incentives and the independence in the auditing process by:

What is the role of an auditor in financial statement analysis?

Use the tables for the question(s) below. Consider the following financial information: -For the year ending December 31,2009 Luther's cash flow from financing activities is:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's Net Profit Margin for the year ending December 31,2008 is closest to:

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its book value Debt -Equity Ratio for 2009 is closest to:

The firm's assets and liabilities at a given point in time are reported on the firm's:

Which of the following statements regarding the balance sheet is INCORRECT?

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago.This reduction in value results in:

Which of the following statements regarding net income transferred to retained earnings is correct?

Use the table for the question(s) below. Consider the following balance sheet: -What is Luther's net working capital in 2008?

The Sarbanes-Oxley Act (SOX)was passed by Congress in 2002,in response to:

The Corporation

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Filters