Question 1

A 30-year mortgage loan is a

Accepted Answer

A) Long-Term Liability. 
B) Current Liability. 
C) Current Asset. 
D) Long-Term Asset. 
A) Long-Term Liability. 
B) Current Liability. 
C) Current Asset. 
D) Long-Term Asset.

Question 2

The above data is for four regional trucking firms.Based on price-earnings ratios,which firm's stock is the best value?

Accepted Answer

A) Firm A 
B) Firm B 
C) Firm C 
D) Firm D 
A) Firm A 
B) Firm B 
C) Firm C 
D) Firm D

Question 3

Use the table for the question(s)below.
Income Statement for Xenon Manufacturing:  
-Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.Calculate the operating margin for 2008 and 2009.What does the change in the operating margin between these two years imply about the company?

Accepted Answer

A) The efficiency of Xenon Manufacturing has significantly risen between 2008 and 2009. 
B) The ability of Xenon Manufacturing to sell its goods and services for more than the costs of producing them rose between 2008 and 2009. 
C) The efficiency of Xenon Manufacturing has significantly fallen between 2008 and 2009. 
D) The leverage of Xenon Manufacturing fell slightly between 2008 and 2009. 
A) The efficiency of Xenon Manufacturing has significantly risen between 2008 and 2009. 
B) The ability of Xenon Manufacturing to sell its goods and services for more than the costs of producing them rose between 2008 and 2009. 
C) The efficiency of Xenon Manufacturing has significantly fallen between 2008 and 2009. 
D) The leverage of Xenon Manufacturing fell slightly between 2008 and 2009.

Question 4

Manufacturer A has a profit margin of 2.0%,an asset turnover of 1.7 and an equity multiplier of 4.9.
Manufacturer B has a profit margin of 2.3%,an asset turnover of 1.1 and an equity multiplier of 4.7.
How much asset turnover should manufacturer B have to match manufacturer A's ROE?

Accepted Answer

A) 1.54% 
B) 3.00% 
C) 3.09% 
D) 4.77% 
A) 1.54% 
B) 3.00% 
C) 3.09% 
D) 4.77%

Question 5

Which of the following is the main lesson that analysts and investors should take from the cases of Enron and WorldCom?

Accepted Answer

A) The usefulness of financial statements to investors is entirely dependent on the ethics of those constructing them. 
B) It is not possible to effectively evaluate a company unless all the financial statements are fully and correctly prepared. 
C) The information in financial statements should be viewed extremely critically. 
D) Readers of even fraudulent financial statements can spot signs of a firm's financial health if those statements are read fully and with care. 
A) The usefulness of financial statements to investors is entirely dependent on the ethics of those constructing them. 
B) It is not possible to effectively evaluate a company unless all the financial statements are fully and correctly prepared. 
C) The information in financial statements should be viewed extremely critically. 
D) Readers of even fraudulent financial statements can spot signs of a firm's financial health if those statements are read fully and with care.

Question 6

Use the table for the question(s)below.
Income Statement for CharmCorp:  
-Which of the following statements regarding the income statement is INCORRECT?

Accepted Answer

A) The income statement shows the earnings and expenses at a given point in time. 
B) The income statement shows the flow of earnings and expenses generated by the firm between two dates. 
C) The last or "bottom" line of the income statement shows the firm's net income. 
D) The first line of an income statement lists the revenues from the sales of products or services. 
A) The income statement shows the earnings and expenses at a given point in time. 
B) The income statement shows the flow of earnings and expenses generated by the firm between two dates. 
C) The last or "bottom" line of the income statement shows the firm's net income. 
D) The first line of an income statement lists the revenues from the sales of products or services.

Question 7

The third party who checks annual financial statements to ensure that they are prepared according to Generally Accepted Accounting Principles (GAAP)and verifies that the information reported is reliable is the

Accepted Answer

A) NYSE Enforcement Board. 
B) Accounting Standards Board. 
C) Securities and Exchange Commission (SE
C) . 
D) auditor. 
A) NYSE Enforcement Board. 
B) Accounting Standards Board. 
C) Securities and Exchange Commission (SE
C) . 
D) auditor.

Question 8

A printing company prints a brochure for a client,and then bills them for this service.At the time the printing company's financial disclosure statements are prepared,the client has not yet paid the bill for this service.How will this transaction be recorded?

Accepted Answer

A) The sale will be added to Net Income on the income statement and retained in Net Income on the statement of cash flows. 
B) The sale will be added to Net Income on the income statement but deducted from Net Income on the statement of cash flows. 
C) The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows. 
D) The sale will neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows. 
A) The sale will be added to Net Income on the income statement and retained in Net Income on the statement of cash flows. 
B) The sale will be added to Net Income on the income statement but deducted from Net Income on the statement of cash flows. 
C) The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows. 
D) The sale will neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows.

Question 9

What role do external auditors play in the firm's financial reporting process?

Accepted Answer

As the name implies,external a

Question 10

Stockholders' equity is the difference between a firm's assets and liabilities,as shown on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is the LEAST likely explanation for a firm's high ROE?

Accepted Answer

A) The firm is growing. 
B) The firm is able to find investment opportunities that are very profitable. 
C) The firm has very efficient use of its assets. 
D) The firm enjoys high sales margins. 
A) The firm is growing. 
B) The firm is able to find investment opportunities that are very profitable. 
C) The firm has very efficient use of its assets. 
D) The firm enjoys high sales margins.

Question 12

Which of the following amounts would NOT be included on the right side of a balance sheet?

Accepted Answer

A) the value of government bonds held by the company 
B) the cash held by the company 
C) the amount of deferred tax liability held by the company 
D) the amount of money owed to the company by customers who have not yet paid for goods and services they have received 
A) the value of government bonds held by the company 
B) the cash held by the company 
C) the amount of deferred tax liability held by the company 
D) the amount of money owed to the company by customers who have not yet paid for goods and services they have received

Question 13

Which of the following is NOT a financial statement that every public company is required to produce?

Accepted Answer

A) income statement 
B) statement of sources and uses of cash 
C) balance sheet 
D) statement of stockholders' equity 
A) income statement 
B) statement of sources and uses of cash 
C) balance sheet 
D) statement of stockholders' equity

Question 14

U.S.public companies are required to file their annual financial statements with the U.S.Securities and Exchange Commission on which form?

Accepted Answer

A) 10-A 
B) 10-K 
C) 10-Q 
D) 10-SEC 
A) 10-A 
B) 10-K 
C) 10-Q 
D) 10-SEC

Question 15

International Financial Reporting Standards are taking root throughout the world.However,it is unlikely that the U.S.will report according to IFRS before the second half of the twenty-first century.

Accepted Answer

A) True 
 B)False

Question 16

Use the table for the question(s)below.
  
-Refer to the income statement above.Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2006 Luther's diluted earnings per share are closest to:

Accepted Answer

A) $1.01 
B) $1.04 
C) $1.53 
D) $3.92 
A) $1.01 
B) $1.04 
C) $1.53 
D) $3.92

Question 17

Use the table for the question(s)below.
  
-Refer to the income statement above.Luther's return on equity (ROE)for the year ending December 31,2006 is closest to:

Accepted Answer

A) 2.0% 
B) 6.5% 
C) 8.4% 
D) 12.7% 
A) 2.0% 
B) 6.5% 
C) 8.4% 
D) 12.7%

Question 18

A manufacturer of plastic bottles for the medical trade purchases a new compression blow molder for its bottle production plant.How will the cost to the company of this piece of equipment be recorded?

Accepted Answer

A) It will be depreciated over time on the income statement and subtracted as a capital expenditure on the statement of cash flows. 
B) It will be depreciated over time on the income statement and subtracted as Inventory on the statement of cash flows. 
C) It will be depreciated over time on the income statement and therefore not be recorded separately on the statement of cash flows. 
D) It will be subtracted from Gross Profit on the income statement and therefore not be recorded separately on the statement of cash flows. 
A) It will be depreciated over time on the income statement and subtracted as a capital expenditure on the statement of cash flows. 
B) It will be depreciated over time on the income statement and subtracted as Inventory on the statement of cash flows. 
C) It will be depreciated over time on the income statement and therefore not be recorded separately on the statement of cash flows. 
D) It will be subtracted from Gross Profit on the income statement and therefore not be recorded separately on the statement of cash flows.

Question 19

The notes to the financial statements would be LEAST likely to be used for which of the following purposes?

Accepted Answer

A) to provide information regarding the context in which these financial numbers were generated 
B) to disclose the financial implications of any off balance sheet transactions 
C) to show how the value of assets listed in the financial statements were arrived at 
D) to explain the method of accounting that was used in the preparation of the financial statements 
A) to provide information regarding the context in which these financial numbers were generated 
B) to disclose the financial implications of any off balance sheet transactions 
C) to show how the value of assets listed in the financial statements were arrived at 
D) to explain the method of accounting that was used in the preparation of the financial statements

Question 20

Use the table for the question(s)below.  
-The above diagram shows a balance sheet for a certain company.All quantities shown are in millions of dollars.How would the balance sheet change if the company's long-term assets were judged to depreciate at an extra $5 million per year?

Accepted Answer

A) Net property,plant,and equipment would rise to $126 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
B) Net property,plant,and equipment would fall to $116 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
C) Long-Term Liabilities would rise to $182 million,and Total Liabilities and Stockholders' Equity would be adjusted accordingly. 
D) Long-Term Liabilities would fall to $172 million,and Total Liabilities and Stockholders' Equity would be adjusted accordingly. 
A) Net property,plant,and equipment would rise to $126 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
B) Net property,plant,and equipment would fall to $116 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
C) Long-Term Liabilities would rise to $182 million,and Total Liabilities and Stockholders' Equity would be adjusted accordingly. 
D) Long-Term Liabilities would fall to $172 million,and Total Liabilities and Stockholders' Equity would be adjusted accordingly.

Exam 2: Introduction to Financial Statement Analysis

A 30-year mortgage loan is a

The above data is for four regional trucking firms.Based on price-earnings ratios,which firm's stock is the best value?

Manufacturer A has a profit margin of 2.0%,an asset turnover of 1.7 and an equity multiplier of 4.9. Manufacturer B has a profit margin of 2.3%,an asset turnover of 1.1 and an equity multiplier of 4.7. How much asset turnover should manufacturer B have to match manufacturer A's ROE?

Which of the following is the main lesson that analysts and investors should take from the cases of Enron and WorldCom?

Use the table for the question(s)below. Income Statement for CharmCorp: -Which of the following statements regarding the income statement is INCORRECT?

The third party who checks annual financial statements to ensure that they are prepared according to Generally Accepted Accounting Principles (GAAP)and verifies that the information reported is reliable is the

A printing company prints a brochure for a client,and then bills them for this service.At the time the printing company's financial disclosure statements are prepared,the client has not yet paid the bill for this service.How will this transaction be recorded?

What role do external auditors play in the firm's financial reporting process?

Stockholders' equity is the difference between a firm's assets and liabilities,as shown on the balance sheet.

Which of the following is the LEAST likely explanation for a firm's high ROE?

Which of the following amounts would NOT be included on the right side of a balance sheet?

Which of the following is NOT a financial statement that every public company is required to produce?

U.S.public companies are required to file their annual financial statements with the U.S.Securities and Exchange Commission on which form?

International Financial Reporting Standards are taking root throughout the world.However,it is unlikely that the U.S.will report according to IFRS before the second half of the twenty-first century.

Use the table for the question(s)below. -Refer to the income statement above.Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2006 Luther's diluted earnings per share are closest to:

Use the table for the question(s)below. -Refer to the income statement above.Luther's return on equity (ROE)for the year ending December 31,2006 is closest to:

A manufacturer of plastic bottles for the medical trade purchases a new compression blow molder for its bottle production plant.How will the cost to the company of this piece of equipment be recorded?

The notes to the financial statements would be LEAST likely to be used for which of the following purposes?

Use the table for the question(s)below. -The above diagram shows a balance sheet for a certain company.All quantities shown are in millions of dollars.How would the balance sheet change if the company's long-term assets were judged to depreciate at an extra $5 million per year?

Corporate Finance and the Financial Manager

Time Value of Money: An Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: A Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

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