Question 1

Use the table for the question(s)below.
Consider the following balance sheet:
    
-What is Luther's net working capital in 2011?

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 2

Cash is a:

Accepted Answer

A) non-current asset. 
B) current asset. 
C) current liability. 
D) non-current (long-term)liability. 
A) non-current asset. 
B) current asset. 
C) current liability. 
D) non-current (long-term)liability.

Question 3

Use the table for the question(s)below.
Consider the following balance sheet:
    
-If in 2012 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then Luther's Market-to-book ratio would be closest to:

Accepted Answer

A) 0.39 
B) 0.76 
C) 1.29 
D) 2.57 
A) 0.39 
B) 0.76 
C) 1.29 
D) 2.57

Question 4

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 5

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-Luther's EBITDA coverage ratio for the year ending December 31, 2012 is closest to:

Accepted Answer

A) 1.64 
B) 1.78 
C) 1.98 
D) 2.19 
A) 1.64 
B) 1.78 
C) 1.98 
D) 2.19

Question 6

Use the information for the question(s)below.
In November 2012, 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.
-Perrigo's enterprise value is closest to:

Accepted Answer

A) $952.16 million 
B) $3,580.14 million 
C) $4,168.06 million 
D) $4,425.15 million 
A) $952.16 million 
B) $3,580.14 million 
C) $4,168.06 million 
D) $4,425.15 million

Question 7

Which of the following is an example of an intangible asset?

Accepted Answer

A) Brand names and trademarks 
B) Patents 
C) Customer relationships 
D) All of the above are intangible assets. 
A) Brand names and trademarks 
B) Patents 
C) Customer relationships 
D) All of the above are intangible assets.

Question 8

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-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 9

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-Luther's Operating Margin for the year ending December 31, 2011 is closest to:

Accepted Answer

A) 0.5% 
B) 0.7% 
C) 5.4% 
D) 6.8% 
A) 0.5% 
B) 0.7% 
C) 5.4% 
D) 6.8%

Question 10

If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will ________, and its ROE will ________.

Accepted Answer

A) increase; increase 
B) decrease; decrease 
C) increase; decrease 
D) decrease; increase 
A) increase; increase 
B) decrease; decrease 
C) increase; decrease 
D) decrease; increase

Question 11

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-For the year ending December 31, 2012 Luther's earnings per share are closest to:

Accepted Answer

A) $0.96 
B) $1.04 
C) $1.28 
D) $1.33 
A) $0.96 
B) $1.04 
C) $1.28 
D) $1.33

Question 12

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 13

Use the table for the question(s)below.
Consider the following balance sheet:
    
-The change in Luther's quick ratio from 2011 to 2012 is closest to:

Accepted Answer

A) a decrease of .10 
B) an increase of .10 
C) a decrease of .15 
D) an increase of .15 
A) a decrease of .10 
B) an increase of .10 
C) a decrease of .15 
D) an increase of .15

Question 14

In the US 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).

Question 15

Use the tables for the question(s)below.
Consider the following financial information:
      
-For the year ending December 31, 2012 Luther's cash flow from operating activities is:

Accepted Answer

Operating cash flow = NI + Dep

Question 16

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 17

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 Value Added 
C) Balance Sheet or Statement of Financial Position 
D) Statement of Changes in Shareholders' Equity 
A) Income Statement 
B) Statement of Value Added 
C) Balance Sheet or Statement of Financial Position 
D) Statement of Changes in Shareholders' Equity

Question 18

Use the table for the question(s)below.
Consider the following balance sheet:
    
-Luther Corporation's share price is $39 and the company has 20 million shares outstanding. Its Market value Debt-Equity Ratio for 2012 is closest to:

Accepted Answer

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

Question 19

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 20

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-Luther's return on equity (ROE)for the year ending December 31, 2012 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%

Exam 2: Introduction to Financial Statement Analysis

Use the table for the question(s)below. Consider the following balance sheet: -What is Luther's net working capital in 2011?

Cash is a:

Use the table for the question(s)below. Consider the following balance sheet: -If in 2012 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then Luther's Market-to-book ratio would be closest to:

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:

Use the table for the question(s)below. Consider the following income statement and other information: -Luther's EBITDA coverage ratio for the year ending December 31, 2012 is closest to:

Which of the following is an example of an intangible asset?

Use the table for the question(s)below. Consider the following income statement and other information: -Which of the following is NOT a reason why cash flow may not equal net income?

Use the table for the question(s)below. Consider the following income statement and other information: -Luther's Operating Margin for the year ending December 31, 2011 is closest to:

If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will ________, and its ROE will ________.

Use the table for the question(s)below. Consider the following income statement and other information: -For the year ending December 31, 2012 Luther's earnings per share are closest to:

The inventory days ratio measures:

Use the table for the question(s)below. Consider the following balance sheet: -The change in Luther's quick ratio from 2011 to 2012 is closest to:

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

Use the tables for the question(s)below. Consider the following financial information: -For the year ending December 31, 2012 Luther's cash flow from operating activities is:

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

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

Use the table for the question(s)below. Consider the following balance sheet: -Luther Corporation's share price is $39 and the company has 20 million shares outstanding. Its Market value Debt-Equity Ratio for 2012 is closest to:

Gross profit is calculated as:

Use the table for the question(s)below. Consider the following income statement and other information: -Luther's return on equity (ROE)for the year ending December 31, 2012 is closest 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

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters

If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will , and its ROE will .