Question 1

The firm's asset turnover measures:

Accepted Answer

A) the value of assets held per dollar of shareholder equity. 
B) the return the firm has earned on its past investments. 
C) the firm's ability to sell a product for more than the cost of producing it. 
D) how efficiently the firm is utilizing its assets to generate sales. 
A) the value of assets held per dollar of shareholder equity. 
B) the return the firm has earned on its past investments. 
C) the firm's ability to sell a product for more than the cost of producing it. 
D) how efficiently the firm is utilizing its assets to generate sales.

Question 2

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

Accepted Answer

A) The government 
B) International Accounting Standards Board (IAS
B)  
C) Securities and Exchange Commission (SE
C) . 
D) auditor. 
A) The government 
B) International Accounting Standards Board (IAS
B)  
C) Securities and Exchange Commission (SE
C) . 
D) auditor.

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 what is Luther's Enterprise Value?

Accepted Answer

A) -$63.3 million 
B) $353.1 million 
C) $389.7 million 
D) $516.9 million 
A) -$63.3 million 
B) $353.1 million 
C) $389.7 million 
D) $516.9 million

Question 4

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 market debt to equity ratio is closest to:

Accepted Answer

A) 0.24 
B) 0.50 
C) 0.75 
D) 0.89 
A) 0.24 
B) 0.50 
C) 0.75 
D) 0.89

Question 5

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-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 6

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-Calculate Luther's return of equity (ROE), return of assets (ROA), and price-to-earnings ratio (P/E)for the year ending December 31, 2011.

Accepted Answer

ROE = NI/shareholder equity = 10.2/63.6

Question 7

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 using the market value of equity, the debt to equity ratio for Luther in 2012 is closest to:

Accepted Answer

A) 1.47 
B) 1.78 
C) 2.31 
D) 4.07 
A) 1.47 
B) 1.78 
C) 2.31 
D) 4.07

Question 8

Use the table for the question(s)below.
Consider the following income statement and other information:
  
-If Luther's accounts receivable were $55.5 million in 2012, then calculate Luther's accounts receivable days for 2012.

Accepted Answer

Accounts r

Question 9

Use the table for the question(s)below.
Consider the following balance sheet:
    
-Luther Corporation's total sales for 2012 were $610.1, and gross profit was $109.0. Accounts payable days for 2012 is closest to:

Accepted Answer

A) 27.5 
B) 5.71 
C) 52.4 
D) 63.8 
A) 27.5 
B) 5.71 
C) 52.4 
D) 63.8

Question 10

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 earnings per share (EPS)is closest to:

Accepted Answer

A) $0.19 
B) $1.79 
C) $2.81 
D) $3.76 
A) $0.19 
B) $1.79 
C) $2.81 
D) $3.76

Question 11

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 market capitalization 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 12

Which of the following is NOT an operating expense?

Accepted Answer

A) Interest expense 
B) Depreciation and amortization 
C) Selling, general and administrative expenses 
D) Research and development 
A) Interest expense 
B) Depreciation and amortization 
C) Selling, general and administrative expenses 
D) Research and development

Question 13

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

Accepted Answer

A) The balance sheet provides a snapshot 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 shareholders' equity in the bottom part. . 
D) The balance sheet reports liabilities in the top part. . 
A) The balance sheet provides a snapshot 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 shareholders' equity in the bottom part. . 
D) The balance sheet reports liabilities in the top part. .

Question 14

The Sarbanes-Oxley Act (SOX)stiffened penalties for providing false information 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 15

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 changes in shareholders' equity. 
A) balance sheet. 
B) income statement. 
C) statement of cash flows. 
D) statement of changes in shareholders' equity.

Question 16

Which of the following balance sheet equations is INCORRECT?

Accepted Answer

A) Assets - Liabilities = Shareholders' Equity 
B) Assets = Liabilities + Shareholders' Equity 
C) Assets - Current Liabilities = Non-current (Long Term)Liabilities 
D) Assets - Current Liabilities = Non-current (Long Term)Liabilities + Shareholders' Equity 
A) Assets - Liabilities = Shareholders' Equity 
B) Assets = Liabilities + Shareholders' Equity 
C) Assets - Current Liabilities = Non-current (Long Term)Liabilities 
D) Assets - Current Liabilities = Non-current (Long Term)Liabilities + Shareholders' Equity

Question 17

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 reported $15 million in net income, then ECE's Return on Equity (ROE)is:

Accepted Answer

A) 5.0% 
B) 7.5% 
C) 10.0% 
D) 15.0% 
A) 5.0% 
B) 7.5% 
C) 10.0% 
D) 15.0%

Question 18

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.
-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 changes in shareholder's equity. 
A) balance sheet. 
B) income statement. 
C) statement of cash flows. 
D) statement of changes in shareholder's equity.

Question 19

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 20

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

Accepted Answer

A) 1.6% 
B) 6.7% 
C) 2.3% 
D) 2.6% 
A) 1.6% 
B) 6.7% 
C) 2.3% 
D) 2.6%

Exam 2: Introduction to Financial Statement Analysis

The firm's asset turnover measures:

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

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 what is Luther's Enterprise Value?

Use the table for the question(s)below. Consider the following income statement and other information: -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 income statement and other information: -Calculate Luther's return of equity (ROE), return of assets (ROA), and price-to-earnings ratio (P/E)for the year ending December 31, 2011.

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 using the market value of equity, the debt to equity ratio for Luther in 2012 is closest to:

Use the table for the question(s)below. Consider the following income statement and other information: -If Luther's accounts receivable were $55.5 million in 2012, then calculate Luther's accounts receivable days for 2012.

Use the table for the question(s)below. Consider the following balance sheet: -Luther Corporation's total sales for 2012 were $610.1, and gross profit was $109.0. Accounts payable days for 2012 is closest to:

Which of the following is NOT an operating expense?

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

The Sarbanes-Oxley Act (SOX)stiffened penalties for providing false information by:

The statement of financial position is also known as the:

Which of the following balance sheet equations is INCORRECT?

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 reported $15 million in net income, then ECE's Return on Equity (ROE)is:

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:

Use the table for the question(s)below. Consider the following income statement and other information: -Luther's return on assets (ROA)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

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