Question 1

Accounting practices and procedures used to prepare financial statements are called ________.

Accepted Answer

A) SEC 
B) IFRS 
C) GAAP 
D) IRB 
A) SEC 
B) IFRS 
C) GAAP 
D) IRB

Question 2

Creditors are primarily interested in short-term liquidity of the company and its ability to make interest and principal payments.

Accepted Answer

A) True 
 B)False

Question 3

The higher the debt ratio,the more the financial leverage a firm has and thus,the greater will be its risk and return.

Accepted Answer

A) True 
 B)False

Question 4

A(n)________ is useful in evaluating credit policies.

Accepted Answer

A) average payment period 
B) current ratio 
C) average collection period 
D) inventory turnover ratio 
A) average payment period 
B) current ratio 
C) average collection period 
D) inventory turnover ratio

Question 5

The average age of inventory is viewed as the average length of time inventory is held by a firm or as the average number of days' sales in inventory.

Accepted Answer

A) True 
 B)False

Question 6

The ________ of a business firm is measured by its ability to satisfy its short-term obligations as they come due.

Accepted Answer

A) activity 
B) liquidity 
C) debt 
D) profitability 
A) activity 
B) liquidity 
C) debt 
D) profitability

Question 7

When assessing the fixed-payment coverage ratio,________.

Accepted Answer

A) the lower its value the more risky is the firm 
B) the lower its value,the higher is the firm's financial leverage 
C) preferred stock dividend payments can be disregarded 
D) the higher its value,the more difficult it is for a firm to pay its debts 
A) the lower its value the more risky is the firm 
B) the lower its value,the higher is the firm's financial leverage 
C) preferred stock dividend payments can be disregarded 
D) the higher its value,the more difficult it is for a firm to pay its debts

Question 8

Which of the following is TRUE of the current ratio?

Accepted Answer

A) The more predictable a firm's cash flows,the higher the acceptable current ratio. 
B) A higher current ratio indicates a higher return on equity. 
C) The more predictable a firm's current ratio,the higher the current liabilities. 
D) A higher current ratio indicates a greater degree of liquidity. 
A) The more predictable a firm's cash flows,the higher the acceptable current ratio. 
B) A higher current ratio indicates a higher return on equity. 
C) The more predictable a firm's current ratio,the higher the current liabilities. 
D) A higher current ratio indicates a greater degree of liquidity.

Question 9

A(n)________ provides a financial summary of a firm's operating results during a specified period.

Accepted Answer

A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of retained earnings 
A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of retained earnings

Question 10

The average age of inventory can be calculated as inventory divided by 365.

Accepted Answer

A) True 
 B)False

Question 11

Table 3.2
Dana Dairy Products Key Ratios   Income Statement
Dana Dairy Products
For the Year Ended December 31,2019   Balance Sheet
Dana Dairy Products
December 31,2019  
-Dana Dairy Products had a ________ degree of financial leverage than the industry standard,resulting in ________.(See Table 3.2)

Accepted Answer

A) lower; lower return on total assets 
B) lower; lower return on equity 
C) higher; higher return on equity 
D) higher; higher return on total assets 
A) lower; lower return on total assets 
B) lower; lower return on equity 
C) higher; higher return on equity 
D) higher; higher return on total assets

Question 12

A firm has a current ratio of 1.To increase that ratio the firm might ________.

Accepted Answer

A) develop a better inventory management system so the firm doesn't have to hold as many items in inventory at one time 
B) hold lower cash balances at the bank and increase holdings of interest-earning marketable securities 
C) take out a long-term bank loan and simultaneously offer customers better credit terms,allowing them to pay their bills more slowly 
D) issue bonds and use the proceeds to purchase new equipment 
A) develop a better inventory management system so the firm doesn't have to hold as many items in inventory at one time 
B) hold lower cash balances at the bank and increase holdings of interest-earning marketable securities 
C) take out a long-term bank loan and simultaneously offer customers better credit terms,allowing them to pay their bills more slowly 
D) issue bonds and use the proceeds to purchase new equipment

Question 13

In 1979 International Business Machines Corp.(IBM)was one of the world's largest companies,and it dominated the market for huge mainframe computers.Back then,IBM's inventory turnover ratio was about 3.3.Through the years,IBM switched from mainframe to personal computers,and today the company earns most of its revenues from a variety of services rather than from selling hardware.By 2017,IBM's inventory turnover ratio had risen to 23.9.What do you think might account for the tremendous increase in IBM's inventory turnover between 1979 and 2017?

Accepted Answer

In the late 70s,IBM's turnover ratio was

Question 14

If a firm uses any debt at all and if the firm generates positive earnings for common stockholders,then which of the following below is TRUE?

Accepted Answer

A) ROE > ROA B) ROE < ROA C) ROE = ROA D) Gross profit margin < net profit margin A) ROE > ROA B) ROE < ROA C) ROE = ROA D) Gross profit margin < net profit margin

Question 15

On December 31,2018,Bradshaw Corporation had $485,000 as an ending balance for its retained earnings account.During 2019,the corporation declared a $3.50/share dividend to its stockholders.The company has 35,000 shares of common stock outstanding.When the books were closed for 2019 year end,the corporation had a final retained earnings balance of $565,000.What was the net profit earned by Bradshaw Corporation during 2019?

Accepted Answer

The answer of On December 31,2018,Bradshaw Corporation had $485,000 as...

Question 16

Which of the following is a limitation of ratio analysis?

Accepted Answer

A) Financial ratios cannot be used to assess a firm's profitability. 
B) Ratios that reveal large deviations from the norm merely indicate the possibility of a problem. 
C) It is difficult to access audited financial statements for ratio analysis. 
D) Ratio analysis assumes that inflation has no effect on a firm's business. 
A) Financial ratios cannot be used to assess a firm's profitability. 
B) Ratios that reveal large deviations from the norm merely indicate the possibility of a problem. 
C) It is difficult to access audited financial statements for ratio analysis. 
D) Ratio analysis assumes that inflation has no effect on a firm's business.

Question 17

In its 2018 fiscal year,the data storage company,NetApp Inc.,reported that it had 267.9 million shares of common stock outstanding,trading at a price of about $68 per share.On the firm's balance sheet,the value of common stock equity was reported as $2.067 billion.NetApp's market/book ratio was ________.

Accepted Answer

A) 8.8 
B) 7.7 
C) 68 
D) greater than 100 
A) 8.8 
B) 7.7 
C) 68 
D) greater than 100

Question 18

The ________ ratio indicates the efficiency with which a firm uses its assets to generate sales.

Accepted Answer

A) inventory turnover 
B) total asset turnover 
C) quick 
D) current asset turnover 
A) inventory turnover 
B) total asset turnover 
C) quick 
D) current asset turnover

Question 19

Both current and prospective shareholders are interested in the firm's current and future level of risk and return,which directly affect share price.

Accepted Answer

A) True 
 B)False

Question 20

The DuPont formula allows a firm to break down its return into the net profit margin,which measures the firm's profitability on sales,and its total asset turnover,which indicates how efficiently the firm has used its assets to generate sales.

Accepted Answer

A) True 
 B)False

Accounting practices and procedures used to prepare financial statements are called ________.

Creditors are primarily interested in short-term liquidity of the company and its ability to make interest and principal payments.

The higher the debt ratio,the more the financial leverage a firm has and thus,the greater will be its risk and return.

A(n)________ is useful in evaluating credit policies.

The average age of inventory is viewed as the average length of time inventory is held by a firm or as the average number of days' sales in inventory.

The ________ of a business firm is measured by its ability to satisfy its short-term obligations as they come due.

When assessing the fixed-payment coverage ratio,________.

Which of the following is TRUE of the current ratio?

A(n)________ provides a financial summary of a firm's operating results during a specified period.

The average age of inventory can be calculated as inventory divided by 365.

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31,2019 Balance Sheet Dana Dairy Products December 31,2019 -Dana Dairy Products had a degree of financial leverage than the industry standard,resulting in .(See Table 3.2)

A firm has a current ratio of 1.To increase that ratio the firm might ________.

If a firm uses any debt at all and if the firm generates positive earnings for common stockholders,then which of the following below is TRUE?

Which of the following is a limitation of ratio analysis?

The ________ ratio indicates the efficiency with which a firm uses its assets to generate sales.

Both current and prospective shareholders are interested in the firm's current and future level of risk and return,which directly affect share price.

The DuPont formula allows a firm to break down its return into the net profit margin,which measures the firm's profitability on sales,and its total asset turnover,which indicates how efficiently the firm has used its assets to generate sales.

The Role of Managerial Finance

The Financial Market Environment

Long- and Short-Term Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters

Exam 3: Financial Statements and Ratio Analysis

Accounting practices and procedures used to prepare financial statements are called ________.

Creditors are primarily interested in short-term liquidity of the company and its ability to make interest and principal payments.

The higher the debt ratio,the more the financial leverage a firm has and thus,the greater will be its risk and return.

A(n)________ is useful in evaluating credit policies.

The average age of inventory is viewed as the average length of time inventory is held by a firm or as the average number of days' sales in inventory.

The ________ of a business firm is measured by its ability to satisfy its short-term obligations as they come due.

When assessing the fixed-payment coverage ratio,________.

Which of the following is TRUE of the current ratio?

A(n)________ provides a financial summary of a firm's operating results during a specified period.

The average age of inventory can be calculated as inventory divided by 365.

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31,2019 Balance Sheet Dana Dairy Products December 31,2019 -Dana Dairy Products had a ________ degree of financial leverage than the industry standard,resulting in ________.(See Table 3.2)

A firm has a current ratio of 1.To increase that ratio the firm might ________.

If a firm uses any debt at all and if the firm generates positive earnings for common stockholders,then which of the following below is TRUE?

Which of the following is a limitation of ratio analysis?

The ________ ratio indicates the efficiency with which a firm uses its assets to generate sales.

Both current and prospective shareholders are interested in the firm's current and future level of risk and return,which directly affect share price.

The DuPont formula allows a firm to break down its return into the net profit margin,which measures the firm's profitability on sales,and its total asset turnover,which indicates how efficiently the firm has used its assets to generate sales.

The Role of Managerial Finance

The Financial Market Environment

Long- and Short-Term Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31,2019 Balance Sheet Dana Dairy Products December 31,2019 -Dana Dairy Products had a degree of financial leverage than the industry standard,resulting in .(See Table 3.2)