Question 1

In general, a successful firm will have a market-to-book ratio that is substantially greater than 1.

Accepted Answer

A) True 
 B)False

Question 2

Use the table for the question(s)below.  
-Consider the above Income Statement for Xenon Manufacturing. All values are in millions of dollars. If Xenon Manufacturing has 25 million shares outstanding, what is its EPS in 2018?

Accepted Answer

A) $0.84 
B) $0.40 
C) $0.36 
D) $0.63 
A) $0.84 
B) $0.40 
C) $0.36 
D) $0.63

Question 3

GenCorp has a total debt of $140 million and shareholders' equity of $50 million. It also has 25 million shares outstanding, with a market price of $3.50 per share. What is GenCorp's market debt-equity ratio?

Accepted Answer

A) 1.60 
B) 0.63 
C) 1.02 
D) 0.36 
A) 1.60 
B) 0.63 
C) 1.02 
D) 0.36

Question 4

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

Accepted Answer

A) The usefulness of financial statements to investors is entirely dependent on the ethics of those constructing them. 
B) The information in financial statements should be viewed extremely critically. 
C) It is not possible to effectively evaluate a company unless all the financial statements are fully and correctly prepared. 
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) The information in financial statements should be viewed extremely critically. 
C) It is not possible to effectively evaluate a company unless all the financial statements are fully and correctly prepared. 
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 5

Which of the following best describes why the left and right sides of a balance sheet are equal?

Accepted Answer

A) By definition, the assets plus the liabilities will be the same as the shareholders' equity. 
B) In a properly run business, the value of liabilities will not exceed the assets held by the company. 
C) The assets must equal liabilities plus shareholders' equity, because shareholders' equity is the difference between the assets and the liabilities. 
D) By accounting convention, the assets of a company must be equal to the liabilities of that company. 
A) By definition, the assets plus the liabilities will be the same as the shareholders' equity. 
B) In a properly run business, the value of liabilities will not exceed the assets held by the company. 
C) The assets must equal liabilities plus shareholders' equity, because shareholders' equity is the difference between the assets and the liabilities. 
D) By accounting convention, the assets of a company must be equal to the liabilities of that company.

Question 6

Is it possible to learn the true financial health of a corporation like HIH where the financial statements are deceptive?

Accepted Answer

Generally speaking, if an informed reade

Question 7

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions)
  
-Refer to the balance sheet above. If on 30 June 2017 Luther has 8 million shares outstanding trading at $15 per share, then what is Luther's market-to-book ratio?

Accepted Answer

market-to-book = market value

Question 8

In Australia, publicly traded companies can choose whether or not they wish to release periodic financial statements.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions)
  
-Refer to the balance sheet above. Luther's quick ratio for 2017 is closest to:

Accepted Answer

A) 0.77 
B) 1.09 
C) 0.92 
D) 1.31 
A) 0.77 
B) 1.09 
C) 0.92 
D) 1.31

Question 11

What will be the effect on the balance sheet if a firm buys a new processing plant through a new loan?

Accepted Answer

The Assets side will increase under Net

Question 12

Allen Company bought a new copy machine to be depreciated straight line for three years. Where would this purchase be reflected on the Statement of Cash Flows?

Accepted Answer

A) It would be an addition to property, plant and equipment, so it would be an investing activity. 
B) It would be an addition to cash, so would be reflected in the change in cash. 
C) It would be an expense on the income statement, so it would be reflected in operating cash flows. 
D) None of the above options is correct. 
A) It would be an addition to property, plant and equipment, so it would be an investing activity. 
B) It would be an addition to cash, so would be reflected in the change in cash. 
C) It would be an expense on the income statement, so it would be reflected in operating cash flows. 
D) None of the above options is correct.

Question 13

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 neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows. 
D) The sale will not be added to Net Income on the income statement but added to 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 neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows. 
D) The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows.

Question 14

Net property, plant, and equipment is a

Accepted Answer

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

Question 15

Use the table for the question(s)below.
Luther Corporation Consolidated Income Statement Year ended 30 June (in $ millions)
  
-Refer to the income statement above. Luther's return on equity (ROE)for the year ending 30 June 2018 is closest to:

Accepted Answer

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

Question 16

Use the table for the question(s)below.
Luther Corporation Consolidated Income Statement Year ended 30 June (in $ millions)
  
-Refer to the income statement above. For the year ending 30 June 2018, Luther's earnings per share are closest to:

Accepted Answer

A) $1.01 
B) $1.04 
C) $4.04 
D) $1.58 
A) $1.01 
B) $1.04 
C) $4.04 
D) $1.58

Question 17

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions)
  
-Refer to the balance sheet above. The change in Luther's quick ratio from 2017 to 2018 is closest to:

Accepted Answer

A) an increase of 0.10 
B) an increase of 0.15 
C) a decrease of 0.15 
D) a decrease of 0.10 
A) an increase of 0.10 
B) an increase of 0.15 
C) a decrease of 0.15 
D) a decrease of 0.10

Question 18

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions)
  
-Refer to the balance sheet above. Luther's current ratio for 2017 is closest to:

Accepted Answer

A) 1.15 
B) 1.09 
C) 1.17 
D) 1.18 
A) 1.15 
B) 1.09 
C) 1.17 
D) 1.18

Question 19

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) Australian Securities and Investments Commission (ASI
C) . 
B) auditor. 
C) Australian Securities Exchange. 
D) Australian Accounting Standards Board. 
A) Australian Securities and Investments Commission (ASI
C) . 
B) auditor. 
C) Australian Securities Exchange. 
D) Australian Accounting Standards Board.

Question 20

Use the table for the question(s)below.
Luther Corporation Consolidated Income Statement Year ended 30 June (in $ millions)
  
-Price-earnings ratios tend to be high for fast-growing firms.

Accepted Answer

A) True 
 B)False

Exam 2: Introduction to Financial Statement Analysis

In general, a successful firm will have a market-to-book ratio that is substantially greater than 1.

Use the table for the question(s)below. -Consider the above Income Statement for Xenon Manufacturing. All values are in millions of dollars. If Xenon Manufacturing has 25 million shares outstanding, what is its EPS in 2018?

GenCorp has a total debt of $140 million and shareholders' equity of $50 million. It also has 25 million shares outstanding, with a market price of $3.50 per share. What is GenCorp's market debt-equity ratio?

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

Which of the following best describes why the left and right sides of a balance sheet are equal?

Is it possible to learn the true financial health of a corporation like HIH where the financial statements are deceptive?

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions) -Refer to the balance sheet above. If on 30 June 2017 Luther has 8 million shares outstanding trading at $15 per share, then what is Luther's market-to-book ratio?

In Australia, publicly traded companies can choose whether or not they wish to release periodic financial statements.

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

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions) -Refer to the balance sheet above. Luther's quick ratio for 2017 is closest to:

What will be the effect on the balance sheet if a firm buys a new processing plant through a new loan?

Allen Company bought a new copy machine to be depreciated straight line for three years. Where would this purchase be reflected on the Statement of Cash Flows?

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?

Net property, plant, and equipment is a

Use the table for the question(s)below. Luther Corporation Consolidated Income Statement Year ended 30 June (in $ millions) -Refer to the income statement above. Luther's return on equity (ROE)for the year ending 30 June 2018 is closest to:

Use the table for the question(s)below. Luther Corporation Consolidated Income Statement Year ended 30 June (in $ millions) -Refer to the income statement above. For the year ending 30 June 2018, Luther's earnings per share are closest to:

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions) -Refer to the balance sheet above. The change in Luther's quick ratio from 2017 to 2018 is closest to:

Luther Corporation Consolidated Balance Sheet 30 June 2017 and 2018 (in $ millions) -Refer to the balance sheet above. Luther's current ratio for 2017 is closest to:

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

Use the table for the question(s)below. Luther Corporation Consolidated Income Statement Year ended 30 June (in $ millions) -Price-earnings ratios tend to be high for fast-growing firms.

Corporate Finance and the Financial Manager

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bond Valuation

Share Valuation: the Dividend-Discount Model

Investment Decision Rules

Fundamentals of Capital Budgeting

Share Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro-Forma Analysis

Working Capital Management

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Insurance and Risk Management

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