Question 1

A common-size balance sheet helps financial managers determine:

Accepted Answer

A) which customers are paying on a timely basis 
B) if costs are increasing faster or slower than sales 
C) if changes are occurring in a firm's mix of assets 
D) if a firm is generating more or less sales per dollar of assets than in prior years 
E) the rate at which the firm's dividends are changing 
A) which customers are paying on a timely basis 
B) if costs are increasing faster or slower than sales 
C) if changes are occurring in a firm's mix of assets 
D) if a firm is generating more or less sales per dollar of assets than in prior years 
E) the rate at which the firm's dividends are changing C

Question 2

Manly Manufacturers Pty Ltd has a profit margin of 7.5 per cent and a dividend payout ratio of 30 per cent.What is the retention ratio?

Accepted Answer

A) 10.66 per cent 
B) 27.33 per cent 
C) 54.60 per cent 
D) 70.00 per cent 
E) 78.20 per cent 
A) 10.66 per cent 
B) 27.33 per cent 
C) 54.60 per cent 
D) 70.00 per cent 
E) 78.20 per cent D

Question 3

Which of the following statements identify problems with financial statement analysis?
I: It is not always easy to identify a suitable benchmark for comparison purposes.
II: As many firms are conglomerates owning more than one line of business it is sometimes difficult to identify groups of firms that are directly comparable.
III: Firms in the same industry operate globally and comparison may be difficult due to different accounting standards used in the preparation of financial statements.
IV: Unusual events may affect financial performance which may give misleading signals when comparing firms' results.

Accepted Answer

A) I only 
B) I,II,III and IV 
C) I,II and IV 
D) I and III 
E) III and IV 
A) I only 
B) I,II,III and IV 
C) I,II and IV 
D) I and III 
E) III and IV C

Question 4

Computer Geeks has sales of $521 000,a profit margin of 14.8 per cent,a total asset turnover rate of 2.16,and an equity multiplier of 1.30.What is the return on equity?

Accepted Answer

A) 8.91 per cent 
B) 12.67 per cent 
C) 18.28 per cent 
D) 32.11 per cent 
E) 41.56 per cent 
A) 8.91 per cent 
B) 12.67 per cent 
C) 18.28 per cent 
D) 32.11 per cent 
E) 41.56 per cent

Question 5

The amount of profit a firm earns for every $1 of equity is referred to as the:

Accepted Answer

A) profit margin 
B) equity multiplier 
C) return on equity 
D) capital intensity ratio 
E) price-earnings ratio 
A) profit margin 
B) equity multiplier 
C) return on equity 
D) capital intensity ratio 
E) price-earnings ratio

Question 6

It takes the Jolly Jumbuck Asian Trading Company 32 days to collect its accounts receivable.Sales for the year are $650 000.What is the accounts receivable turnover ratio?

Accepted Answer

A) 11.23 
B) 11.41 
C) 11.78 
D) 12.23 
E) 12.55 
A) 11.23 
B) 11.41 
C) 11.78 
D) 12.23 
E) 12.55

Question 7

The ratios that are based on financial statement values and used for comparison purposes are called:

Accepted Answer

A) financial ratios 
B) industrial statistics 
C) equity standards 
D) accounting returns 
E) analytical standards 
A) financial ratios 
B) industrial statistics 
C) equity standards 
D) accounting returns 
E) analytical standards

Question 8

Swagerman Incorporated has total assets of $6 842 200 and total debt of
$3 000 000.What is the equity multiplier?

Accepted Answer

A) 1.78 
B) 2.28 
C) 0.44 
D) 1.56 
E) 0.56 
A) 1.78 
B) 2.28 
C) 0.44 
D) 1.56 
E) 0.56

Question 9

The relationship between a firm's earnings and the multiple of those earnings which investors are willing to pay to purchase one share of stock is called the:

Accepted Answer

A) financial leverage ratio 
B) debt-equity ratio 
C) capital intensity ratio 
D) market-to-book ratio 
E) price-earnings ratio 
A) financial leverage ratio 
B) debt-equity ratio 
C) capital intensity ratio 
D) market-to-book ratio 
E) price-earnings ratio

Question 10

If a firm has a 100 per cent dividend payout ratio,then the internal growth rate of the firm is:

Accepted Answer

A) zero per cent 
B) 100 per cent 
C) equal to the ROA 
D) negative 
E) infinite 
A) zero per cent 
B) 100 per cent 
C) equal to the ROA 
D) negative 
E) infinite

Question 11

Ben-Q company has 178 300 shares issued to shareholders and the shares sell for $4.10 per share at the end of the year.As the company's net profit is $450 000,what are its earnings per share (EPS)?

Accepted Answer

A) $0.62 
B) $4.38 
C) $2.52 
D) $2.08 
E) $1.01 
A) $0.62 
B) $4.38 
C) $2.52 
D) $2.08 
E) $1.01

Question 12

Haymarket Traders Pty Ltd has sales of $450 000,a profit margin of 5 per cent and dividends of $10 500.What is the retention ratio?

Accepted Answer

A) 53.33 per cent 
B) 46.67 per cent 
C) 23.33 per cent 
D) 35.33 per cent 
E) 47.10 per cent 
A) 53.33 per cent 
B) 46.67 per cent 
C) 23.33 per cent 
D) 35.33 per cent 
E) 47.10 per cent

Question 13

Which of the following are determinants of a firm's sustainable rate of growth?
I.amount of sales generated from each dollar invested in assets
II.amount of debt per dollar of equity
III.amount of current assets per dollar of current liabilities
IV.percentage of net income distributed as dividends

Accepted Answer

A) I and III only 
B) II and IV only 
C) I,II and IV only 
D) II,III and IV only 
E) I,II,III and IV 
A) I and III only 
B) II and IV only 
C) I,II and IV only 
D) II,III and IV only 
E) I,II,III and IV

Question 14

The acid-test ratio is also called the:

Accepted Answer

A) current ratio 
B) cash ratio 
C) times interest earned ratio 
D) quick ratio 
E) return on equity ratio 
A) current ratio 
B) cash ratio 
C) times interest earned ratio 
D) quick ratio 
E) return on equity ratio

Question 15

Which one of the following is the abbreviation for the international coding system that classifies a firm by its industry sector?

Accepted Answer

A) NYSE 
B) NRMA 
C) ASIC 
D) GICS 
E) SBIC 
A) NYSE 
B) NRMA 
C) ASIC 
D) GICS 
E) SBIC

Question 16

Sales divided by total assets is referred to as the:

Accepted Answer

A) days' sales in total assets 
B) capital intensity ratio 
C) return on assets 
D) total asset turnover 
E) asset utilisation rate 
A) days' sales in total assets 
B) capital intensity ratio 
C) return on assets 
D) total asset turnover 
E) asset utilisation rate

Question 17

Which one of the following transactions will increase the liquidity of a firm?

Accepted Answer

A) using cash to purchase new equipment 
B) increasing short-term debt while decreasing long-term debt by an equivalent amount 
C) issuing long-term debt to repurchase shares of outstanding stock 
D) increasing the sales on credit while reducing cash sales by the same amount 
E) selling inventory on credit 
A) using cash to purchase new equipment 
B) increasing short-term debt while decreasing long-term debt by an equivalent amount 
C) issuing long-term debt to repurchase shares of outstanding stock 
D) increasing the sales on credit while reducing cash sales by the same amount 
E) selling inventory on credit

Question 18

The Du Pont identity can be used to help a financial manager determine:
I.the degree of financial leverage used by a firm
II.the operating efficiency of a firm
III.the utilisation rate of a firm's assets
IV.the rate of return on a firm's assets

Accepted Answer

A) II and III only 
B) I and III only 
C) II,III and IV only 
D) I,II and III only 
E) I,II,III and IV 
A) II and III only 
B) I and III only 
C) II,III and IV only 
D) I,II and III only 
E) I,II,III and IV

Question 19

Friendly's Shoe Store has earnings before interest and taxes of $21 680 and net income of $12 542.The tax rate is 34 per cent.What is the times interest earned ratio?

Accepted Answer

A) 0.88 
B) 1.67 
C) 3.09 
D) 5.59 
E) 8.10 
A) 0.88 
B) 1.67 
C) 3.09 
D) 5.59 
E) 8.10

Question 20

The financial ratio,defined as earnings before interest and taxes divided by
Interest paid,is called the:

Accepted Answer

A) times interest earned ratio 
B) debt-equity ratio 
C) profit margin 
D) return on equity 
E) cash coverage ratio 
A) times interest earned ratio 
B) debt-equity ratio 
C) profit margin 
D) return on equity 
E) cash coverage ratio

A common-size balance sheet helps financial managers determine:

Manly Manufacturers Pty Ltd has a profit margin of 7.5 per cent and a dividend payout ratio of 30 per cent.What is the retention ratio?

Computer Geeks has sales of $521 000,a profit margin of 14.8 per cent,a total asset turnover rate of 2.16,and an equity multiplier of 1.30.What is the return on equity?

The amount of profit a firm earns for every $1 of equity is referred to as the:

It takes the Jolly Jumbuck Asian Trading Company 32 days to collect its accounts receivable.Sales for the year are $650 000.What is the accounts receivable turnover ratio?

The ratios that are based on financial statement values and used for comparison purposes are called:

Swagerman Incorporated has total assets of $6 842 200 and total debt of $3 000 000.What is the equity multiplier?

The relationship between a firm's earnings and the multiple of those earnings which investors are willing to pay to purchase one share of stock is called the:

If a firm has a 100 per cent dividend payout ratio,then the internal growth rate of the firm is:

Ben-Q company has 178 300 shares issued to shareholders and the shares sell for $4.10 per share at the end of the year.As the company's net profit is $450 000,what are its earnings per share (EPS)?

Haymarket Traders Pty Ltd has sales of $450 000,a profit margin of 5 per cent and dividends of $10 500.What is the retention ratio?

Which of the following are determinants of a firm's sustainable rate of growth? I.amount of sales generated from each dollar invested in assets II.amount of debt per dollar of equity III.amount of current assets per dollar of current liabilities IV.percentage of net income distributed as dividends

The acid-test ratio is also called the:

Which one of the following is the abbreviation for the international coding system that classifies a firm by its industry sector?

Sales divided by total assets is referred to as the:

Which one of the following transactions will increase the liquidity of a firm?

The Du Pont identity can be used to help a financial manager determine: I.the degree of financial leverage used by a firm II.the operating efficiency of a firm III.the utilisation rate of a firm's assets IV.the rate of return on a firm's assets

Friendly's Shoe Store has earnings before interest and taxes of $21 680 and net income of $12 542.The tax rate is 34 per cent.What is the times interest earned ratio?

The financial ratio,defined as earnings before interest and taxes divided by Interest paid,is called the:

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Long-Term Financing

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters

Exam 3: Working With Financial Statements

A common-size balance sheet helps financial managers determine:

Manly Manufacturers Pty Ltd has a profit margin of 7.5 per cent and a dividend payout ratio of 30 per cent.What is the retention ratio?

Computer Geeks has sales of $521 000,a profit margin of 14.8 per cent,a total asset turnover rate of 2.16,and an equity multiplier of 1.30.What is the return on equity?

The amount of profit a firm earns for every $1 of equity is referred to as the:

It takes the Jolly Jumbuck Asian Trading Company 32 days to collect its accounts receivable.Sales for the year are $650 000.What is the accounts receivable turnover ratio?

The ratios that are based on financial statement values and used for comparison purposes are called:

Swagerman Incorporated has total assets of $6 842 200 and total debt of $3 000 000.What is the equity multiplier?

The relationship between a firm's earnings and the multiple of those earnings which investors are willing to pay to purchase one share of stock is called the:

If a firm has a 100 per cent dividend payout ratio,then the internal growth rate of the firm is:

Ben-Q company has 178 300 shares issued to shareholders and the shares sell for $4.10 per share at the end of the year.As the company's net profit is $450 000,what are its earnings per share (EPS)?

Haymarket Traders Pty Ltd has sales of $450 000,a profit margin of 5 per cent and dividends of $10 500.What is the retention ratio?

Which of the following are determinants of a firm's sustainable rate of growth? I.amount of sales generated from each dollar invested in assets II.amount of debt per dollar of equity III.amount of current assets per dollar of current liabilities IV.percentage of net income distributed as dividends

The acid-test ratio is also called the:

Which one of the following is the abbreviation for the international coding system that classifies a firm by its industry sector?

Sales divided by total assets is referred to as the:

Which one of the following transactions will increase the liquidity of a firm?

The Du Pont identity can be used to help a financial manager determine: I.the degree of financial leverage used by a firm II.the operating efficiency of a firm III.the utilisation rate of a firm's assets IV.the rate of return on a firm's assets

Friendly's Shoe Store has earnings before interest and taxes of $21 680 and net income of $12 542.The tax rate is 34 per cent.What is the times interest earned ratio?

The financial ratio,defined as earnings before interest and taxes divided by Interest paid,is called the:

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Long-Term Financing

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters