Question 1

Which one of these measures a firm's long-run ability to meet its obligations?

Accepted Answer

A) Cash ratio 
B) Total asset turnover 
C) Quick ratio 
D) Return on equity 
E) Equity multiplier 
A) Cash ratio 
B) Total asset turnover 
C) Quick ratio 
D) Return on equity 
E) Equity multiplier

Question 2

When using the percentage of sales approach to calculate the external financing need,some accounts are assumed to vary in direct proportion to sales while others do not.For each of the following accounts,explain how they are generally expected to change using this approach:

Accepted Answer

Current assets
Fixed assets,if operating

Question 3

Western Wear has net working capital of $3,500,net fixed assets of $42,000,sales of $69,000,and current liabilities of $9,800.From each $1 in total assets,the firm generates sales of:

Accepted Answer

A) $1.43 
B) $1.52 
C) $1.25 
D) $1.64 
E) $1.39 
A) $1.43 
B) $1.52 
C) $1.25 
D) $1.64 
E) $1.39

Question 4

Which of the following are liquidity ratios?
I.Cash coverage ratio
II.Current ratio
III.Quick ratio
IV.Capital intensity

Accepted Answer

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

Question 5

A firm has total debt of $1,500 and a debt-equity ratio of .40.What is the value of the total assets?

Accepted Answer

A) $1,560 
B) $3,000 
C) $5,250 
D) $6,500 
E) $7,200 
A) $1,560 
B) $3,000 
C) $5,250 
D) $6,500 
E) $7,200

Question 6

The Uptowner has $956,400 in sales.The profit margin is 4.75 percent.There are 25,000 shares of stock outstanding with a market price per share of $32.40.What is the price-earnings ratio?

Accepted Answer

A) 8.47 
B) 5.89 
C) 21.09 
D) 17.83 
E) 13.64 
A) 8.47 
B) 5.89 
C) 21.09 
D) 17.83 
E) 13.64

Question 7

The Top Shop has net income of $240 and total equity of $2,000.The debt-equity ratio is 1 and the plowback ratio is 40 percent.What is the internal growth rate?

Accepted Answer

A) 2.46% 
B) 3.00% 
C) 4.92% 
D) 5.88% 
E) 6.00% 
A) 2.46% 
B) 3.00% 
C) 4.92% 
D) 5.88% 
E) 6.00%

Question 8

The quick ratio is calculated as:

Accepted Answer

A) current assets divided by current liabilities. 
B) current assets minus inventory,divided by current liabilities. 
C) net working capital divided by current liabilities. 
D) cash on hand divided by current liabilities. 
E) current liabilities divided by current assets. 
A) current assets divided by current liabilities. 
B) current assets minus inventory,divided by current liabilities. 
C) net working capital divided by current liabilities. 
D) cash on hand divided by current liabilities. 
E) current liabilities divided by current assets.

Question 9

Which one of the following statements is correct if a firm has an accounts receivable turnover measure of 10?

Accepted Answer

A) It takes the firm 36.5 days to pay its creditors. 
B) It takes the firm 36.5 days to sell its inventory and collect payment from the sale. 
C) It take the firm 36.5 days to collect payment for a sale. 
D) The firm has ten times more in accounts receivable than it does in cash. 
E) It takes an average of ten days to collect payment from the firm's customers. 
A) It takes the firm 36.5 days to pay its creditors. 
B) It takes the firm 36.5 days to sell its inventory and collect payment from the sale. 
C) It take the firm 36.5 days to collect payment for a sale. 
D) The firm has ten times more in accounts receivable than it does in cash. 
E) It takes an average of ten days to collect payment from the firm's customers.

Question 10

Patti's has net income of $43,700,a price-earnings ratio of 15.7,and earnings per share of $1.39.How many shares of stock are outstanding?

Accepted Answer

A) 2,002 shares 
B) 38,690 shares 
C) 31,439 shares 
D) 493,590 shares 
E) 28,750 shares 
A) 2,002 shares 
B) 38,690 shares 
C) 31,439 shares 
D) 493,590 shares 
E) 28,750 shares

Question 11

Jensen's Boats has sales of $387,000,cost of goods sold of $204,000,depreciation of $32,000,and selling and general costs of $21,000.The firm has a loan balance of $87,400 with an interest rate of 7 percent.What is the value of the interest bearing debt to EBITDA measure?

Accepted Answer

A) .67 times 
B) .54 times 
C) 1.49 times 
D) 1.85 times 
E) 1.78 times 
A) .67 times 
B) .54 times 
C) 1.49 times 
D) 1.85 times 
E) 1.78 times

Question 12

Which ratio computes the amount of net income generated per each $1 of sales?

Accepted Answer

A) EV multiple 
B) Gross margin 
C) Return on equity 
D) Profit margin 
E) PE ratio 
A) EV multiple 
B) Gross margin 
C) Return on equity 
D) Profit margin 
E) PE ratio

Question 13

Tree Top Furniture has current sales of $311,000 and fixed assets of $198,000.The firm is currently operating at 83 percent of capacity.What is the maximum percentage increase the firm can have in sales without investing in additional fixed assets?

Accepted Answer

A) 20.48% 
B) 17.00% 
C) 19.25% 
D) 23.09% 
E) 36.33% 
A) 20.48% 
B) 17.00% 
C) 19.25% 
D) 23.09% 
E) 36.33%

Question 14

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

Accepted Answer

A) Accounts payable 
B) Cash 
C) Accounts receivable 
D) Inventory 
E) Fixed assets 
A) Accounts payable 
B) Cash 
C) Accounts receivable 
D) Inventory 
E) Fixed assets

Question 15

A firm has 5,000 shares of stock outstanding with a market value of $23.60 a share,$74,800 of long-term debt with an interest rate of 7.5 percent,cash on hand of $6,400,sales of $198,000,costs of $107,200,and depreciation of $13,400.The tax rate is 35 percent.What is the enterprise value multiple?

Accepted Answer

A) 2.05 times 
B) 3.97 times 
C) 2.19 times 
D) 4.18 times 
E) 3.10 times 
A) 2.05 times 
B) 3.97 times 
C) 2.19 times 
D) 4.18 times 
E) 3.10 times

Question 16

Which one of these measures a firm's operating and asset use efficiency as well as its financial leverage?

Accepted Answer

A) Equity multiplier 
B) Capital intensity ratio 
C) DuPont identity 
D) Profit margin 
E) Return on assets 
A) Equity multiplier 
B) Capital intensity ratio 
C) DuPont identity 
D) Profit margin 
E) Return on assets

Question 17

Supra's has sales of $893,000,total assets of $932,500,a profit margin of 6.5 percent,and a total debt ratio of 40 percent.What is the return on equity?

Accepted Answer

A) 15.56% 
B) 10.37% 
C) 8.71% 
D) 6.22% 
E) 11.49% 
A) 15.56% 
B) 10.37% 
C) 8.71% 
D) 6.22% 
E) 11.49%

Which one of these measures a firm's long-run ability to meet its obligations?

When using the percentage of sales approach to calculate the external financing need,some accounts are assumed to vary in direct proportion to sales while others do not.For each of the following accounts,explain how they are generally expected to change using this approach:

Western Wear has net working capital of $3,500,net fixed assets of $42,000,sales of $69,000,and current liabilities of $9,800.From each $1 in total assets,the firm generates sales of:

Which of the following are liquidity ratios? I.Cash coverage ratio II.Current ratio III.Quick ratio IV.Capital intensity

A firm has total debt of $1,500 and a debt-equity ratio of .40.What is the value of the total assets?

The Uptowner has $956,400 in sales.The profit margin is 4.75 percent.There are 25,000 shares of stock outstanding with a market price per share of $32.40.What is the price-earnings ratio?

The Top Shop has net income of $240 and total equity of $2,000.The debt-equity ratio is 1 and the plowback ratio is 40 percent.What is the internal growth rate?

The quick ratio is calculated as:

Which one of the following statements is correct if a firm has an accounts receivable turnover measure of 10?

Patti's has net income of $43,700,a price-earnings ratio of 15.7,and earnings per share of $1.39.How many shares of stock are outstanding?

Jensen's Boats has sales of $387,000,cost of goods sold of $204,000,depreciation of $32,000,and selling and general costs of $21,000.The firm has a loan balance of $87,400 with an interest rate of 7 percent.What is the value of the interest bearing debt to EBITDA measure?

Which ratio computes the amount of net income generated per each $1 of sales?

Tree Top Furniture has current sales of $311,000 and fixed assets of $198,000.The firm is currently operating at 83 percent of capacity.What is the maximum percentage increase the firm can have in sales without investing in additional fixed assets?

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

A firm has 5,000 shares of stock outstanding with a market value of $23.60 a share,$74,800 of long-term debt with an interest rate of 7.5 percent,cash on hand of $6,400,sales of $198,000,costs of $107,200,and depreciation of $13,400.The tax rate is 35 percent.What is the enterprise value multiple?

Which one of these measures a firm's operating and asset use efficiency as well as its financial leverage?

Supra's has sales of $893,000,total assets of $932,500,a profit margin of 6.5 percent,and a total debt ratio of 40 percent.What is the return on equity?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 3: Financial Statements Analysis and Financial Models

Which one of these measures a firm's long-run ability to meet its obligations?

When using the percentage of sales approach to calculate the external financing need,some accounts are assumed to vary in direct proportion to sales while others do not.For each of the following accounts,explain how they are generally expected to change using this approach:

Western Wear has net working capital of $3,500,net fixed assets of $42,000,sales of $69,000,and current liabilities of $9,800.From each $1 in total assets,the firm generates sales of:

Which of the following are liquidity ratios? I.Cash coverage ratio II.Current ratio III.Quick ratio IV.Capital intensity

A firm has total debt of $1,500 and a debt-equity ratio of .40.What is the value of the total assets?

The Uptowner has $956,400 in sales.The profit margin is 4.75 percent.There are 25,000 shares of stock outstanding with a market price per share of $32.40.What is the price-earnings ratio?

The Top Shop has net income of $240 and total equity of $2,000.The debt-equity ratio is 1 and the plowback ratio is 40 percent.What is the internal growth rate?

The quick ratio is calculated as:

Which one of the following statements is correct if a firm has an accounts receivable turnover measure of 10?

Patti's has net income of $43,700,a price-earnings ratio of 15.7,and earnings per share of $1.39.How many shares of stock are outstanding?

Jensen's Boats has sales of $387,000,cost of goods sold of $204,000,depreciation of $32,000,and selling and general costs of $21,000.The firm has a loan balance of $87,400 with an interest rate of 7 percent.What is the value of the interest bearing debt to EBITDA measure?

Which ratio computes the amount of net income generated per each $1 of sales?

Tree Top Furniture has current sales of $311,000 and fixed assets of $198,000.The firm is currently operating at 83 percent of capacity.What is the maximum percentage increase the firm can have in sales without investing in additional fixed assets?

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

A firm has 5,000 shares of stock outstanding with a market value of $23.60 a share,$74,800 of long-term debt with an interest rate of 7.5 percent,cash on hand of $6,400,sales of $198,000,costs of $107,200,and depreciation of $13,400.The tax rate is 35 percent.What is the enterprise value multiple?

Which one of these measures a firm's operating and asset use efficiency as well as its financial leverage?

Supra's has sales of $893,000,total assets of $932,500,a profit margin of 6.5 percent,and a total debt ratio of 40 percent.What is the return on equity?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters