Question 1

Which of the following is NOT true of common-size balance sheets?

Accepted Answer

A)  Each asset and liability item on the balance sheet is standardized by dividing it by total assets. 
B)  Balance sheet accounts are represented as percentages of total assets. 
C)  Each asset and liability item on the balance sheet is standardized by dividing it by sales. 
D)  Common-size balance sheets allow us to make meaningful comparisons between the balance sheets of two firms that are different in size. 
A)  Each asset and liability item on the balance sheet is standardized by dividing it by total assets. 
B)  Balance sheet accounts are represented as percentages of total assets. 
C)  Each asset and liability item on the balance sheet is standardized by dividing it by sales. 
D)  Common-size balance sheets allow us to make meaningful comparisons between the balance sheets of two firms that are different in size. C

Question 2

Which one of the following is NOT an advantage of using return on equity (ROE) as a goal?

Accepted Answer

A)  ROE is highly correlated with shareholder wealth maximization. 
B)  ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknesses. 
C)  ROE does not consider risk. 
D)  All of the above are advantages of using ROE as a goal. 
A)  ROE is highly correlated with shareholder wealth maximization. 
B)  ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknesses. 
C)  ROE does not consider risk. 
D)  All of the above are advantages of using ROE as a goal. C

Question 3

Which of the following is true of a firm that has both debt and equity?

Accepted Answer

A)  Its return on equity (RO
E)  will be greater than its return on asset (RO
A) . 
B)  Its return on equity (RO
E)  will be lesser than its return on asset (RO
A) . 
C)  Its return on equity (RO
E)  will be equal to its return on asset (RO
A) . 
D)  None of the above. 
A)  Its return on equity (RO
E)  will be greater than its return on asset (RO
A) . 
B)  Its return on equity (RO
E)  will be lesser than its return on asset (RO
A) . 
C)  Its return on equity (RO
E)  will be equal to its return on asset (RO
A) . 
D)  None of the above. A

Question 4

Juventus Corp has total assets of $4,744,288, total debt of $2,912,000, and net sales of $7,212,465. Their net profit margin for the year is 18 percent. What is Juventus's return on assets (ROA)? Round intermediate calculations to nearest dollar and percentage answer to one decimal place.

Accepted Answer

A)  25.6% 
B)  18% 
C)  27.4% 
D)  None of the above 
A)  25.6% 
B)  18% 
C)  27.4% 
D)  None of the above

Question 5

What are some of the main limitations of ratio analysis?

Accepted Answer

While financial ratio analysis can provi

Question 6

A firm's management analyzes financial statements so that:

Accepted Answer

A)  they can get feedback on their investing, financing, and working capital decisions by identifying trends in the various accounts that are reported in the financial statements. 
B)  similar to shareholders, they can focus on profitability, dividend, capital appreciation, and return on investment. 
C)  they can get more stock options. 
D)  Both a and b 
A)  they can get feedback on their investing, financing, and working capital decisions by identifying trends in the various accounts that are reported in the financial statements. 
B)  similar to shareholders, they can focus on profitability, dividend, capital appreciation, and return on investment. 
C)  they can get more stock options. 
D)  Both a and b

Question 7

Deutsche Bearings has total sales of $9,745,923, inventories of $2,237,435, cash and equivalents of $755,071, and day's sales outstanding of 49 days. If the firm's management wanted its day's sales outstanding (DSO) to be 35 days, by how much will the accounts receivable have to change? Round your final answer to two decimal places.

Accepted Answer

A)  $373,816.23 
B)  −$373,816.23 
C)  −$379,008.12 
D)  $379,008.12 
A)  $373,816.23 
B)  −$373,816.23 
C)  −$379,008.12 
D)  $379,008.12

Question 8

Sorenstam Corp. has an equity multiplier of 2.34 times, total assets of $4,512,895, a ROE of 17.5 percent, and a total assets turnover of 3.1 times. Calculate the firm's ROA. Round your percentage answer to two decimal places.

Accepted Answer

A)  6.23% 
B)  4.53% 
C)  7.48% 
D)  5.79% 
A)  6.23% 
B)  4.53% 
C)  7.48% 
D)  5.79%

Question 9

If Randolph Corp. has accounts receivables of $654,803 and net sales of $1,932,349, what is its accounts receivable turnover? Round your final answer to two decimal places.

Accepted Answer

A)  0.34 times 
B)  1.78 times 
C)  2.95 times 
D)  None of the above 
A)  0.34 times 
B)  1.78 times 
C)  2.95 times 
D)  None of the above

Question 10

While doing an industry group analysis, you form the comparison group by choosing firms that are larger than the firm being compared.

Accepted Answer

A) True 
 B)False

Question 11

A company can improve its liquidity by increasing its accounts payable, while maintaining the other accounts constant.

Accepted Answer

A) True 
 B)False

Question 12

What will be a firm's equity multiplier given a debt ratio of 0.45? Round your final answer to two decimal places.

Accepted Answer

A)  1.82 
B)  1.28 
C)  2.22 
D)  None of the above 
A)  1.82 
B)  1.28 
C)  2.22 
D)  None of the above

Question 13

Gateway Corp. has an inventory turnover ratio of 5.6. What is its day's sales in inventory? Round your final answer to nearest day.

Accepted Answer

A)  65 days 
B)  64 days 
C)  61 days 
D)  57 days 
A)  65 days 
B)  64 days 
C)  61 days 
D)  57 days

Question 14

Saunders, Inc., has a ROE of 18.7 percent, an equity multiplier of 2.53 times, sales of $2.75 million, and a total assets turnover of 2.7 times. What is the firm's net income? Round your final answer to two decimal places.

Accepted Answer

A)  $75,281.80 
B)  $514,250.00 
C)  $51,425.00 
D)  $7,528.10 
A)  $75,281.80 
B)  $514,250.00 
C)  $51,425.00 
D)  $7,528.10

Question 15

The equity multiplier of a firm is computed by dividing the total equity by its total assets.

Accepted Answer

A) True 
 B)False

Question 16

Shareholders analyze financial statements in order to:

Accepted Answer

A)  assess the cash flows that the firm will generate from its operations. 
B)  determine the firm's profitability, their return for that period, and the dividend they are likely to receive. 
C)  focus on the value of the stock they hold. 
D)  All of the above 
A)  assess the cash flows that the firm will generate from its operations. 
B)  determine the firm's profitability, their return for that period, and the dividend they are likely to receive. 
C)  focus on the value of the stock they hold. 
D)  All of the above

Question 17

Firms with a lower return on assets (ROA) and higher leverage will have a lower return on equity (ROE) than firms with a higher return on assets (ROA) and lower leverage.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following does NOT change a firm's current ratio?

Accepted Answer

A)  The firm collects its accounts receivables. 
B)  The firm purchases inventory by taking a short-term loan. 
C)  The firm pays down its accounts payables. 
D)  None of the above. 
A)  The firm collects its accounts receivables. 
B)  The firm purchases inventory by taking a short-term loan. 
C)  The firm pays down its accounts payables. 
D)  None of the above.

Question 19

Which of the following is true of ratio analysis?

Accepted Answer

A)  A ratio is computed by dividing one balance sheet item or income statement item by another. 
B)  The choice of the scale determines the story that can be garnered from the ratio. 
C)  Ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed. 
D)  All of the above are true. 
A)  A ratio is computed by dividing one balance sheet item or income statement item by another. 
B)  The choice of the scale determines the story that can be garnered from the ratio. 
C)  Ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed. 
D)  All of the above are true.

Question 20

The Standard Industrial Classification (SIC) codes are four-digit numbers in which the last two digits describe the type of business or industry in which the firm is engaged.

Accepted Answer

A) True 
 B)False

Which of the following is NOT true of common-size balance sheets?

Which one of the following is NOT an advantage of using return on equity (ROE) as a goal?

Which of the following is true of a firm that has both debt and equity?

Juventus Corp has total assets of $4,744,288, total debt of $2,912,000, and net sales of $7,212,465. Their net profit margin for the year is 18 percent. What is Juventus's return on assets (ROA)? Round intermediate calculations to nearest dollar and percentage answer to one decimal place.

What are some of the main limitations of ratio analysis?

A firm's management analyzes financial statements so that:

Sorenstam Corp. has an equity multiplier of 2.34 times, total assets of $4,512,895, a ROE of 17.5 percent, and a total assets turnover of 3.1 times. Calculate the firm's ROA. Round your percentage answer to two decimal places.

If Randolph Corp. has accounts receivables of $654,803 and net sales of $1,932,349, what is its accounts receivable turnover? Round your final answer to two decimal places.

While doing an industry group analysis, you form the comparison group by choosing firms that are larger than the firm being compared.

A company can improve its liquidity by increasing its accounts payable, while maintaining the other accounts constant.

What will be a firm's equity multiplier given a debt ratio of 0.45? Round your final answer to two decimal places.

Gateway Corp. has an inventory turnover ratio of 5.6. What is its day's sales in inventory? Round your final answer to nearest day.

Saunders, Inc., has a ROE of 18.7 percent, an equity multiplier of 2.53 times, sales of $2.75 million, and a total assets turnover of 2.7 times. What is the firm's net income? Round your final answer to two decimal places.

The equity multiplier of a firm is computed by dividing the total equity by its total assets.

Shareholders analyze financial statements in order to:

Firms with a lower return on assets (ROA) and higher leverage will have a lower return on equity (ROE) than firms with a higher return on assets (ROA) and lower leverage.

Which of the following does NOT change a firm's current ratio?

Which of the following is true of ratio analysis?

The Standard Industrial Classification (SIC) codes are four-digit numbers in which the last two digits describe the type of business or industry in which the firm is engaged.

The Financial Manager and the Firm

The Financial System and the Level of Interest Rates

The Financial System and the Level of Interest Rates

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Stock Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics

The Cost of Capital

Working Capital Management

How Firms Raise Capital

Capital Structure Policy

Dividends, Stock Repurchases, and Payout Policy

Business Formation, Growth, and Valuation

Financial Planning and Managing Growth

Options and Corporate Finance

International Financial Management

Filters

Exam 4: Analyzing Financial Statements

Which of the following is NOT true of common-size balance sheets?

Which one of the following is NOT an advantage of using return on equity (ROE) as a goal?

Which of the following is true of a firm that has both debt and equity?

Juventus Corp has total assets of $4,744,288, total debt of $2,912,000, and net sales of $7,212,465. Their net profit margin for the year is 18 percent. What is Juventus's return on assets (ROA)? Round intermediate calculations to nearest dollar and percentage answer to one decimal place.

What are some of the main limitations of ratio analysis?

A firm's management analyzes financial statements so that:

Sorenstam Corp. has an equity multiplier of 2.34 times, total assets of $4,512,895, a ROE of 17.5 percent, and a total assets turnover of 3.1 times. Calculate the firm's ROA. Round your percentage answer to two decimal places.

If Randolph Corp. has accounts receivables of $654,803 and net sales of $1,932,349, what is its accounts receivable turnover? Round your final answer to two decimal places.

While doing an industry group analysis, you form the comparison group by choosing firms that are larger than the firm being compared.

A company can improve its liquidity by increasing its accounts payable, while maintaining the other accounts constant.

What will be a firm's equity multiplier given a debt ratio of 0.45? Round your final answer to two decimal places.

Gateway Corp. has an inventory turnover ratio of 5.6. What is its day's sales in inventory? Round your final answer to nearest day.

Saunders, Inc., has a ROE of 18.7 percent, an equity multiplier of 2.53 times, sales of $2.75 million, and a total assets turnover of 2.7 times. What is the firm's net income? Round your final answer to two decimal places.

The equity multiplier of a firm is computed by dividing the total equity by its total assets.

Shareholders analyze financial statements in order to:

Firms with a lower return on assets (ROA) and higher leverage will have a lower return on equity (ROE) than firms with a higher return on assets (ROA) and lower leverage.

Which of the following does NOT change a firm's current ratio?

Which of the following is true of ratio analysis?

The Standard Industrial Classification (SIC) codes are four-digit numbers in which the last two digits describe the type of business or industry in which the firm is engaged.

The Financial Manager and the Firm

The Financial System and the Level of Interest Rates

The Financial System and the Level of Interest Rates

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Stock Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics

The Cost of Capital

Working Capital Management

How Firms Raise Capital

Capital Structure Policy

Dividends, Stock Repurchases, and Payout Policy

Business Formation, Growth, and Valuation

Financial Planning and Managing Growth

Options and Corporate Finance

International Financial Management

Filters