Question 1

A decrease in ________ will increase gross profit margin.

Accepted Answer

A)  cost of goods sold 
B)  depreciation expense 
C)  interest expense 
D)  both A and B 
A)  cost of goods sold 
B)  depreciation expense 
C)  interest expense 
D)  both A and B

Question 2

Which of the following will help an analyst determine how well a firm is able to service its debt?

Accepted Answer

A)  Total liability turnover 
B)  Times-interest-earned 
C)  Return on debt 
D)  Asset ratio 
A)  Total liability turnover 
B)  Times-interest-earned 
C)  Return on debt 
D)  Asset ratio

Question 3

In 2016, ABC's average collection period is

Accepted Answer

A)  30 days. 
B)  32.5 days. 
C)  25 days. 
D)  35 days. 
A)  30 days. 
B)  32.5 days. 
C)  25 days. 
D)  35 days.

Question 4

Based on the information in Table 1, the current ratio is

Accepted Answer

A)  2.97. 
B)  1.46. 
C)  2.11. 
D)  2.23. 
A)  2.97. 
B)  1.46. 
C)  2.11. 
D)  2.23.

Question 5

In 2012, Snout and Smith, Inc. had a gross profit of $27,000 on sales of $110,000. S & S's operating expenses for 2012 were $13,000, and its net profit margin was .0585. Snout and Smith had no interest expense in 2012. What was S&S's operating profit margin?

Accepted Answer

A)  0.245 
B)  0.118 
C)  0.127 
D)  0.157 
A)  0.245 
B)  0.118 
C)  0.127 
D)  0.157

Question 6

Which of the following statements is FALSE?

Accepted Answer

A)  The calculation of the accounts receivable average collection period (ACP) would generally produce a more realistic assessment of how a firm is managing its accounts receivable if the analyst were to calculate the ACP for each month and average the results, than if the analyst were to solely use the fiscal year-end accounts receivable value. 
B)  If an analyst were to compare the inventory turnover of one firm to that of another, the comparison can be distorted if the two firms use different methods of valuing ending inventory. 
C)  Assume that two firms are in the same industry and one reports a higher debt ratio than the other. We can safely say that the firm that has the highest debt ratio is the riskier of the two firms. 
D)  A firm that has a current ratio that is significantly above the industry norm will, as a direct consequence, also have a significantly better return on assets than if its current ratio was below the industry norm. 
A)  The calculation of the accounts receivable average collection period (ACP) would generally produce a more realistic assessment of how a firm is managing its accounts receivable if the analyst were to calculate the ACP for each month and average the results, than if the analyst were to solely use the fiscal year-end accounts receivable value. 
B)  If an analyst were to compare the inventory turnover of one firm to that of another, the comparison can be distorted if the two firms use different methods of valuing ending inventory. 
C)  Assume that two firms are in the same industry and one reports a higher debt ratio than the other. We can safely say that the firm that has the highest debt ratio is the riskier of the two firms. 
D)  A firm that has a current ratio that is significantly above the industry norm will, as a direct consequence, also have a significantly better return on assets than if its current ratio was below the industry norm.

Question 7

In 2016, ABC's inventory turnover is

Accepted Answer

A)  23.9. 
B)  20.3. 
C)  15.5. 
D)  16.1. 
A)  23.9. 
B)  20.3. 
C)  15.5. 
D)  16.1.

Question 8

By using common size income statements, firms can determine how various expenses as a percentage of total sales changed from period to period.

Accepted Answer

A) True 
 B)False

Question 9

A retailer that accepts credit cards will have a higher accounts receivable turnover ratio than a retailer with its own credit department.

Accepted Answer

A) True 
 B)False

Question 10

Common size income statements represent all figures on the income statement

Accepted Answer

A)  as a percentage change from the previous year. 
B)  percentages of the current year's sales. 
C)  as a percentage of some benchmark figure. 
D)  as a percentage of total assets. 
A)  as a percentage change from the previous year. 
B)  percentages of the current year's sales. 
C)  as a percentage of some benchmark figure. 
D)  as a percentage of total assets.

A decrease in ________ will increase gross profit margin.

Which of the following will help an analyst determine how well a firm is able to service its debt?

In 2016, ABC's average collection period is

Based on the information in Table 1, the current ratio is

In 2012, Snout and Smith, Inc. had a gross profit of $27,000 on sales of $110,000. S & S's operating expenses for 2012 were $13,000, and its net profit margin was .0585. Snout and Smith had no interest expense in 2012. What was S&S's operating profit margin?

Which of the following statements is FALSE?

In 2016, ABC's inventory turnover is

By using common size income statements, firms can determine how various expenses as a percentage of total sales changed from period to period.

A retailer that accepts credit cards will have a higher accounts receivable turnover ratio than a retailer with its own credit department.

Common size income statements represent all figures on the income statement

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, Taxes, and Cash Flows

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 4: Financial Analysis-Sizing up Firm Performance

A decrease in ________ will increase gross profit margin.

Which of the following will help an analyst determine how well a firm is able to service its debt?

In 2016, ABC's average collection period is

Based on the information in Table 1, the current ratio is

In 2012, Snout and Smith, Inc. had a gross profit of $27,000 on sales of $110,000. S & S's operating expenses for 2012 were $13,000, and its net profit margin was .0585. Snout and Smith had no interest expense in 2012. What was S&S's operating profit margin?

Which of the following statements is FALSE?

In 2016, ABC's inventory turnover is

By using common size income statements, firms can determine how various expenses as a percentage of total sales changed from period to period.

A retailer that accepts credit cards will have a higher accounts receivable turnover ratio than a retailer with its own credit department.

Common size income statements represent all figures on the income statement

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, Taxes, and Cash Flows

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters