Question 1

A Kingston firm has sales of $49,800, costs of $36,100, interest paid of $380, and depreciation of $3,200. The tax rate is 35 %. What is the value of the cash coverage ratio?

Accepted Answer

A)  25.73 
B)  30.00 
C)  32.11 
D)  36.05 
E)  41.08

Question 2

What was inventory turnover for 2018?

Accepted Answer

A)  1.38 
B)  1.42 
C)  1.48 
D)  3.15 
E)  3.38

Question 3

Water Forms, Inc. has sales of $268,900, net income of $34,800, net fixed assets of $146,700, and current assets of $98,200. The firm has $46,900 in inventory. What is the common-size statement value of inventory?

Accepted Answer

A)  16.82 % 
B)  17.44 % 
C)  19.15 % 
D)  26.09 % 
E)  31.97 %

Question 4

Profit margin is defined as:

Accepted Answer

A)  EBIT divided by sales. 
B)  Cost of goods sold divided by sales. 
C)  Net income divided by sales. 
D)  Net income divided by total assets. 
E)  EBIT divided by total assets.

Question 5

It is often said that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?

Accepted Answer

The answer of It is often said that anyone with...

Question 6

Etling Eccentricities has 400,000 shares of common stock outstanding, net income after tax of $1.2 million, retained earnings of $17 million, and total equity of $35 million. What is EE's earnings per share?

Accepted Answer

A)  $3.00 
B)  $4.00 
C)  $4.25 
D)  $8.75 
E)  $13.50

Question 7

An equity multiplier of 0.64 means that for every $1 the firm raises in new equity, the firm can:

Accepted Answer

A)  Acquire an additional $0.64 in new assets. 
B)  Acquire an additional $0.64 in new debt. 
C)  Earn $0.64 in additional profits. 
D)  Earn $0.64 in additional profits per share. 
E)  Pay $0.64 in additional dividends per share.

Question 8

The financial ratio days' sales in inventory is measured as:

Accepted Answer

A)  Inventory turnover plus 365 days. 
B)  Inventory times 365 days. 
C)  Inventory plus cost of goods sold, divided by 365 days. 
D)  365 days divided by inventory. 
E)  365 days divided by inventory turnover.

Question 9

The financial ratio days' sales in receivables is measured as:

Accepted Answer

A)  Receivables turnover plus 365 days. 
B)  Accounts receivable times 365 days. 
C)  Accounts receivable plus sales, divided by 365 days. 
D)  365 days divided by receivables turnover. 
E)  365 days divided by accounts receivable.

Question 10

Calculate the current ratio given the following information: current liabilities = $40,000; sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover = 5; inventory turnover = 3.

Accepted Answer

A)  1.60 
B)  1.70 
C)  1.80 
D)  1.90 
E)  2.00

Question 11

What was the total asset turnover in 2018?

Accepted Answer

A)  0.23 
B)  0.25 
C)  0.52 
D)  0.57 
E)  1.92

Question 12

A firm has total debt of $1,850 and a debt-equity ratio of.64. What is the value of the total assets?

Accepted Answer

A)  $1,128.05 
B)  $1,184.00 
C)  $2,571.95 
D)  $3,034.00 
E)  $4,740.63

Question 13

The most effective methods of directly evaluating the financial performance of a firm is to compare the current financial ratios to those of the same firm from prior time periods and compare a firm's financial ratios to those of other firms in the firm's peer group who have similar operations.

Accepted Answer

A) True 
 B)False

Question 14

A reduction in interest expense, all else constant, will cause a(n):

Accepted Answer

A)  Decrease in the times interest earned ratio. 
B)  Increase in the cash coverage ratio. 
C)  Decrease in the long-term debt ratio. 
D)  Decrease in the return on equity. 
E)  Increase in the price earnings ratio.

Question 15

Use the following statement of financial position and statement of comprehensive income   What is the net working capital to total assets ratio for Bluebird for 2018?

Accepted Answer

A)  28.17 % 
B)  34.18 % 
C)  39.27 % 
D)  46.11 % 
E)  47.15 %

Question 16

A price earnings ratio of 14 means that:

Accepted Answer

A)  Stockholders are currently paying a price equal to 14 times earnings per share when they buy one share of stock. 
B)  The market value of each share of outstanding common stock is currently valued at $14 per share. 
C)  The market-to-book ratio must be equal to 4. 
D)  The current selling price of a product is equal to 14 times the net income generated from the sale of that product. 
E)  The market value of the common stock is currently equal to 14 times the book value per share.

Question 17

Calculate the value of total equity given the following information: total debt ratio = 0.52; total assets = $25,000.

Accepted Answer

A)  $11,000 
B)  $11,250 
C)  $11,500 
D)  $11,750 
E)  $12,000

Question 18

Assume Marble Comics' days' sales in inventory ratio was 120 days in 2010. By how much did it change in 2018?

Accepted Answer

A)  Increased by 11 days 
B)  Increased by 32 days 
C)  Increased by 48 days 
D)  Decreased by 22 days 
E)  Decreased by 44 days

Question 19

Creditors are most likely interested in the:

Accepted Answer

A)  Fixed asset turnover. 
B)  Times interest earned ratio. 
C)  Earnings per share ratio. 
D)  Price-earnings ratio. 
E)  Return on assets ratio.

Question 20

The following statement of financial position and statement of comprehensive income should be used.   What is Woodburn's total debt ratio for 2018?

Accepted Answer

A)  23.45 % 
B)  29.01 % 
C)  35.42 % 
D)  40.54 % 
E)  43.09 %

Exam 3: Working With Financial Statements