Question 1

Julie's Market Place has earnings per share of $.35, a book value of $2.10 per share, and a market-to-book ratio of 3. What is the firm's price-earnings ratio?

Accepted Answer

A)  15 
B)  16 
C)  17 
D)  18 
E)  19

Question 2

A very short-term creditor would likely be most interested in a firm's ________________.

Accepted Answer

A)  Current ratio 
B)  Quick ratio 
C)  NWC to total assets ratio 
D)  Cash ratio 
E)  Interval measure

Question 3

Which of the following is a use of cash?

Accepted Answer

A)  An increase in accounts payable. 
B)  A reduction in inventory. 
C)  An increase in retained earnings. 
D)  An increase in notes payable. 
E)  An increase in accounts receivable.

Question 4

Determine the value of cash given the following information: cash ratio = 2; cash equivalents = $600 ; current liabilities = $800.

Accepted Answer

A)  $1,000 
B)  $1,100 
C)  $1,200 
D)  $1,300 
E)  $1,400

Question 5

Based on the information provided above, what was the firm's tax rate in 2018?

Accepted Answer

A)  23.91% 
B)  28.21% 
C)  39.29% 
D)  15.19% 
E)  23.86

Question 6

Last year, New Flying Industries had a price-earnings ratio of 15. This year, the price earnings ratio is 18. Based on this information, it can be stated with certainty that:

Accepted Answer

A)  The price per share increased. 
B)  The earnings per share decreased. 
C)  Investors are paying a higher price for each share of stock purchased. 
D)  Investors are receiving a higher rate of return this year. 
E)  Either the price per share, the earnings per share, or both changed.

Question 7

Suppose you calculated the following ratio for a firm: The sum of the compensation paid to owners, directors, and managers, divided by total sales. Which class of financial ratios should this be included in and why? Who might be interested in such a ratio?

Accepted Answer

The answer of Suppose you calculated the following ratio for...

Question 8

You have the following data for the Fosberg Winery of St Catherines. What is Fosberg's return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80; Profit margin = 4.5%; Tax rate = 35%.

Accepted Answer

A)  3.6% 
B)  3.9% 
C)  5.7% 
D)  6.4% 
E)  9.3%

Exam 3: Working With Financial Statements