Question 1

Ideally, a proposed comprehensive budget should be compared with financial ratios that have been agreed upon as part of the firm's corporate objectives.

Accepted Answer

A) True 
 B)False

Question 2

The information on a firm's lifo reserve can be used to improve the analysis of inventory, liquidity in general, and the debt position.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following ratios is given the highest significance rating by commercial loan officers?

Accepted Answer

A) Inventory Turnover In Days 
B) Degree of Financial Leverage 
C) Times Interest Earned 
D) Fixed Charge Coverage 
E) Debt/Equity

Question 4

Substantial research and development will result in more conservative earnings.

Accepted Answer

A) True 
 B)False

Question 5

The Beaver Study indicated the following ratio (ratios) to be the best for forecasting financial failure:

Accepted Answer

A) cash flow/total debt. 
B) net income/total assets. 
C) total debt/total assets. 
D) cash flow/total debt and net income/total assets. 
E) all of the answers are correct.

Question 6

A decline in the acid-test ratio indicates a reduced ability to pay current liabilities with funds from the sale of inventory.

Accepted Answer

A) True 
 B)False

Question 7

Ratios with a primary measure of profitability appear frequently in loan agreements.

Accepted Answer

A) True 
 B)False

Question 8

In financial accounting, which of the following assets is not considered to be an intangible asset?

Accepted Answer

A) Goodwill 
B) Patents 
C) Copyrights 
D) Trademarks 
E) Accounts receivable

Question 9

Edward I.Altman developed a multivariate model to predict bankruptcy.The model produces an overall discriminant score called a Z value.Which of the following statements is probably an unreasonable statement relating to the Z value?

Accepted Answer

A) The sales generating ability of the firm's assets is one of the important considerations in the Z value. 
B) The lack of a market value for a company's stock will reduce the significance of the Z value approach. 
C) Total assets is an important consideration in the Z value computation. 
D) Cumulative profitability over time is considered in the Z value computation. 
E) A Z score of 2.00 or below indicates a very healthy company.

Question 10

The authors (Tom Copeland, Tim Keller, and Jack Morrin) maintain that the correct way to value dot.coms is by using the classic discounted-cash-flow (DCF) approach to valuating, reinforcing the continued importance of basic economics and finance.

Accepted Answer

A) True 
 B)False

Question 11

There are many practical and theoretical issues related to the computation of financial ratios.

Accepted Answer

A) True 
 B)False

Exam 11: Expanded Analysis

Ideally, a proposed comprehensive budget should be compared with financial ratios that have been agreed upon as part of the firm's corporate objectives.

The information on a firm's lifo reserve can be used to improve the analysis of inventory, liquidity in general, and the debt position.

Which of the following ratios is given the highest significance rating by commercial loan officers?

Substantial research and development will result in more conservative earnings.

The Beaver Study indicated the following ratio (ratios) to be the best for forecasting financial failure:

A decline in the acid-test ratio indicates a reduced ability to pay current liabilities with funds from the sale of inventory.

Ratios with a primary measure of profitability appear frequently in loan agreements.

In financial accounting, which of the following assets is not considered to be an intangible asset?

Edward I.Altman developed a multivariate model to predict bankruptcy.The model produces an overall discriminant score called a Z value.Which of the following statements is probably an unreasonable statement relating to the Z value?

The authors (Tom Copeland, Tim Keller, and Jack Morrin) maintain that the correct way to value dot.coms is by using the classic discounted-cash-flow (DCF) approach to valuating, reinforcing the continued importance of basic economics and finance.

There are many practical and theoretical issues related to the computation of financial ratios.