Question 1

Shares outstanding of common stock = 1,000,000 
Shares outstanding of preferred stock = 500,000 
Market price of common stock = $18.
-The Debt to Equity ratio is:

Accepted Answer

A)  0.31% 
B)  2.5 times 
C)  1.43 times 
D)  0.70%

Question 2

A debt/equity ratio of 8.1 means:

Accepted Answer

A)  debt is turning over 8.1 times a year. 
B)  the firm is financing the company with 81% borrowed funds. 
C)  the firm has 8.1 times more debt than equity. 
D)  the firm has 81 times more equity than debt.

Question 3

Benchmarking is:

Accepted Answer

A)  a comparison of actual corporate ratios with those that were targeted. 
B)  analyzing a firm's ratios relative to industry averages. 
C)  a form of trend analysis. 
D)  closely associated with Dupont analysis.

Question 4

Distinguish between the cash budget and the capital budget.

Accepted Answer

The answer of Distinguish between the cash budget and the...

Question 5

General and administrative expenses are an example of a balance sheet item which moves spontaneously with sales. Comment on this statement.

Accepted Answer

The answer of General and administrative expenses are an example...

Question 6

All of the following items represent liabilities with the exception of:

Accepted Answer

A)  prepaid expenses. 
B)  accrued expenses. 
C)  notes payable. 
D)  long- term debt.

Question 7

A company has seen its net profit margin DECREASE year over year. Sales have increased. The gross profit margin is unchanged. Interest and amortization expenses and the tax rate are also unchanged. No new shares were issued. Why has the net profit margin declined?

Accepted Answer

The answer of A company has seen its net profit...

Question 8

Use the following information to answer the question:
    Sales for 2000 are projected to double; no new equipment is expected to be purchased or sold in 2000. Depreciation expense along with preferred stock and common stock will remain unchanged in 2000. Current assets, accounts payable, accrued expenses, COGS, and selling expenses vary at a constant percentage of sales. Notes payable, long- term debt, preferred stock, and common stock are scheduled to stay the same.
-Retained earnings for the end of the year 2000 are projected to be

Accepted Answer

A)  $4,000 
B)  $7,400 
C)  $26,400 
D)  $15,730

Question 9

Use the following information to answer the question:
  The Deluxe Drugs Company (DDC) has provided you with the following financial statement information for 1999: 
1999 year end Balance Sheet (in thousands of dollars)
 
-What is the Modified DuPont equation for the Deluxe Drug Company? Carefully label all parts.

Accepted Answer

The answer of Use the following information to answer the...

Question 10

What assets are current assets? Which of these assets are least liquid? Why?

Accepted Answer

The answer of What assets are current assets? Which of...

Question 11

Use the following information to answer the question:
    Sales for 2000 are projected to double; no new equipment is expected to be purchased or sold in 2000. Depreciation expense along with preferred stock and common stock will remain unchanged in 2000. Current assets, accounts payable, accrued expenses, COGS, and selling expenses vary at a constant percentage of sales. Notes payable, long- term debt, preferred stock, and common stock are scheduled to stay the same.
-Forecasted total assets for the end of the year 2000 are:

Accepted Answer

A)  $100,000 
B)  $120,000 
C)  $60,000 
D)  $95,000

Question 12

What is the purpose of trend analysis and industry comparison?

Accepted Answer

The answer of What is the purpose of trend analysis...

Question 13

Use the following information to answer the question:
   
-Calculate each of the following ratios. Be sure to give the complete equation as well as the solution.
a. Current ratio
b. Quick ratio
c. Total Debt/Total Asset Ratio
d. Inventory Turnover Ratio
e. ROE
f. Times Interest Earned
g. EPS
h. Net Profit Margin
i. Market to Book Ratio
j. Total Assets Turnover Ratio

Accepted Answer

The answer of Use the following information to answer the...

Question 14

The Modified DuPont equation is most accurately described as a function of:

Accepted Answer

A)  return on equity. 
B)  asset utilization. 
C)  profitability and debt. 
D)  return on assets and debt load.

Question 15

Use the following information to answer the question:
  The Deluxe Drugs Company (DDC) has provided you with the following financial statement information for 1999: 
1999 year end Balance Sheet (in thousands of dollars)
 
-What is the Modified DuPont equation for the retail drug industry? Carefully label all parts.

Accepted Answer

The answer of Use the following information to answer the...

Question 16

Additional funds needed represents:

Accepted Answer

A)  long- term funds needed. 
B)  the amount to be borrowed. 
C)  the amount needed to achieve the necessary asset growth. 
D)  the desired short- term to long- term debt ratio of the firm.

Question 17

Would a creditor be more concerned if they learned that a manufacturing client had a falling quick ratio, or if another client whose business was supplying raw materials supplier had a falling quick ratio? Why?

Accepted Answer

The answer of Would a creditor be more concerned if...

Question 18

Retained earning:

Accepted Answer

A)  belong to the debt holders. 
B)  are usually paid out within the year. 
C)  belong to the common shareholders. 
D)  belong to all shareholders.

Question 19

EVA or Economic Value Added is:

Accepted Answer

A)  a measure of the amount of profit remaining after accounting for the return expected by the firm's investor's. 
B)  concerned only with the increase in EBIT. 
C)  a comparison of the amount of the firm's current value with the amount the current owners paid for it. 
D)  concerned only with returns based on the original cost of investment for the firm's suppliers of capital.

Question 20

Given the following information, calculate earnings per share. Round to the nearest cent.

Accepted Answer

A)  1.20 
B)  3.20 
C)  1.79 
D)  1.39

Exam 2: Essential Concepts in Finance: Part A

Shares outstanding of common stock = 1,000,000 Shares outstanding of preferred stock = 500,000 Market price of common stock = $18. -The Debt to Equity ratio is:

A debt/equity ratio of 8.1 means:

Benchmarking is:

Distinguish between the cash budget and the capital budget.

General and administrative expenses are an example of a balance sheet item which moves spontaneously with sales. Comment on this statement.

All of the following items represent liabilities with the exception of:

A company has seen its net profit margin DECREASE year over year. Sales have increased. The gross profit margin is unchanged. Interest and amortization expenses and the tax rate are also unchanged. No new shares were issued. Why has the net profit margin declined?

What assets are current assets? Which of these assets are least liquid? Why?

What is the purpose of trend analysis and industry comparison?

The Modified DuPont equation is most accurately described as a function of:

Additional funds needed represents:

Would a creditor be more concerned if they learned that a manufacturing client had a falling quick ratio, or if another client whose business was supplying raw materials supplier had a falling quick ratio? Why?

Retained earning:

EVA or Economic Value Added is:

Given the following information, calculate earnings per share. Round to the nearest cent.