Question 1

Katelyn's Kites has net income of $240 and total equity of $2,000. The debt-equity ratio is 1.0 and the plowback ratio is 40%. What is the internal growth rate?

Accepted Answer

A)  2.46% 
B)  3.00% 
C)  4.92% 
D)  5.88% 
E)  6.00%

Question 2

The receivables turnover ratio is measured as:

Accepted Answer

A)  sales plus accounts receivable. 
B)  sales divided by accounts receivable. 
C)  sales minus accounts receivable, divided by sales. 
D)  accounts receivable times sales. 
E)  accounts receivable divided by sales.

Question 3

Lee Sun's has sales of $3,000,total assets of $3,000,and a profit margin of 5%. The firm has a total debt ratio of 60%. What is the return on equity?

Accepted Answer

A)  5% 
B)  12.5% 
C)  23.2% 
D)  41.3% 
E)  250%

Question 4

The market-to-book ratio is measured as:

Accepted Answer

A)  total equity divided by total assets. 
B)  net income times market price per share of stock. 
C)  net income divided by market price per share of stock. 
D)  market price per share of stock divided by earnings per share. 
E)  market value of equity per share divided by book value of equity per sharE.

Question 5

List and interpret two liquidity ratios.

Accepted Answer

The answer of List and interpret two liquidity ratios....

Question 6

The percentage of sales method:

Accepted Answer

A)  requires that all accounts grow at the same rate. 
B)  separates accounts that vary with sales and those that do not vary with sales. 
C)  allows the analyst to calculate how much financing the firm will need to support the predicted sales level. 
D)  Both requires that all accounts grow at the same rate; and separates accounts that vary with sales and those that do not vary with sales. 
E)  Both separates accounts that vary with sales and those that do not vary with sales; and allows the analyst to calculate how much financing the firm will need to support the predicted sales level.

Question 7

A supplier,who requires payment within ten days,is most concerned with which one of the following ratios when granting credit?

Accepted Answer

A)  current 
B)  cash 
C)  debt-equity 
D)  quick 
E)  total debt

Question 8

What is the return on equity for 2011?

Accepted Answer

A)  16.2% 
B)  20.9% 
C)  21.7% 
D)  22.1% 
E)  23.3%

Question 9

The current ratio is measured as:

Accepted Answer

A)  current assets minus current liabilities. 
B)  current assets divided by current liabilities. 
C)  current liabilities minus inventory, divided by current assets. 
D)  cash on hand divided by current liabilities. 
E)  current liabilities divided by current assets.

Question 10

The main objective of long-term financial planning models is to:

Accepted Answer

A)  determine the asset requirements given the investment activities of the firm. 
B)  plan for contingencies or uncertain events. 
C)  determine the external financing needs. 
D)  All of these. 
E)  None of these.

Question 11

A firm has sales of $4,000,costs of $3,000,interest paid of $100,and depreciation of $400. The tax rate is 34%. What is the value of the cash coverage ratio?

Accepted Answer

A)  3 
B)  4 
C)  6 
D)  7 
E)  10

Question 12

Ratios that measure how efficiently a firm uses its assets to generate sales are known as _______ ratios.

Accepted Answer

A)  asset management 
B)  long-term solvency 
C)  short-term solvency 
D)  profitability 
E)  market value

Question 13

Which one of the following statements is correct if a firm has a receivables turnover measure of 10?

Accepted Answer

A)  It takes a firm 10 days to collect payment from its customers. 
B)  It takes a firm 36.5 days to sell its inventory and collect the payment from the sale. 
C)  It takes a firm 36.5 days to pay its creditors. 
D)  The firm has an average collection period of 36.5 days. 
E)  The firm has ten times more in accounts receivable than it does in cash.

Question 14

The three parts of the Du Pont identity can be generally described as: I. operating efficiency,asset use efficiency and firm profitability.
II) financial leverage,operating efficiency and asset use efficiency.
III) the equity multiplier,the profit margin and the total asset turnover.
IV) the debt-equity ratio,the capital intensity ratio and the profit margin.

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and IV only 
D)  I and III only 
E)  III and IV only

Question 15

Which one of the following statements is correct concerning ratio analysis?

Accepted Answer

A)  A single ratio is often computed differently by different individuals. 
B)  Ratios do not address the problem of size differences among firms. 
C)  Only a very limited number of ratios can be used for analytical purposes. 
D)  Each ratio has a specific formula that is used consistently by all analysts. 
E)  Ratios can not be used for comparison purposes over periods of timE.

Question 16

Rosita's Restaurant has sales of $5,000,total debt of $1,300,total equity of $2,400,and a profit margin of 6%. What is the return on assets?

Accepted Answer

A)  8.11% 
B)  12.50% 
C)  23.08% 
D)  27.13% 
E)  135.13%

Question 17

One key reason a long-term financial plan is developed is because:

Accepted Answer

A)  the plan determines your financial policy. 
B)  the plan determines your investment policy. 
C)  there are direct connections between achievable corporate growth and the financial policy. 
D)  there is unlimited growth possible in a well-developed financial plan. 
E)  None of these.

Question 18

Which of the following will increase sustainable growth?

Accepted Answer

A)  Buy back existing stock 
B)  Decrease debt 
C)  Increase profit margin 
D)  Increase asset requirement or asset turnover ratio 
E)  Increase dividend payout ratio

Question 19

A firm has a market capitalization of $2 million,market value of interest bearing debt of $1 million,book value of interest bearing debt of $500,000 and cash of $100,000. What is the enterprise value?

Accepted Answer

A)  $2.5 million 
B)  $2.9 million 
C)  $3.0 million 
D)  $3.5 million 
E)  $3.6 million

Question 20

Financial planning,when properly executed:

Accepted Answer

A)  ignores the normal restraints encountered by a firm. 
B)  ensures that the primary goals of senior management are fully achieved. 
C)  reduces the necessity of daily management oversight of the business operations. 
D)  helps ensure that proper financing is in place to support the desired level of growth. 
E)  eliminates the need to plan more than one year in advancE.

Exam 3: Financial Statements Analysis and Financial Models