Question 1

The value of the variable "b" as used in the internal growth rate formula can be computed as:

Accepted Answer

A) 1 + Growth rate. 
B) Total dividends/Net income. 
C) 1 − Dividend payout ratio. 
D) Net income/Total sales. 
E) 1 − PE ratio.

Question 2

Southern Foods has net income of $39,900,net sales of $318,600,total assets of $663,000,common stock of $106,800 with a par value of $1 per share,and retained earnings of $224,400.The stock has a market value of $5.45 per share.What is the price-earnings ratio?

Accepted Answer

A) 17.12 
B) 19.94 
C) 12.82 
D) 14.59 
E) 16.64

Question 3

Georgetown Supply has sales of $318,200,net income of $41,400,current assets of $118,400,net fixed assets of $238,300,net working capital of $18,900,and long-term debt of $175,000.What is the equity multiplier?

Accepted Answer

A) 1.71 
B) 4.34 
C) 1.44 
D) 3.82 
E) 2.92

Question 4

Kelso's has a return on equity of 16.2 percent,a debt-equity ratio of 44 percent,a capital intensity ratio of 1.08,a current ratio of 1.25,and current assets of $138,000.What is the profit margin?

Accepted Answer

A) 12.15 percent 
B) 9.72 percent 
C) 7.48 percent 
D) 15.19 percent 
E) 13.69 percent

Question 5

Ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as:

Accepted Answer

A) asset management ratios. 
B) long-term solvency measures. 
C) liquidity measures. 
D) profitability ratios. 
E) market value ratios.

Question 6

Which one of the following is a liquidity ratio?

Accepted Answer

A) Quick ratio 
B) Cash coverage ratio 
C) Total debt ratio 
D) EV multiple 
E) Times interest earned ratio

Question 7

Vinnie's Motors has a market-to-book ratio of 3.4.The book value per share is $34 and earnings per share are $1.36.Holding the market-to-book ratio and earnings per share constant,a $1 increase in the book value per share will:

Accepted Answer

A) decrease the price-earnings ratio. 
B) decrease the EV multiple. 
C) decrease the market price per share. 
D) increase the price-earnings ratio. 
E) increase the return on equity.

Question 8

Leo's Markets has sales of $684,000,costs of $437,000,interest paid of $13,800,total assets of $712,000,and depreciation of $109,400.The tax rate is 21 percent and the equity multiplier is 1.6.What is the return on equity?

Accepted Answer

A) 21.30 percent 
B) 23.92 percent 
C) 20.06 percent 
D) 19.48 percent 
E) 21.98 percent

Question 9

Which one of these terms is most synonymous with the term "income from operations"?

Accepted Answer

A) TTM 
B) EBIT 
C) LTM 
D) EBITDA 
E) EPS

Question 10

A banker considering loaning money to a firm for ten years would most likely prefer the firm have a debt ratio of ________,and a times interest earned ratio of ________.

Accepted Answer

A) .50; .75 
B) .50; 1.00 
C) .45; 1.75 
D) .40; .75 
E) .40; 1.75

Question 11

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 12

Sun Shade's has sales of $363,000,total assets of $323,500,and a profit margin of 14.6 percent.The firm has a total debt ratio of 54 percent.What is the return on equity?

Accepted Answer

A) 28.45 percent 
B) 35.61 percent 
C) 23.29 percent 
D) 31.74 percent 
E) 7.88 percent

Question 13

The sustainable rate of growth for a firm can be increased by:

Accepted Answer

A) decreasing the debt-equity ratio. 
B) decreasing the profit margin. 
C) increasing the dividend payout ratio. 
D) increasing the capital intensity ratio. 
E) increasing the total asset turnover.

Question 14

Jones Mfg.has current assets of $26,900,net working capital of $8,200,long-term debt of $21,500,and total equity of $57,800.What is the equity multiplier?

Accepted Answer

A) 1.70 
B) 1.59 
C) 1.66 
D) 1.80 
E) 1.99

Question 15

JB Markets has sales of $848,600,net income of $94,000,dividends paid of $28,200,total assets of $913,600,and current liabilities of $78,900.Assume that all costs,assets,and current liabilities change spontaneously with sales.The tax rate and dividend payout ratios remain constant.If the firm's managers project a firm growth rate of 15 percent for next year,what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity.

Accepted Answer

A) $49,535 
B) $68,211 
C) −$10,406 
D) $13,909 
E) $32,408

Question 16

The projected addition to retained earnings can be calculated as:

Accepted Answer

A) PM × Δ Sales. 
B) PM × Δ Sales × (1 − Dividend payout ratio). 
C) PM × Projected sales × (1 − Dividend payout ratio). 
D) Projected sales × (1 − Dividend payout ratio). 
E) PM × Projected sales.

Question 17

Highland Lumber has net sales of $642,100,depreciation of $138,400,interest expense of $15,600,cost of goods sold of $409,800,and taxes of $16,400.What is the cash coverage ratio?

Accepted Answer

A) 11.06 
B) 6.02 
C) 13.79 
D) 14.89 
E) 8.78

Question 18

In the financial planning model,the external financing needed (EFN)as shown on a pro forma balance sheet is equal to the changes in assets:

Accepted Answer

A) plus the changes in liabilities minus the changes in equity. 
B) minus the changes in both liabilities and equity. 
C) minus the changes in liabilities only. 
D) plus the changes in both liabilities and equity. 
E) minus the change in retained earnings.

Question 19

A firm with a high level of growth opportunities is most apt to have a:

Accepted Answer

A) high PE ratio and a high EV multiple. 
B) high cash ratio and a low EV multiple. 
C) high PE ratio and a low EV multiple. 
D) low PE ratio and a high EV multiple. 
E) low cash ratio and a low PE ratio.

Question 20

Projected future financial statements are called:

Accepted Answer

A) imaginative statements. 
B) pro forma statements. 
C) reconciled statements. 
D) aggregated statements. 
E) comparative statements.

Exam 3: Financial Statements and Cash Flow