Question 1

The Sarbanes-Oxley Act of 2002 established the Private Company Accounting Oversight Board (PCAOB) which is a for-profit corporation that oversees CEOs of public corporations.

Accepted Answer

A) True 
 B)False

Question 2

The ________ ratio measures the proportion of total assets financed by the firm's creditors.

Accepted Answer

A)  total asset turnover 
B)  fixed asset turnover 
C)  current 
D)  debt

Question 3

Time-series analysis evaluates performance of firms at the same point in time using financial ratios.

Accepted Answer

A) True 
 B)False

Question 4

The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 5

The ________ ratio may indicate the firm is experiencing stockouts and lost sales.

Accepted Answer

A)  average payment period 
B)  inventory turnover 
C)  average collection period 
D)  quick

Question 6

Total assets less net fixed assets equals

Accepted Answer

A)  gross assets. 
B)  current assets. 
C)  depreciation. 
D)  liabilities and equity.

Question 7

Earnings per share results from dividing earnings available for common stockholders by the number of shares of common stock authorized.

Accepted Answer

A) True 
 B)False

Question 8

The two categories of ratios that should be utilized to assess a firm's true liquidity are the

Accepted Answer

A)  current and quick ratios. 
B)  liquidity and profitability ratios. 
C)  liquidity and debt ratios. 
D)  liquidity and activity ratios.

Question 9

The analyst should be careful when conducting ratio analysis to ensure that

Accepted Answer

A)  the overall performance of the firm is not judged on a single ratio. 
B)  the dates of the financial statements being compared are the same. 
C)  audited statements are used. 
D)  the same accounting procedures were used. 
E)  all of the above.

Question 10

Table 3.2
Dana Dairy Products Key Ratios  Income Statement
Dana Dairy Products
For the Year Ended December 31, 2010  Balance Sheet
Dana Dairy Products
December 31, 2010 
-The gross profit margin and net profit margin for Dana Dairy Products in 2010 were ________. (See Table 3.2)

Accepted Answer

A)  13 percent and 0.9 percent, respectively. 
B)  13 percent and 1.5 percent, respectively. 
C)  2 percent and 0.9 percent, respectively. 
D)  2 percent and 1.5 percent, respectively.

Question 11

A U.S. parent company's foreign equity accounts are translated into dollars using the exchange rate that prevailed when the parent's equity investment was made (the historical rate).

Accepted Answer

A) True 
 B)False

Question 12

The financial leverage multiplier is an indicator of

Accepted Answer

A)  operating leverage. 
B)  financial leverage. 
C)  long-term debt. 
D)  current liabilities.

Question 13

A firm with a substandard return on total assets can improve its return on equity, all else remaining the same, by

Accepted Answer

A)  increasing its debt ratio. 
B)  increasing its total asset turnover. 
C)  decreasing its debt ratio. 
D)  decreasing its total asset turnover.

Question 14

The current ratio provides a better measure of overall liquidity only when a firm's inventory cannot easily be converted into cash. If inventory is liquid, the quick ratio is a preferred measure of overall liquidity.

Accepted Answer

A) True 
 B)False

Question 15

Publicly-owned corporations are those which are financed by the proceeds from the treasury securities.

Accepted Answer

A) True 
 B)False

Question 16

FASB Standard No. 52 mandates that U.S. based companies must translate their foreign-currency-denominated assets and liabilities into dollars using the

Accepted Answer

A)  historical rate. 
B)  current rate. 
C)  average rate. 
D)  none of the above.

Question 17

Earnings per share represent the dollar amount earned and distributed to shareholders.

Accepted Answer

A) True 
 B)False

Question 18

Ag Silver Mining, Inc. has $500,000 of earnings before interest and taxes at the year end. Interest expenses for the year were $10,000. The firm expects to distribute $100,000 in dividends. Calculate the earnings after taxes for the firm assuming a 40 percent tax on ordinary income.

Accepted Answer

The answer of Ag Silver Mining, Inc. has $500,000 of...

Question 19

The ________ measures the percentage of each sales dollar remaining after ALL expenses, including taxes, have been deducted.

Accepted Answer

A)  net profit margin 
B)  operating profit margin 
C)  gross profit margin 
D)  earnings available to common shareholders

Question 20

Given the following balance sheet, income statement, historical ratios and industry averages, calculate the Pulp, Paper, and Paperboard, Inc. financial ratios for the most recent year. Analyze its overall financial situation for the most recent year. Analyze its overall financial situation from both a cross-sectional and time-series viewpoint. Break your analysis into an evaluation of the firm's liquidity, activity, debt, and profitability.
Income Statement
Pulp, Paper and Paperboard, Inc.
For the Year Ended December 31, 2005  Balance Sheet
Pulp, Paper and Paperboard, Inc.
December 31, 2005  Historical and Industry Average Ratios
Pulp, Paper and Paperboard, Inc.

Accepted Answer

The answer of Given the following balance sheet, income statement,...

Exam 3: Financial Statements and Ratio Analysis

The Sarbanes-Oxley Act of 2002 established the Private Company Accounting Oversight Board (PCAOB) which is a for-profit corporation that oversees CEOs of public corporations.

The ________ ratio measures the proportion of total assets financed by the firm's creditors.

Time-series analysis evaluates performance of firms at the same point in time using financial ratios.

The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity.

The ________ ratio may indicate the firm is experiencing stockouts and lost sales.

Total assets less net fixed assets equals

Earnings per share results from dividing earnings available for common stockholders by the number of shares of common stock authorized.

The two categories of ratios that should be utilized to assess a firm's true liquidity are the

The analyst should be careful when conducting ratio analysis to ensure that

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31, 2010 Balance Sheet Dana Dairy Products December 31, 2010 -The gross profit margin and net profit margin for Dana Dairy Products in 2010 were ________. (See Table 3.2)

A U.S. parent company's foreign equity accounts are translated into dollars using the exchange rate that prevailed when the parent's equity investment was made (the historical rate).

The financial leverage multiplier is an indicator of

A firm with a substandard return on total assets can improve its return on equity, all else remaining the same, by

The current ratio provides a better measure of overall liquidity only when a firm's inventory cannot easily be converted into cash. If inventory is liquid, the quick ratio is a preferred measure of overall liquidity.

Publicly-owned corporations are those which are financed by the proceeds from the treasury securities.

FASB Standard No. 52 mandates that U.S. based companies must translate their foreign-currency-denominated assets and liabilities into dollars using the

Earnings per share represent the dollar amount earned and distributed to shareholders.

Ag Silver Mining, Inc. has $500,000 of earnings before interest and taxes at the year end. Interest expenses for the year were $10,000. The firm expects to distribute $100,000 in dividends. Calculate the earnings after taxes for the firm assuming a 40 percent tax on ordinary income.

The ________ measures the percentage of each sales dollar remaining after ALL expenses, including taxes, have been deducted.