Question 1

A firm whose primary business is in a line of regional grocery stores would be most likely to have to include which of the following facts,if TRUE,in the firm's management discussion and analysis (MD&A)?

Accepted Answer

A) that a large number of funds were allocated to advertising to increase awareness of the firm's brand in new areas it had expanded into this year 
B) that some senior members of the management team have retired in this financial year 
C) that the company has lost a class action suit brought against the firm by its employees and is expected to have to pay a large amount of damages 
D) that the firm has plans to expand into the organic food business in the next financial year by purchasing several small organic food retailers 
E) that food prices have increased,increasing the firm's costs

Question 2

Use the table for the question(s)below.
AOS Industries Statement of Cash Flows for 2015
 
-Consider the above statement of cash flows.If all amounts shown above are in millions of dollars,what was AOS Industries' change in retained earnings for 2015?

Accepted Answer

A) $1.3 million 
B) $1.7 million 
C) $2.1 million 
D) $5.4 million 
E) $3.2 million

Question 3

What is a firm's net income?

Accepted Answer

A) earnings before interest and taxes are deducted 
B) the third line of an income statement that represents the difference between sales revenues and costs 
C) a measure of the firm's profitability over a given period 
D) net sales less cost of sales 
E) earnings after interest is deducted but before taxes are deducted

Question 4

Use the table for the question(s)below.
 
-Refer to the income statement above.Luther's return on assets (ROA)for the year ending December 31,2015 is closest to:

Accepted Answer

A) 2.0% 
B) 6.5% 
C) 8.4% 
D) 12.7% 
E) 32.5%

Question 5

Use the table for the question(s)below.
 
-Refer to the income statement above.Luther has convertible bonds outstanding that would allow bondholders to convert their bonds into 700,000 shares of Luther stock.For the year ending December 31,2015 Luther's diluted earnings per share are closest to:

Accepted Answer

A) $0.95 
B) $1.01 
C) $1.04 
D) $1.53 
E) $3.92

Question 6

Use the table for the question(s)below.
Income Statement for Xenon Manufacturing:
 
-Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.If Xenon Manufacturing has 25 million shares outstanding,what is its EPS in 2015?

Accepted Answer

A) $0.36 
B) $0.40 
C) $0.63 
D) $0.84 
E) $0.64

Question 7

Why must care be taken when comparing a firm's share price to its operating income?

Accepted Answer

A) Both share price and operating income are related to the whole firm. 
B) Share price is a quantity related to the entire firm,while operating income is an amount that is related solely to equity holders. 
C) Both share price and operating income are related solely to equity holders. 
D) Share price is a quantity related to equity holders,while operating income is an amount that is related to the whole firm. 
E) Share price is a quantity related to the enterprise value of the firm,while operating income is related to the equity holders.

Question 8

A firm has 41 million shares outstanding with a current share price of $4.30 The firm has a market-to-book ratio of 8.5 and a book debt-equity ratio of 2.2.If the firm currently has $18 million in cash,what is its enterprise value?

Accepted Answer

A) $176 million 
B) $204 million 
C) $148 million 
D) $49 million 
E) $240 million

Question 9

Use the table for the question(s)below.
  
-Refer to the statement of financial position above.The change in Luther's quick ratio from 2014 to 2015 is closest to:

Accepted Answer

A) a decrease of 0.10 
B) an increase of 0.10 
C) a decrease of 0.15 
D) an increase of 0.15 
E) being unchanged

Question 10

Use the table for the question(s)below.
  
-Refer to the statement of financial position above.If on December 31,2014 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's enterprise value?

Accepted Answer

The answer of Use the table for the question(s)below.
 ...

Question 11

Which of the following statement of financial position equations is correct?

Accepted Answer

A) Assets - Liabilities = Shareholders' Equity 
B) Assets + Liabilities = Shareholders' Equity 
C) Assets - Current Liabilities = Long Term Liabilities 
D) Assets + Current Liabilities = Long Term Liabilities + Shareholders' Equity 
E) Assets + Current Liabilities = Long Term Liabilities - Shareholders' Equity

Question 12

A firm has ROE of 18.5%,net profit margin of 3.2% and an asset turnover ratio of 0.7.What is the firm's equity multiplier?

Accepted Answer

A) 4.0 
B) 8.3 
C) 13.0 
D) 4.6 
E) 5.8

Question 13

Use the tables for the question(s)below.
Balance Sheet
  
-The balance sheet and income statement of a particular firm are shown above.What does the accounts payable days ratio tell you about this company?

Accepted Answer

A) It takes on average about 4 weeks to pay its suppliers. 
B) It takes on average about 6 weeks to pay its suppliers. 
C) It takes on average about 7 weeks to pay its suppliers. 
D) It takes on average about 8 weeks to pay its suppliers. 
E) It takes on average about 10 weeks to pay its suppliers.

Question 14

Which of the following firms would be expected to have a high ROE based on that firm's high profitability?

Accepted Answer

A) a medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals 
B) a low-end retailer that has a low mark-up on all items it sells 
C) a brokerage firm that has high levels of leverage 
D) a grocery store chain that has very high turnover,selling many multiples of its assets per year 
E) a mining firm that is mostly engaged in exploration for new deposits

Question 15

Use the table for the question(s)below.
  
-Refer to the statement of financial position above.When using the book value of equity,the debt-equity ratio for Luther in 2015 is closest to:

Accepted Answer

A) 2.21 
B) 2.29 
C) 2.98 
D) 3.03 
E) 4.39

Question 16

A public company has a book value of $128 million.They have 20 million shares outstanding,with a market price of $4 per share.Which of the following statements is TRUE regarding this company?

Accepted Answer

A) Investors may consider this firm to be a growth company. 
B) Investors believe the company's assets are not likely to be profitable since its market value is worth less than its book value. 
C) The firm's market value is more than its book value. 
D) The value of the firm's assets are greater than their liquidation value. 
E) The firm's market-to-book ratio is greater than 1.

Question 17

A small company has current assets of $112,000 and current liabilities of $117,000.Which of the following statements about that company is most likely to be TRUE?

Accepted Answer

A) Since net working capital is negative,the company will not have enough funds to meet its obligations. 
B) Since net working capital is high,the company will likely have little difficulty meeting its obligations. 
C) Since net working capital is very high,the company will have ample money to invest after it meets its obligations. 
D) Since net working capital is nearly zero,the company is well run and will have little difficulty attracting investors. 
E) Since net working capital is negative,the company will likely have little difficulty meeting its obligations.

Question 18

A firm has ROE of 15% and a net profit margin of 4.5%.If the firm has 6.5 dollars in assets per dollar of equity,what is the firm's asset turnover ratio?

Accepted Answer

A) 0.5 
B) 2 
C) 1 
D) 1.5 
E) 2.5

Question 19

What role do external auditors play in the firm's financial reporting process?

Accepted Answer

The answer of What role do external auditors play in...

Question 20

Use the table for the question(s)below.
  
-Refer to the statement of financial position above.If in 2015 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then what is Luther's enterprise value?

Accepted Answer

A) -$63.3 million 
B) $353.1 million 
C) $389.7 million 
D) $516.9 million 
E) $163.2 million

Exam 2: Introduction to Financial Statement Analysis

A firm whose primary business is in a line of regional grocery stores would be most likely to have to include which of the following facts,if TRUE,in the firm's management discussion and analysis (MD&A) ?

Use the table for the question(s) below. AOS Industries Statement of Cash Flows for 2015 -Consider the above statement of cash flows.If all amounts shown above are in millions of dollars,what was AOS Industries' change in retained earnings for 2015?

What is a firm's net income?

Use the table for the question(s) below. -Refer to the income statement above.Luther's return on assets (ROA) for the year ending December 31,2015 is closest to:

Use the table for the question(s) below. -Refer to the income statement above.Luther has convertible bonds outstanding that would allow bondholders to convert their bonds into 700,000 shares of Luther stock.For the year ending December 31,2015 Luther's diluted earnings per share are closest to:

Use the table for the question(s) below. Income Statement for Xenon Manufacturing: -Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.If Xenon Manufacturing has 25 million shares outstanding,what is its EPS in 2015?

Why must care be taken when comparing a firm's share price to its operating income?

A firm has 41 million shares outstanding with a current share price of $4.30 The firm has a market-to-book ratio of 8.5 and a book debt-equity ratio of 2.2.If the firm currently has $18 million in cash,what is its enterprise value?

Use the table for the question(s) below. -Refer to the statement of financial position above.The change in Luther's quick ratio from 2014 to 2015 is closest to:

Use the table for the question(s)below. -Refer to the statement of financial position above.If on December 31,2014 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's enterprise value?