Question 1

Time-series analysis is an example of trend analysis.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 2

If a company's P/E ratio is 24 and the company's EPS is $1.50 then the company's share price is:

Accepted Answer

A) $36.00. 
B) $25.50. 
C) $16.00. 
D) $6.25.

Question 3

A current ratio of 2.5 means that for every dollar of:

Accepted Answer

A) accounts payable,there is $2.50 of cash. 
B) current liabilities,there is $2.50 of current assets. 
C) current assets,there is $2.50 of current liabilities. 
D) total liabilities,there is $2.50 of current liabilities.

Question 4

The P/E ratio indicates how much investors are willing to pay for a share as a multiple of current earnings.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 5

Liquidity measures the ability of a company to meet its current financial obligations.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 6

In general,P/E ratios are fairly consistent across industries,regardless of the goods or services sold.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 7

A company that has a current ratio less than one cannot cover:

Accepted Answer

A) current liabilities with its current cash flow. 
B) current expenses with its current sales revenue. 
C) expenses with its current revenues. 
D) current liabilities with its current assets.

Question 8

Calculate the company's days to sell ratio for the current year?

Accepted Answer

A) 16.82 
B) 21.69 
C) 5.94 
D) 26.53

Question 9

P/E ratios can be calculated using the average EPS from the last four quarters.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 10

A company originally issues 180,000 shares at a price of $22; one year later the share price is $40 and the number of outstanding shares is unchanged.During the year,the company had net income of $230,400.The P/E ratio at the end of the year is:

Accepted Answer

A) 0.0002. 
B) 24.22. 
C) 31.25. 
D) 0.0001.

Question 11

Company X has a capital acquisitions ratio of 0.8.Company Y has a capital acquisitions ratio of 1.2.Which of the following statements is true?

Accepted Answer

A) Company X is more likely to have a higher quality of income ratio than Company Y. 
B) Company Y is less likely to need external financing than Company X. 
C) Company X is more likely to have a higher times interest earned ratio than Company Y. 
D) Company X is less likely to need external financing than Company Y.

Question 12

Benchmarks involves comparing one company to itself over time or to another company or industry average.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 13

Unlike solvency rates,liquidity ratios relate to the company's long-run survival.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 14

Company X has net sales revenue of $436,000,cost of goods sold of $343,000,and all other expenses of $157,000,if interest expense is $16,000 and income tax expense is zero,the times interest earned ratio is:

Accepted Answer

A) -3.0 
B) +5.0 
C) +6.8 
D) -4.8

Question 15

If an analyst wants to examine a company's short-run ability to survive,which of the following would best be considered?

Accepted Answer

A) Liquidity 
B) Market share 
C) Profitability 
D) Solvency

Question 16

Company X has net sales revenue of $1,250,000,cost of goods sold of $760,000,and all other expenses of $290,000.The beginning balance of shareholders' equity is $400,000 and the beginning balance of fixed assets is $361,000.The ending balance of shareholders' equity is $600,000 and the ending balance of fixed assets is $389,000.What is the fixed asset turnover ratio?

Accepted Answer

A) 0.53 
B) 2.50 
C) 3.33 
D) 0.80

Question 17

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

Accepted Answer

A) large percent of assets and inventory costs are stable. 
B) large percent of assets and inventory costs are not stable. 
C) small percent of assets and inventory costs are not stable. 
D) small percent of assets and inventory costs are stable.

Question 18

If a company's P/E ratio suddenly decreases:

Accepted Answer

A) you should sell the shares as soon as possible. 
B) you should buy more of the shares to increase your average gain. 
C) the company probably announced higher earnings forecasts. 
D) the market must have reacted to some bad news that is expected to affect the company in the future.

Question 19

When using ratio data for comparison to other companies,analyst should:

Accepted Answer

A) not assume that all companies in the industry are in direct competition. 
B) not interpret the data as a way of determining which companies will survive and outperform others. 
C) only use data from one time period. 
D) use industry averages,rather than individual companies,for the comparison.

Question 20

Calculate the company's accounts receivable turnover ratio for the current year?

Accepted Answer

A) 10.62 
B) 4.0 
C) 4.3 
D) 6.31

Exam 13: Measuring and Evaluating Financial Performance

Time-series analysis is an example of trend analysis. BT: Knowledge

If a company's P/E ratio is 24 and the company's EPS is $1.50 then the company's share price is:

A current ratio of 2.5 means that for every dollar of:

The P/E ratio indicates how much investors are willing to pay for a share as a multiple of current earnings. BT: Knowledge

Liquidity measures the ability of a company to meet its current financial obligations. BT: Knowledge

In general,P/E ratios are fairly consistent across industries,regardless of the goods or services sold. BT: Comprehension

A company that has a current ratio less than one cannot cover:

Calculate the company's days to sell ratio for the current year?

P/E ratios can be calculated using the average EPS from the last four quarters. BT: Knowledge

A company originally issues 180,000 shares at a price of $22; one year later the share price is $40 and the number of outstanding shares is unchanged.During the year,the company had net income of $230,400.The P/E ratio at the end of the year is:

Company X has a capital acquisitions ratio of 0.8.Company Y has a capital acquisitions ratio of 1.2.Which of the following statements is true?

Benchmarks involves comparing one company to itself over time or to another company or industry average. BT: Knowledge

Unlike solvency rates,liquidity ratios relate to the company's long-run survival. BT: Knowledge

Company X has net sales revenue of $436,000,cost of goods sold of $343,000,and all other expenses of $157,000,if interest expense is $16,000 and income tax expense is zero,the times interest earned ratio is:

If an analyst wants to examine a company's short-run ability to survive,which of the following would best be considered?

How competitors calculate inventory cost is least likely to affect comparisons between competitors if inventory makes up a:

If a company's P/E ratio suddenly decreases:

When using ratio data for comparison to other companies,analyst should:

Calculate the company's accounts receivable turnover ratio for the current year?