Deck 3: Working With Financial Statements

Question 1

Another name for return on equity is return on total capitalization.

Answer 1

False

Question 2

Payment of a note payable and repurchase of common stock are uses of cash.

Answer 2

True

Question 3

Determine the value of cash given the following information: cash ratio = 2; cash equivalents = $600 ; current liabilities = $800.

A) $1,000
B) $1,100
C) $1,200
D) $1,300
E) $1,400

Answer 3

A

Question 4

An increase in long-term debt is source of cash?

Question 5

The most effective methods of directly evaluating the financial performance of a firm is to compare the current financial ratios to those of the same firm from prior time periods and compare a firm's financial ratios to those of other firms in the firm's peer group who have similar operations.

Question 6

When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that the firms may use differing accounting methods for inventory purposes.

Question 7

If a firm has only current assets and no fixed assets of any kind, its times interest earned ratio must exceed its cash coverage ratio.

Question 8

Days' sales in inventory of car dealerships are generally higher when compared to grocery stores.

Question 9

Due to the difficulty of access the true enterprise value, one can use the market cap as a proxy for enterprise value to calculate the EV/EBITDA ratio.

Question 10

When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that the operations of the two firms may vary geographically.

Question 11

If a firm uses cash to purchase inventory, its quick ratio will increase.

Question 12

Common size statements can only be completed on the statement of comprehensive income and statement of financial position.

Question 13

If a firm uses part of the cash it received from payment of an account receivable to buy inventory and leaves the rest in its bank account, its current ratio will remain unchanged.

Question 14

The equity multiplier, the profit margin and the total asset turnover are the three parts of the Du Pont identity.

Question 15

The statement of cash flows cannot be standardized.

Question 16

A poor industry outlook along with low investor opinion of the firm are most apt to cause a firm to have a higher price-earnings ratio?

Question 17

During the year, Doug's Bakery decreased its accounts receivable by $50, increased its inventory by $100, and decreased its accounts payable by $50. For these three accounts, the firm has a net:

A) $200 use of cash.
B) $100 use of cash.
C) $0 use of cash.
D) $100 source of cash.
E) $200 source of cash.

Question 18

Calculate net income given the following information: tax rate = 30%; times interest earned = 10.75 times; sales = $4,500; cost of goods sold = $1,600; general and administrative expenses = $750.

A) $965
B) $1,065
C) $1,165
D) $1,265
E) $1,365

Question 19

When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that either one, or both, of the firms may be conglomerates and thus have unrelated lines of business.

Question 20

When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that the two firms may be seasonal in nature and have different fiscal year ends.

Question 21

A Waterloo firm with net income of $500,000 pays 48% of net income out in dividends. If the firm has 150,000 shares of common stock outstanding, what is the dividend paid per share of stock?

A) $0.30
B) $1.44
C) $1.60
D) $1.73
E) $3.33

Question 22

The following statement of financial position and statement of comprehensive income should be used. How many dollars of sales are being generated by every $1 that Woodburn has in total assets($ in thousands)? (Use 2018 assets)

A) $1.01
B) $1.07
C) $1.09
D) $1.12
E) $1.16

Question 23

Calculate total asset value given the following information: ROA = 5%; Total equity = $600,000 and ROE = 8%.

A) $960,000
B) $1,100,000
C) $1,200,000
D) $1,300,000
E) $1,400,000

Question 24

A firm has a total debt ratio of .47. This means that that firm has 47 cents in debt for every:

A) $1.00 in equity.
B) $1.00 in total sales.
C) $1.00 in current assets.
D) $0.53 in equity.
E) $0.53 in total assets.

Question 25

Calculate sales given the following data. Total fixed assets $400,000; long-term liabilities $155,000; total liabilities $280,000; total shareholders' equity $320,000; net working capital turnover 20.

A) $1,500,000
B) $1,700,000
C) $1,900,000
D) $2,100,000
E) $2,250,000

Question 26

A Kingston firm has net working capital of $2,580, net fixed assets of $13,120, sales of $22,580, and current liabilities of $1,610. How many dollars' worth of sales are generated from every $1 in total assets?

A) $1.27
B) $1.30
C) $1.67
D) $1.72
E) $1.75

Question 27

Atlasta Limo Corp. has an average collection period of 36.5 days. Sales are $300,001. What is the average investment in receivables?

A) $4,441
B) $8,219
C) $10,000
D) $30,000
E) $36,500

Question 28

Bentley and Moore has net working capital of $6,900, net fixed assets of $86,100, sales of $156,000, and current liabilities of $41,700. How many dollars' worth of sales are generated from every $1 in total assets?

A) $1.13
B) $1.16
C) $1.22
D) $1.25
E) $1.27

Question 29

An Edmonton firm has a debt-equity ratio of 62 %, a total asset turnover of 1.39, and a profit margin of 7.8 %. The total equity is $672,100. What is the amount of the net income?

A) $118,048
B) $119,600
C) $120,202
D) $121,212
E) $124,097

Question 30

If you were to prepare a statement of cash flows, what is the net cash flow from financing activities ($ in millions)?

A) - $678
B) - $108
C) $15
D) $1,325
E) $3,003

Question 31

Freda's, Inc. has sales of $3,200, current liabilities of $900, total assets of $3,000, and net working capital of $500. How many dollars' worth of sales are generated from every $1 in net fixed assets?

A) $.91
B) $1.07
C) $1.67
D) $2.00
E) $2.29

Question 32

Calculate the value of total equity given the following information: total debt ratio = 0.52; total assets = $25,000.

A) $11,000
B) $11,250
C) $11,500
D) $11,750
E) $12,000

Question 33

Given the following information, calculate sales value. Total asset turnover 0.80; total liabilities $5,000; total equity $5,000.

A) $8,600
B) $8,000
C) $10,600
D) $11,600
E) $12,600

Question 34

Swenson Motors has total debt of $682,400 and a debt-equity ratio of.65. What is the value of the total assets?

A) $1,049,846
B) $1,364,800
C) $1,414,141
D) $1,578,002
E) $1,732,246

Question 35

A Quebec City firm has a debt-equity ratio of.65. From this, you can determine that the firm has _____ in assets for every $1 in equity.

A) $.54
B) $.65
C) $1.54
D) $1.65
E) $2.54

Question 36

Calculate depreciation expense given the following information. Interest expense $2,000; times interest earned 5; cash coverage ratio 5.5.

A) $1,000
B) $1,200
C) $1,400
D) $1,600
E) $1,800

Question 37

During the year, The Train Stop decreased its accounts receivable by $60, increased its inventory by $130, and decreased its accounts payable by $20. For these three accounts, the firm has a net:

A) $90 use of cash.
B) $50 use of cash.
C) $170 use of cash.
D) $90 source of cash.
E) $50 source of cash.

Question 38

Calculate net income given the following information: tax rate = 30%; accounts receivable = $900; receivable turnover = 5 times; inventory = $500; inventory turnover = 3.20 times; operating expenses = $700; interest expense = $200.

A) $1,400
B) $1,465
C) $1,565
D) $1,665
E) $1,765

Question 39

Supreme Corporation's total current assets are valued at $35,000 and are comprised of cash, accounts receivable and inventory. Determine the value of the cash account given the following information: sales = $140,000; cost of goods sold = $120,000; accounts receivable turnover = 17.50 times; inventory turnover = 8 times.

A) $11,000
B) $12,000
C) $13,000
D) $14,000
E) $15,000

Question 40

How many additional assets can RTF, Inc. acquire if the company issues an additional $1,000 in common stock ($ in millions)?

A) $1,000
B) $1,190
C) $1,500
D) $1,780
E) Cannot be determined from the information given.

Question 41

Calculate the value of short-term debt given the following information: total debt = $100,000; debt/equity ratio = 0.40; long-term debt ratio = 0.2308.

A) $20,000
B) $25,000
C) $30,000
D) $35,000
E) $40,000

Question 42

A firm has sales of $500, total assets of $300, and a debt/equity ratio of 1. If its return on equity is 15%, what is its net income?

A) $7.50
B) $15.00
C) $22.50
D) $32.50
E) $50.00

Question 43

During the year, Douglass Industries decreased the accounts receivable by $230, decreased the inventory by $150, and increased the accounts payable by $110. These three changes represent a _____ of cash.

A) $270 use
B) $490 use
C) $190 source
D) $270 source
E) $490 source

Question 44

Given a profit margin = 10%, ROE = 20%, D/E = 1.5, and assets = $200, calculate sales.

A) $10
B) $160
C) $250
D) $640
E) $1,000

Question 45

Calculate the value of long-term debt given the following information: total debt = $320,000; debt/equity ratio = 0.80; long-term debt ratio = 0.3750.

A) $230,000
B) $235,000
C) $240,000
D) $245,000
E) $250,000

Question 46

Calculate gross profit given the following information: accounts receivable = $3,500; inventory = $4,500; receivable turnover = 80 times; inventory turnover = 18 times.

A) $199,000
B) $209,000
C) $219,000
D) $229,000
E) $239,000

Question 47

Use the following statement of financial position and statement of comprehensive income Blue Bird, Inc. has 1,500 shares of stock outstanding. The price-earnings ratio for 2018 is 21. What is the market price per share of stock?

A) $18.90
B) $21.00
C) $23.94
D) $24.16
E) $26.87

Question 48

Gwen's Pastry Shop has annual sales of $238,000, a profit margin of 6 %, and a return on assets of 7.7 %. The firm has _____ in total assets.

A) $176,067
B) $185,455
C) $220,984
D) $224,528
E) $256,326

Question 49

A firm has a total book value of equity of $2 million, a market to book ratio of 2, and a book value per share of $5.00. What is the total market value of the firm's equity?

A) $10
B) $500,000
C) $2 million
D) $4 million
E) $20 million

Question 50

Calculate the value of cost of goods sold for Molson's Brewing Company given the following information: Current liabilities = $340,000; Quick ratio = 1.8; Inventory turnover = 4.0; Current ratio = 3.3.

A) $2,040,000
B) $3,060,000
C) $3,999,999
D) $4,180,222
E) $5,888,100

Question 51

Calculate net income given the following information: fixed asset turnover = 4 times; profit margin = 20%; net fixed assets = $25,000.

A) $16,000
B) $18,000
C) $20,000
D) $22,000
E) $24,000

Question 52

Calculate cash given the following information. Total current assets $57,000; supplies $4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of goods sold 75,000.

A) $24,000
B) $22,000
C) $20,000
D) $18,000
E) $16,000

Question 53

Calculate net income given the following information: tax rate = 30%; accounts receivable = $15,000; receivable turnover = 6 times; inventory = $4,000; inventory turnover = 6.25 times; operating expenses = $15,000; interest expense = $9,000.

A) $29,700
B) $28,700
C) $27,700
D) $26,700
E) $25,700

Question 54

Calculate the value of total assets given the following information: total debt ratio = 0.55; total equity = $7,700.

A) $11,000
B) $17,111
C) $33,000
D) $44,000
E) $55,000

Question 55

If you were to prepare a statement of cash flows, what is the cash flow from investment activities ($ in millions)?

A) -$1,500
B) -$2,400
C) -$3,400
D) $4,500
E) $4,600

Question 56

What is the change in net working capital ($ in millions)?

A) -$3,655
B) -$3,015
C) $3,655
D) $6,670
E) $10,755

Question 57

Calculate the value of total assets given the following information: total debt ratio = 0.26; total equity = $32,560.

A) $11,000
B) $22,000
C) $33,000
D) $44,000
E) $55,000

Question 58

Determine the value of cash given the following information: cash ratio = 1.5625; cash equivalents = $500 ; current liabilities = $1,600.

A) $1,500
B) $2,000
C) $2,500
D) $3,000
E) $3,500

Question 59

A firm has total debt of $1,850 and a debt-equity ratio of.64. What is the value of the total assets?

A) $1,128.05
B) $1,184.00
C) $2,571.95
D) $3,034.00
E) $4,740.63

Question 60

Calculate net income given the following information: shares outstanding = 1,250,000; stock price = $35/share; PE ratio = 12.50.

A) $2,500,000
B) $2,750,000
C) $3,000,000
D) $3,250,000
E) $3,500,000

Question 61

Danny Corporation's total current assets are valued at $233,000 and are comprised of cash, accounts receivable and inventory. Determine the value of the cash account given the following information: sales = $225,000; cost of goods sold = $135,000; accounts receivable turnover = 3 times; inventory turnover = 1.5 times.

A) $68,000
B) $66,000
C) $64,000
D) $62,000
E) $60,000

Question 62

The following statement of financial position and statement of comprehensive income should be used. How will Woodburn's accounts receivable appear on the statement of cash flows for 2018($ in thousands)?

A) $40 operating activity cash outflow.
B) $40 investment activity cash outflow.
C) $40 operating activity cash inflow.
D) $40 investment activity cash inflow.
E) $40 financing activity cash inflow.

Question 63

Etling Eccentricities has 400,000 shares of common stock outstanding, net income after tax of $1.2 million, retained earnings of $17 million, and total equity of $35 million. What is EE's earnings per share?

A) $3.00
B) $4.00
C) $4.25
D) $8.75
E) $13.50

Question 64

The net cash from investment activity for 2018 is ($ in millions):

A) -$1,030
B) -$840
C) -$650
D) $840
E) $1,030

Question 65

Calculate total current assets given the following information. Cash $10,000; supplies $3,000; average collection period 54.75 days; days' sales in inventory 91.25 days; sales $80,000; COGS $60,000.

A) $42,000
B) $40,000
C) $38,000
D) $36,000
E) $34,000

Question 66

Calculate gross profit given the following information: accounts receivable = $40,000; inventory = $80,000; receivable turnover = 25 times; inventory turnover = 6 times.

A) $500,000
B) $520,000
C) $540,000
D) $580,000
E) $620,000

Question 67

Jorge Corp. of North Bay has 100,000 shares outstanding. EBIT is $1 million and interest paid is $200,001. If the corporate tax rate is 34%, what is Jorge's earnings per share?

A) $2.72
B) $3.40
C) $5.28
D) $6.60
E) $10.00

Question 68

How would a $15,000 decrease in AR and a $8,000 increase in inventory affect cash?

A) $15,000 source; $8,000 use
B) $15,000 use; $8,000 source
C) $7,000 use
D) $23,000 use
E) $23,000 source

Question 69

Calculate total equity value given the following information: ROE = 8%; Total assets = $1,000,000 and ROA = 5%

A) $625,000
B) $650,000
C) $700,000
D) $750,000
E) $800,000

Question 70

How would a $5,000 increase in AR and a $2,000 decrease in inventory affect cash?

A) $5,000 source; $2,000 use
B) $2,000 source; $5,000 use
C) $5,000 source; $2,000 source
D) $3,000 source
E) $7,000 source

Question 71

The Frasier Company has a long-term debt ratio of 0.5 and a current ratio of 1.3. Current liabilities are $900, sales are $6,000, profit margin is 10%, and ROE is 19&. What is the amount of the firm's net fixed assets?

A) $7,546
B) $7,046
C) $6,556
D) $6,046
E) $5,556

Question 72

A Halifax firm generates net income of $530. The depreciation expense is $60 and dividends paid are $80. Accounts payable decrease by $40, accounts receivable decrease by $30, inventory increases by $20, and net fixed assets decrease by $40. What is the net cash from operating activity?

A) $480
B) $530
C) $560
D) $580
E) $600

Question 73

A firm has a profit margin of 9% on sales of $400,000. There are 10,000 shares of common stock outstanding. What is the earnings per share?

A) $1.80
B) $3.60
C) $4.00
D) $36.00
E) $40.00

Question 74

Calculate net income given the following information: fixed asset turnover = 8 times; profit margin = 18.75%; net fixed assets = $30,000.

A) $42,000
B) $43,000
C) $44,000
D) $45,000
E) $46,000

Question 75

Calculate the value of long-term debt given the following information: total debt = $100,000; debt/equity ratio = 0.40; long-term debt ratio = 0.2308.

A) $75,000
B) $70,000
C) $65,000
D) $60,000
E) $55,000

Question 76

The net cash from financing activity for 2018 is ($ in millions):

A) -$975
B) -$775
C) -$475
D) $475
E) $775

Question 77

Calculate the value of total equity given the following information: total debt ratio = 0.76; total assets = $1,250.

A) $300
B) $325
C) $350
D) $375
E) $400

Question 78

The sources of cash include ($ in millions):

A) $220 from accounts payable and $840 from fixed assets.
B) $840 from fixed assets and $70 from accounts receivable.
C) $70 from accounts receivable and $1,540 from common stock.
D) $1,540 from common stock and $220 from accounts payable.
E) $2,125 from long term debt and $1,540 from common stock.

Question 79

If the firm is currently carrying a price/earnings ratio of 2, what is the firm's approximate market price per share?

A) $8
B) $11
C) $56
D) $78
E) $129

Question 80

Sandwiches-To-Go has a return on equity of 12 % and a debt-equity ratio of.40. The total asset turnover is 1.63 and the profit margin is 5 %. The total equity is $21,400. What is the amount of the net income?

A) $2,568
B) $3,819
C) $4,186
D) $6,283
E) $6,420