Question 1

Which one of the following statements is correct?

Accepted Answer

A)  Book values should always be given precedence over market values.
B)  Financial statements are frequently used as the basis for performance evaluations.
C)  Historical information provides no value to someone who is predicting future performance.
D)  Potential lenders place little value on financial statement information.
E)  Reviewing financial information over time has very limited value.F) C) and D)
G) A) and E)

Question 2

According to the Statement of Cash Flows, a decrease in accounts receivable will _____ the cash flow from _____ activities.

Accepted Answer

A)  decrease; operating
B)  decrease; financing
C)  increase; operating
D)  increase; financing
E)  increase; investmentF) None of the above
G) All of the above

Question 3

What is the amount of the cash flow from investment activity for 2012?

Accepted Answer

A)  $18,100
B)  $24,800
C)  $29,300
D)  $32,000
E)  $39,400F) A) and E)
G) A) and D)

Question 4

An increase in which of the following will increase the return on equity, all else constant?
I.sales
II.net income
III.depreciation
IV.total equity

Accepted Answer

A)  I only
B)  I and II only
C)  II and IV only
D)  II and III only
E)  I, II, and III onlyF) A) and E)
G) A) and D)

Question 5

The Purple Martin has annual sales of $687,400, total debt of $210,000, total equity of $365,000, and a profit margin of 4.80 percent.What is the return on assets?

Accepted Answer

A)  5.74 percent
B)  6.48 percent
C)  7.02 percent
D)  7.78 percent
E)  9.79 percentF) A) and B)
G) C) and D)

Question 6

What is the net cash flow from investment activity for 2012?

Accepted Answer

A)  -$1,840
B)  -$1,680
C)  -$80
D)  $80
E)  $1,840F) C) and E)
G) A) and B)

Question 7

Canine Supply has sales of $2,200, total assets of $1,400, and a debt-equity ratio of 0.5.Its return on equity is 15 percent.What is the net income?

Accepted Answer

A)  $128.16
B)  $131.41
C)  $132.09
D)  $136.67
E)  $140.00F) B) and C)
G) A) and E)

Question 8

Which one of the following accurately describes the three parts of the Du Pont identity?

Accepted Answer

A)  operating efficiency, equity multiplier, and profitability ratio
B)  financial leverage, operating efficiency, and profitability ratio
C)  equity multiplier, profit margin, and total asset turnover
D)  debt-equity ratio, capital intensity ratio, and profit margin
E)  return on assets, profit margin, and equity multiplierF) A) and D)
G) B) and C)

Question 9

BL Industries has ending inventory of $300,000, and cost of goods sold for the year just ended was $1,410,000.On average, how long does a unit of inventory sit on the shelf before it is sold?

Accepted Answer

A)  17.16 days
B)  21.43 days
C)  77.66 days
D)  78.29 days
E)  83.13 daysF) A) and E)
G) C) and D)

Question 10

Townsend Enterprises has a PEG ratio of 5.3, net income of $49,200, a price-earnings ratio of 17.6, and a profit margin of 7.1 percent.What is the earnings growth rate?

Accepted Answer

A)  0.33 percent
B)  1.06 percent
C)  3.32 percent
D)  5.30 percent
E)  10.60 percentF) B) and D)
G) A) and B)

Question 11

If a firm produces a twelve percent return on assets and also a twelve percent return on equity, then the firm:

Accepted Answer

A)  may have short-term, but not long-term debt.
B)  is using its assets as efficiently as possible.
C)  has no net working capital.
D)  has a debt-equity ratio of 1.0.
E)  has an equity multiplier of 1.0.F) B) and C)
G) A) and C)

Question 12

Which of the following can be used to compute the return on equity?
I.Profit margin × Return on assets
II.Return on assets × Equity multiplier
III.Net income/Total equity
IV.Return on assets × Total asset turnover

Accepted Answer

A)  I and III only
B)  II and III only
C)  II and IV only
D)  I, II, and III only
E)  I, II, III, and IVF) A) and B)
G) A) and E)

Question 13

The cash coverage ratio directly measures the ability of a firm's revenues to meet which one of its following obligations?

Accepted Answer

A)  payment to supplier
B)  payment to employee
C)  payment of interest to a lender
D)  payment of principle to a lender
E)  payment of a dividend to a shareholderF) A) and B)
G) A) and C)

Question 14

Jasper United had sales of $21,000 in 2011 and $24,000 in 2012.The firm's current accounts remained constant.Given this information, which one of the following statements must be true?

Accepted Answer

A)  The total asset turnover rate increased.
B)  The days' sales in receivables increased.
C)  The net working capital turnover rate increased.
D)  The fixed asset turnover decreased.
E)  The receivables turnover rate decreased.F) C) and D)
G) None of the above

Question 15

In general, what does a high Tobin's Q value indicate and how reliable does that value tend to be?

Accepted Answer

A high Tobin's Q indicates that the curr...

Question 16

Relationships determined from a firm's financial information and used for comparison purposes are known as:

Accepted Answer

A)  financial ratios.
B)  identities.
C)  dimensional analysis.
D)  scenario analysis.
E)  solvency analysis.F) A) and C)
G) None of the above

Question 17

Big Guy Subs has net income of $150,980, a price-earnings ratio of 12.8, and earnings per share of $0.87.How many shares of stock are outstanding?

Accepted Answer

A)  13,558
B)  14,407
C)  165,523
D)  171,000
E)  173,540F) A) and B)
G) B) and C)

Question 18

Al's has a price-earnings ratio of 18.5.Ben's also has a price-earnings ratio of 18.5.Which one of the following statements must be true if Al's has a higher PEG ratio than Ben's?

Accepted Answer

A)  Al's has more net income than Ben's.
B)  Ben's is increasing its earnings at a faster rate than the Al's.
C)  Al's has a higher market value per share than does Ben's.
D)  Ben's has a lower market-to-book ratio than Al's.
E)  Al's has a higher net income than Ben's.F) C) and D)
G) All of the above

Question 19

The sources and uses of cash over a stated period of time are reflected on the:

Accepted Answer

A)  income statement.
B)  balance sheet.
C)  tax reconciliation statement.
D)  statement of cash flows.
E)  statement of operating position.F) All of the above
G) A) and E)

Question 20

Taylor's Men's Wear has a debt-equity ratio of 42 percent, sales of $749,000, net income of $41,300, and total debt of $206,300.What is the return on equity?

Accepted Answer

A)  7.79 percent
B)  8.41 percent
C)  8.74 percent
D)  9.09 percent
E)  9.16 percentF) A) and D)
G) None of the above

Exam 3: Financial Statement Analysis

Which of the following can be used to compute the return on equity? I.Profit margin × Return on assets II.Return on assets × Equity multiplier III.Net income/Total equity IV.Return on assets × Total asset turnover

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Taylor's Men's Wear has a debt-equity ratio of 42 percent, sales of $749,000, net income of $41,300, and total debt of $206,300.What is the return on equity?

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Townsend Enterprises has a PEG ratio of 5.3, net income of $49,200, a price-earnings ratio of 17.6, and a profit margin of 7.1 percent.What is the earnings growth rate?

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Which one of the following statements is correct?

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Relationships determined from a firm's financial information and used for comparison purposes are known as:

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What is the amount of the cash flow from investment activity for 2012?

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The sources and uses of cash over a stated period of time are reflected on the:

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Al's has a price-earnings ratio of 18.5.Ben's also has a price-earnings ratio of 18.5.Which one of the following statements must be true if Al's has a higher PEG ratio than Ben's?

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According to the Statement of Cash Flows, a decrease in accounts receivable will _____ the cash flow from _____ activities.

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BL Industries has ending inventory of $300,000, and cost of goods sold for the year just ended was $1,410,000.On average, how long does a unit of inventory sit on the shelf before it is sold?

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What is the net cash flow from investment activity for 2012?

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Canine Supply has sales of $2,200, total assets of $1,400, and a debt-equity ratio of 0.5.Its return on equity is 15 percent.What is the net income?

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Big Guy Subs has net income of $150,980, a price-earnings ratio of 12.8, and earnings per share of $0.87.How many shares of stock are outstanding?

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The Purple Martin has annual sales of $687,400, total debt of $210,000, total equity of $365,000, and a profit margin of 4.80 percent.What is the return on assets?

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Which one of the following accurately describes the three parts of the Du Pont identity?

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In general, what does a high Tobin's Q value indicate and how reliable does that value tend to be?

Correct AnswerverifiedA high Tobin's Q indicates that the curr...View AnswerShow Answer

If a firm produces a twelve percent return on assets and also a twelve percent return on equity, then the firm:

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An increase in which of the following will increase the return on equity, all else constant? I.sales II.net income III.depreciation IV.total equity

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Jasper United had sales of $21,000 in 2011 and $24,000 in 2012.The firm's current accounts remained constant.Given this information, which one of the following statements must be true?

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The cash coverage ratio directly measures the ability of a firm's revenues to meet which one of its following obligations?

Correct AnswerverifiedShow Answer

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According to the Statement of Cash Flows, a decrease in accounts receivable will _ the cash flow from _ activities.

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A high Tobin's Q indicates that the curr...
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