Question 1

When examining the EBITDA ratio,lower numbers are:

Accepted Answer

A)   considered good.
B)   considered mediocre.
C)   considered poor.
D)   indifferent to higher numbers.
E)   it is impossible to garner information from this ratio.F) All of the above
G) A) and E)

Question 2

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600. How many days,on average,does it take Mario's to sell its inventory?

Accepted Answer

A)   42.10 days
B)   66.37 days
C)   78.21 days
D)   104.29 days
E)   273.75 daysF) B) and D)
G) C) and E)

Question 3

It is easier to evaluate a firm using its financial statements when the firm:

Accepted Answer

A)   is a conglomerate.
B)   is global in nature.
C)   uses the same accounting procedures as other firms in its industry.
D)   has a different fiscal year than other firms in its industry.
E)   tends to have one-time events such as asset sales and property acquisitions.F) A) and B)
G) B) and C)

Question 4

Neal's Nails has an 11% return on assets and a 30% dividend payout ratio. What is the internal growth rate?

Accepted Answer

A)   7.11%
B)   7.70%
C)   8.34%
D)   8.46%
E)   11.99%F) B) and D)
G) A) and E)

Question 5

It is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them. What kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm?

Accepted Answer

This question is totally open-ended and ...

Question 6

The inventory turnover ratio is measured as:

Accepted Answer

A)   total sales minus inventory.
B)   inventory times total sales.
C)   cost of goods sold divided by inventory.
D)   inventory times cost of goods sold.
E)   inventory plus cost of goods sold.F) A) and D)
G) A) and C)

Question 7

Which one of the following sets of ratios applies most directly to shareholders?

Accepted Answer

A)   Return on assets and profit margin
B)   Quick ratio and times interest earned
C)   Price-earnings ratio and debt-equity ratio
D)   Market-to-book ratio and price-earnings ratio
E)   Cash coverage ratio and times equity multiplierF) A) and E)
G) A) and B)

Question 8

A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable. Taken together,what do these three figures imply about the firm's operations and its cash flows?

Accepted Answer

It takes,on average,105 days to sell inv...

Question 9

Last year,Alfred's Automotive had a price-earnings ratio of 15. This year,the price earnings ratio is 18. Based on this information,it can be stated with certainty that:

Accepted Answer

A)   the price per share increased.
B)   the earnings per share decreased.
C)   investors are paying a higher price for each share of stock purchased.
D)   investors are receiving a higher rate of return this year.
E)   either the price per share, the earnings per share, or both changed.F) A) and B)
G) A) and C)

Question 10

To calculate sustainable growth rate without using return on equity,the analyst needs the:

Accepted Answer

A)   profit margin.
B)   payout ratio.
C)   debt-to-equity ratio.
D)   total asset turnover.
E)   All ofF) C) and E)
G) B) and C)

Question 11

If a firm decreases its operating costs,all else constant,then:

Accepted Answer

A)   the profit margin increases while the equity multiplier decreases.
B)   the return on assets increases while the return on equity decreases.
C)   the total asset turnover rate decreases while the profit margin increases.
D)   both the profit margin and the equity multiplier increase.
E)   both the return on assets and the return on equity increasE.F) All of the above
G) C) and E)

Question 12

What is the days' sales in receivables in 2011?

Accepted Answer

A)   31.8 days
B)   33.7 days
C)   38.4 days
D)   41.9 days
E)   47.4 daysF) A) and B)
G) A) and C)

Question 13

Windswept,Inc. has 90 million shares of stock outstanding. Its price-earnings ratio for 2011 is 12. What is the market price per share of stock?

Accepted Answer

A)   $57.12
B)   $59.94
C)   $62.82
D)   $64.13
E)   $65.03F) C) and D)
G) A) and B)

Question 14

Which two of the following represent the most effective methods of directly evaluating the financial performance of a firm?
I. comparing the current financial ratios to those of the same firm from prior time periods
II. comparing a firm's financial ratios to those of other firms in the firm's peer group who have similar operations
III. comparing the financial statements of the firm to the financial statements of similar firms operating in other countries
IV. comparing the financial ratios of the firm to the average ratios of all firms located in the same geographic area

Accepted Answer

A)   I and II only
B)   II and III only
C)   III and IV only
D)   I and IV only
E)   I and III onlyF) None of the above
G) B) and C)

Question 15

The financial ratio measured as net income divided by sales is known as the firm's:

Accepted Answer

A)   profit margin.
B)   return on assets.
C)   return on equity.
D)   asset turnover.
E)   earnings before interest and taxes.F) B) and C)
G) B) and D)

Question 16

Puffy's Pastries generates five cents of net income for every $1 in sales. Thus,Puffy's has a _______ of 5%.

Accepted Answer

A)   return on assets
B)   return on equity
C)   profit margin
D)   Du Pont measure
E)   total asset turnoverF) C) and D)
G) B) and D)

Question 17

What is the debt-equity ratio for 2011?

Accepted Answer

A)   22.5%
B)   26.2%
C)   35.5%
D)   45.1%
E)   47.7%F) B) and D)
G) B) and C)

Question 18

A firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800. How many dollars worth of sales are generated from every $1 in total assets?

Accepted Answer

A)   $2.11
B)   $2.32
C)   $3.73
D)   $4.52
E)   $6.70F) A) and B)
G) A) and C)

Question 19

The cash ratio is measured as:

Accepted Answer

A)   current assets divided by current liabilities.
B)   current assets minus cash on hand, divided by current liabilities.
C)   current liabilities plus current assets, divided by cash on hand.
D)   cash on hand plus inventory, divided by current liabilities.
E)   cash on hand divided by current liabilities.F) B) and C)
G) A) and E)

Question 20

The only difference between Joe's and Moe's is that Joe's has old,fully depreciated equipment. Moe's just purchased all new equipment which will be depreciated over eight years. Assuming all else equal:

Accepted Answer

A)   Joe's will have a lower profit margin.
B)   Joe's will have a lower return on equity.
C)   Moe's will have a higher net income.
D)   Moe's will have a lower profit margin.
E)   Moe's will have a higher return on assets.F) D) and E)
G) A) and E)

Exam 3: Financial Statements Analysis and Financial Models

Which one of the following sets of ratios applies most directly to shareholders?

Correct Answer
verified

It is easier to evaluate a firm using its financial statements when the firm:

Correct Answer
verified

When examining the EBITDA ratio,lower numbers are:

Correct Answer
verified

Puffy's Pastries generates five cents of net income for every $1 in sales. Thus,Puffy's has a _______ of 5%.

Correct Answer
verified

Last year,Alfred's Automotive had a price-earnings ratio of 15. This year,the price earnings ratio is 18. Based on this information,it can be stated with certainty that:

Correct Answer
verified

Windswept,Inc. has 90 million shares of stock outstanding. Its price-earnings ratio for 2011 is 12. What is the market price per share of stock?

Correct Answer
verified

The inventory turnover ratio is measured as:

Correct Answer
verified

Neal's Nails has an 11% return on assets and a 30% dividend payout ratio. What is the internal growth rate?

Correct Answer
verified

A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable. Taken together,what do these three figures imply about the firm's operations and its cash flows?

Correct Answer
verified
It takes,on average,105 days to sell inv...
View Answer

What is the debt-equity ratio for 2011?

Correct Answer
verified

If a firm decreases its operating costs,all else constant,then:

Correct Answer
verified

What is the days' sales in receivables in 2011?

Correct Answer
verified

The cash ratio is measured as:

Correct Answer
verified

To calculate sustainable growth rate without using return on equity,the analyst needs the:

Correct Answer
verified

The only difference between Joe's and Moe's is that Joe's has old,fully depreciated equipment. Moe's just purchased all new equipment which will be depreciated over eight years. Assuming all else equal:

Correct Answer
verified

A firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800. How many dollars worth of sales are generated from every $1 in total assets?

Correct Answer
verified

The financial ratio measured as net income divided by sales is known as the firm's:

Correct Answer
verified

It is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them. What kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm?

Correct Answer
verified
This question is totally open-ended and ...
View Answer

Correct Answer
verified

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600. How many days,on average,does it take Mario's to sell its inventory?

Correct Answer
verified

Exam 3: Financial Statements Analysis and Financial Models

Which one of the following sets of ratios applies most directly to shareholders?

Correct AnswerverifiedShow Answer

It is easier to evaluate a firm using its financial statements when the firm:

Correct AnswerverifiedShow Answer

When examining the EBITDA ratio,lower numbers are:

Correct AnswerverifiedShow Answer

Puffy's Pastries generates five cents of net income for every $1 in sales. Thus,Puffy's has a _______ of 5%.

Correct AnswerverifiedShow Answer

Last year,Alfred's Automotive had a price-earnings ratio of 15. This year,the price earnings ratio is 18. Based on this information,it can be stated with certainty that:

Correct AnswerverifiedShow Answer

Windswept,Inc. has 90 million shares of stock outstanding. Its price-earnings ratio for 2011 is 12. What is the market price per share of stock?

Correct AnswerverifiedShow Answer

The inventory turnover ratio is measured as:

Correct AnswerverifiedShow Answer

Neal's Nails has an 11% return on assets and a 30% dividend payout ratio. What is the internal growth rate?

Correct AnswerverifiedShow Answer

A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable. Taken together,what do these three figures imply about the firm's operations and its cash flows?

Correct AnswerverifiedIt takes,on average,105 days to sell inv...View AnswerShow Answer

What is the debt-equity ratio for 2011?

Correct AnswerverifiedShow Answer

If a firm decreases its operating costs,all else constant,then:

Correct AnswerverifiedShow Answer

What is the days' sales in receivables in 2011?

Correct AnswerverifiedShow Answer

The cash ratio is measured as:

Correct AnswerverifiedShow Answer

To calculate sustainable growth rate without using return on equity,the analyst needs the:

Correct AnswerverifiedShow Answer

The only difference between Joe's and Moe's is that Joe's has old,fully depreciated equipment. Moe's just purchased all new equipment which will be depreciated over eight years. Assuming all else equal:

Correct AnswerverifiedShow Answer

A firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800. How many dollars worth of sales are generated from every $1 in total assets?

Correct AnswerverifiedShow Answer

The financial ratio measured as net income divided by sales is known as the firm's:

Correct AnswerverifiedShow Answer

It is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them. What kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm?

Correct AnswerverifiedThis question is totally open-ended and ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600. How many days,on average,does it take Mario's to sell its inventory?

Correct AnswerverifiedShow Answer

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Correct Answer
verified
It takes,on average,105 days to sell inv...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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This question is totally open-ended and ...
View Answer

Correct Answer
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Correct Answer
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