Question 1

Dandelion Fields has a Tobin's Q of .96.The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000.The firm has 20,000 shares of stock outstanding and a book value per share of $2.09.What is the market to book ratio?

Accepted Answer

A)  2.75 times
B)  3.18 times
C)  3.54 times
D)  4.01 times
E)  4.20 timesF) A) and C)
G) B) and E)

Question 2

Tobin's Q relates the market value of a firm's assets to which one of the following?

Accepted Answer

A)  initial cost of creating the firm
B)  current book value of the firm
C)  average asset value of similar firms
D)  average market value of similar firms
E)  today's cost to duplicate those assetsF) A) and B)
G) B) and D)

Question 3

Which one of the following is a source of cash?

Accepted Answer

A)  repurchase of common stock
B)  acquisition of debt
C)  purchase of inventory
D)  payment to a supplier
E)  granting credit to a customerF) D) and E)
G) A) and E)

Question 4

You need to analyze a firm's performance in relation to its peers.You can do this either by comparing the firms' balance sheets and income statements or by comparing the firms' ratios.If you only had time to use one means of comparison which method would you use and why?

Accepted Answer

Firms generally are sized differently ma...

Question 5

The Home Supply Co.has a current accounts receivable balance of $280,000.Credit sales for the year just ended were $1,830,000.How many days on average did it take for credit customers to pay off their accounts during this past year?

Accepted Answer

A)  54.29 days
B)  55.01 days
C)  55.50 days
D)  55.85 days
E)  61.00 daysF) B) and C)
G) C) and D)

Question 6

A firm currently has $600 in debt for every $1,000 in equity.Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income.Which one of the following will decrease as a result of this action?

Accepted Answer

A)  equity multiplier
B)  total asset turnover
C)  profit margin
D)  return on assets
E)  return on equityF) A) and D)
G) C) and D)

Question 7

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent.What is the return on equity?

Accepted Answer

A)  26 percent
B)  50 percent
C)  65 percent
D)  84 percent
E)  135 percentF) All of the above
G) B) and C)

Question 8

A firm has annual sales of $320,000,a price-earnings ratio of 24,and a profit margin of 4.2 percent.There are 14,000 shares of stock outstanding.What is the price-sales ratio?

Accepted Answer

A)  0.97
B)  1.01
C)  1.08
D)  1.15
E)  1.22F) C) and E)
G) None of the above

Question 9

The U.S.government coding system that classifies a firm by the nature of its business operations is known as the:

Accepted Answer

A)  NASDAQ 100.
B)  Standard & Poor's 500.
C)  Standard Industrial Classification code.
D)  Governmental ID code.
E)  Government Engineered Coding System.F) C) and D)
G) A) and D)

Question 10

An increase in current liabilities will have which one of the following effects,all else held constant? Assume all ratios have positive values.

Accepted Answer

A)  increase in the cash ratio
B)  increase in the net working capital to total assets ratio
C)  decrease in the quick ratio
D)  decrease in the cash coverage ratio
E)  increase in the current ratioF) B) and D)
G) A) and B)

Question 11

Reliable Cars has sales of $807,200,total assets of $1,105,100,and a profit margin of 9.68 percent.The firm has a total debt ratio of 78 percent.What is the return on equity?

Accepted Answer

A)  13.09 percent
B)  16.67 percent
C)  17.68 percent
D)  28.56 percent
E)  32.14 percentF) None of the above
G) C) and D)

Question 12

According to the Statement of Cash Flows,an increase in interest expense will _____ the cash flow from _____ activities.

Accepted Answer

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

Question 13

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 C)
G) A) and C)

Question 14

Beach Wear has current liabilities of $350,000,a quick ratio of 1.65,inventory turnover of 3.2,and a current ratio of 2.9.What is the cost of goods sold?

Accepted Answer

A)  $980,000
B)  $1,060,000
C)  $1,200,000
D)  $1,400,000
E)  $1,560,000F) D) and E)
G) A) and E)

Question 15

A firm has sales of $68,400,costs of $42,900,interest paid of $2,100,and depreciation of $6,500.The tax rate is 34 percent.What is the value of the cash coverage ratio?

Accepted Answer

A)  12.14
B)  15.24
C)  17.27
D)  23.41
E)  24.56F) B) and E)
G) B) and D)

Question 16

Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a chosen point in time?

Accepted Answer

A)  statement of standardization
B)  statement of cash flows
C)  common-base year statement
D)  common-size statement
E)  base reconciliation statementF) B) and C)
G) B) and D)

Question 17

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

Accepted Answer

A)  volatile market prices
B)  negative earnings
C)  positive PEG ratios
D)  a negative Tobin's Q
E)  increasing salesF) A) and B)
G) A) and C)

Question 18

Oscar's Dog House has a profit margin of 5.6 percent,a return on assets of 12.5 percent,and an equity multiplier of 1.49.What is the return on equity?

Accepted Answer

A)  17.14 percent
B)  18.63 percent
C)  19.67 percent
D)  21.69 percent
E)  22.30 percentF) A) and B)
G) D) and E)

Question 19

Assume a firm has a positive cash balance which is increasing annually.Why then is it important to analyze a statement of cash flows?

Accepted Answer

It is possible that the increase in the ...

Question 20

A firm has total debt of $4,850 and a debt-equity ratio of 0.57.What is the value of the total assets?

Accepted Answer

A)  $6,128.05
B)  $7,253.40
C)  $9,571.95
D)  $11,034.00
E)  $13,358.77F) A) and B)
G) All of the above

Exam 3: Working With Financial Statements

Beach Wear has current liabilities of $350,000,a quick ratio of 1.65,inventory turnover of 3.2,and a current ratio of 2.9.What is the cost of goods sold?

Correct AnswerverifiedShow Answer

Tobin's Q relates the market value of a firm's assets to which one of the following?

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The Home Supply Co.has a current accounts receivable balance of $280,000.Credit sales for the year just ended were $1,830,000.How many days on average did it take for credit customers to pay off their accounts during this past year?

Correct AnswerverifiedShow Answer

Dandelion Fields has a Tobin's Q of .96.The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000.The firm has 20,000 shares of stock outstanding and a book value per share of $2.09.What is the market to book ratio?

Correct AnswerverifiedShow Answer

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

Correct AnswerverifiedShow Answer

A firm has annual sales of $320,000,a price-earnings ratio of 24,and a profit margin of 4.2 percent.There are 14,000 shares of stock outstanding.What is the price-sales ratio?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which one of the following is a source of cash?

Correct AnswerverifiedShow Answer

The U.S.government coding system that classifies a firm by the nature of its business operations is known as the:

Correct AnswerverifiedShow Answer

Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a chosen point in time?

Correct AnswerverifiedShow Answer

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent.What is the return on equity?

Correct AnswerverifiedShow Answer

You need to analyze a firm's performance in relation to its peers.You can do this either by comparing the firms' balance sheets and income statements or by comparing the firms' ratios.If you only had time to use one means of comparison which method would you use and why?

Correct AnswerverifiedFirms generally are sized differently ma...View AnswerShow Answer

According to the Statement of Cash Flows,an increase in interest expense will _____ the cash flow from _____ activities.

Correct AnswerverifiedShow Answer

Assume a firm has a positive cash balance which is increasing annually.Why then is it important to analyze a statement of cash flows?

Correct AnswerverifiedIt is possible that the increase in the ...View AnswerShow Answer

A firm has total debt of $4,850 and a debt-equity ratio of 0.57.What is the value of the total assets?

Correct AnswerverifiedShow Answer

Oscar's Dog House has a profit margin of 5.6 percent,a return on assets of 12.5 percent,and an equity multiplier of 1.49.What is the return on equity?

Correct AnswerverifiedShow Answer

An increase in current liabilities will have which one of the following effects,all else held constant? Assume all ratios have positive values.

Correct AnswerverifiedShow Answer

A firm currently has $600 in debt for every $1,000 in equity.Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income.Which one of the following will decrease as a result of this action?

Correct AnswerverifiedShow Answer

A firm has sales of $68,400,costs of $42,900,interest paid of $2,100,and depreciation of $6,500.The tax rate is 34 percent.What is the value of the cash coverage ratio?

Correct AnswerverifiedShow Answer

Reliable Cars has sales of $807,200,total assets of $1,105,100,and a profit margin of 9.68 percent.The firm has a total debt ratio of 78 percent.What is the return on equity?

Correct AnswerverifiedShow Answer

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Firms generally are sized differently ma...
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According to the Statement of Cash Flows,an increase in interest expense will _ the cash flow from _ activities.

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It is possible that the increase in the ...
View Answer

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