Question 1

ROA can be increased by increasing asset turnover.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of a liquidity ratio?

Accepted Answer

A) Times interest earned (TI
E)  
B) P/E ratio 
C) Return on equity 
D) Quick ratio 
A) Times interest earned (TI
E)  
B) P/E ratio 
C) Return on equity 
D) Quick ratio

Question 3

The P/E ratio measures the price that investors are prepared to pay for each dollar of earnings.

Accepted Answer

A) True 
 B)False

Question 4

Assume the following data: Long-term debt = 100; Value of leases = 20; Book value of equity = 80. Calculate the debt-equity ratio.

Accepted Answer

A) 0.50 
B) 0.60 
C) 1.00 
D) 1.50 
A) 0.50 
B) 0.60 
C) 1.00 
D) 1.50

Question 5

What are the different categories of financial ratios?

Accepted Answer

There are five categories of f

Question 6

If the debt ratio is 0.5, what is the debt-equity ratio? (Assume no leases.)

Accepted Answer

A) 0.5 
B) 1.00 
C) 2.00 
D) 4.00 
A) 0.5 
B) 1.00 
C) 2.00 
D) 4.00

Question 7

According to the DuPont system: ROE = (assets/equity)× (sales/assets)× [(after-tax interest + net income)/sales] × [(net income)/( after-tax interest + net income)].

Accepted Answer

A) True 
 B)False

Question 8

Assume the following data: EBIT = 400; Tax = 100; Sales = 3,000; Total assets = 1,500. Calculate the ROA (return on assets).

Accepted Answer

A) 10.0 percent 
B) 20.0 percent 
C) 7.5 percent 
D) 26.7 percent 
A) 10.0 percent 
B) 20.0 percent 
C) 7.5 percent 
D) 26.7 percent

Question 9

Why is liquidity relevant?

Accepted Answer

Firms often have a need to con

Question 10

Efficiency ratios indicate
I. whether the firm is using its assets productively;
II. whether the firm is liquid;
III. whether the firm is profitable;
IV. how highly the firm is valued by investors

Accepted Answer

A) I only 
B) II only 
C) III only 
D) III and IV only 
A) I only 
B) II only 
C) III only 
D) III and IV only

Question 11

Assume the following data: EBIT = 400; Tax = 100; Sales = 3,000; Average total assets = 1,500. Calculate the profit margin.

Accepted Answer

A) 10.0 percent 
B) 18.3 percent 
C) 7.5 percent 
D) 26.7 percent 
A) 10.0 percent 
B) 18.3 percent 
C) 7.5 percent 
D) 26.7 percent

Question 12

Assume the following data: Sales = 3,200; Cost of goods sold = 1,600; Receivables = 200. Calculate the accounts receivable period.

Accepted Answer

A) 24.3 
B) 22.8 
C) 137.0 
D) 45.6 
A) 24.3 
B) 22.8 
C) 137.0 
D) 45.6

Exam 28: Financial Analysis

ROA can be increased by increasing asset turnover.

Which of the following is an example of a liquidity ratio?

The P/E ratio measures the price that investors are prepared to pay for each dollar of earnings.

Assume the following data: Long-term debt = 100; Value of leases = 20; Book value of equity = 80. Calculate the debt-equity ratio.

What are the different categories of financial ratios?

If the debt ratio is 0.5, what is the debt-equity ratio? (Assume no leases.)

According to the DuPont system: ROE = (assets/equity)× (sales/assets)× [(after-tax interest + net income)/sales] × [(net income)/( after-tax interest + net income)].

Assume the following data: EBIT = 400; Tax = 100; Sales = 3,000; Total assets = 1,500. Calculate the ROA (return on assets).

Why is liquidity relevant?

Efficiency ratios indicate I. whether the firm is using its assets productively; II. whether the firm is liquid; III. whether the firm is profitable; IV. how highly the firm is valued by investors

Assume the following data: EBIT = 400; Tax = 100; Sales = 3,000; Average total assets = 1,500. Calculate the profit margin.

Assume the following data: Sales = 3,200; Cost of goods sold = 1,600; Receivables = 200. Calculate the accounts receivable period.

Introduction to Corporate Finance

How to Calculate Present Values

Valuing Bonds

The Value of Common Stocks

Net Present Value and Other Investment Criteria

Making Investment Decisions With the Net Present Value Rule

Introduction to Risk and Return

Portfolio Theory and the Capital Asset Pricing Model

Risk and the Cost of Capital

Project Analysis

How to Ensure That Projects Truly Have Positive Npvs

Agency Problems and Investment

Efficient Markets and Behavioral Finance

An Overview of Corporate Financing

How Corporations Issue Securities

Payout Policy

Does Debt Policy Matter

How Much Should a Corporation Borrow

Financing and Valuation

Understanding Options

Valuing Options

Real Options

Credit Risk and the Value of Corporate Debt

The Many Different Kinds of Debt

Leasing

Managing Risk

Managing International Risks

Financial Planning

Working Capital Management

Mergers

Corporate Restructuring

Governance and Corporate Control Around the World

Filters