Question 1

is the firm's ROE?

Accepted Answer

A)  8.54% 
B)  8.99% 
C)  9.44% 
D)  9.91% 
E)  10.41% 
A)  8.54% 
B)  8.99% 
C)  9.44% 
D)  9.91% 
E)  10.41%

Question 2

Bonner Corp.'s sales last year were $415,000, and its year-end total assets were $355,000 The average firm in the industry has a total assets turnover ratio (TATO) of 2.4 Bonner's new CFO believes the firm has excess assets that can be sold so as to bring the TATO down to the industry average without affecting sales By how much must the assets be reduced to bring the TATO to the industry average, holding sales constant?

Accepted Answer

A)  $164,330 
B)  $172,979 
C)  $182,083 
D)  $191,188 
E)  $200,747 
A)  $164,330 
B)  $172,979 
C)  $182,083 
D)  $191,188 
E)  $200,747

Question 3

is the firm's EBITDA coverage?

Accepted Answer

A)  3.29 
B)  3.46 
C)  3.64 
D)  3.82 
E)  4.01 
A)  3.29 
B)  3.46 
C)  3.64 
D)  3.82 
E)  4.01

Question 4

inventory turnover and current ratio are related The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

Accepted Answer

A) True 
 B)False

Question 5

Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength.

Accepted Answer

A) True 
 B)False

Question 6

decline in a firm's inventory turnover ratio suggests that it is managing its inventory more efficiently and also that its liquidity position is improving, i.e., it is becoming more liquid.

Accepted Answer

A) True 
 B)False

Question 7

basic earning power ratio (BEP) reflects the earning power of a firm's assets after giving consideration to financial leverage and tax effects.

Accepted Answer

A) True 
 B)False

Question 8

is the firm's EPS?

Accepted Answer

A)  $5.84 
B)  $6.15 
C)  $6.47 
D)  $6.80 
E)  $7.14 
A)  $5.84 
B)  $6.15 
C)  $6.47 
D)  $6.80 
E)  $7.14

Question 9

Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year Trend analysis is one method of measuring changes in a firm's performance over time.

Accepted Answer

A) True 
 B)False

Question 10

is the firm's equity multiplier?

Accepted Answer

A)  3.33 
B)  3.50 
C)  3.68 
D)  3.86 
E)  4.05 
A)  3.33 
B)  3.50 
C)  3.68 
D)  3.86 
E)  4.05

Question 11

Hutchinson Corporation has zero debt-it is financed only with common equityIts total assets are $410,000The new CFO wants to employ enough debt to bring the debt/assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value How much must the firm borrow to achieve the target debt ratio?

Accepted Answer

A)  $155,800 
B)  $164,000 
C)  $172,200 
D)  $180,810 
E)  $189,851 
A)  $155,800 
B)  $164,000 
C)  $172,200 
D)  $180,810 
E)  $189,851

Question 12

is the firm's TIE?

Accepted Answer

A)  1.94 
B)  2.15 
C)  2.39 
D)  2.66 
E)  2.93 
A)  1.94 
B)  2.15 
C)  2.39 
D)  2.66 
E)  2.93

Question 13

is the firm's profit margin?

Accepted Answer

A)  1.40% 
B)  1.56% 
C)  1.73% 
D)  1.93% 
E)  2.12% 
A)  1.40% 
B)  1.56% 
C)  1.73% 
D)  1.93% 
E)  2.12%

Question 14

times-interest-earned ratio is one, but not the only, indication of a firm's ability to meet its long-term and short-term debt obligations.

Accepted Answer

A) True 
 B)False

Question 15

Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use measures of a firm's liquidity position.

Accepted Answer

A) True 
 B)False

Question 16

current and quick ratios always indicate that a firm is managing its liquidity position well.

Accepted Answer

A) True 
 B)False

Question 17

current ratio and inventory turnover ratios both help us measure the firm's liquidity The current ratio measures the relationship of a firm's current assets to its current liabilities, while the inventory turnover ratio gives us an indication of how long it takes the firm to convert its inventory into cash.

Accepted Answer

A) True 
 B)False

Question 18

is the firm's BEP?

Accepted Answer

A)  6.00% 
B)  6.32% 
C)  6.65% 
D)  6.98% 
E)  7.33% 
A)  6.00% 
B)  6.32% 
C)  6.65% 
D)  6.98% 
E)  7.33%

Question 19

Which of the following statements is CORRECT?

Accepted Answer

A)  Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10%, and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will decrease. 
B)  Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will increase. 
C)  Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Without additional information, we cannot tell what will happen to the ROE. 
D)  The modified Du Pont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE. 
E)  Other things held constant, an increase in the debt ratio will result in an increase in the profit margin on sales. 
A)  Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10%, and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will decrease. 
B)  Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will increase. 
C)  Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Without additional information, we cannot tell what will happen to the ROE. 
D)  The modified Du Pont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE. 
E)  Other things held constant, an increase in the debt ratio will result in an increase in the profit margin on sales.

is the firm's ROE?

is the firm's EBITDA coverage?

inventory turnover and current ratio are related The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength.

decline in a firm's inventory turnover ratio suggests that it is managing its inventory more efficiently and also that its liquidity position is improving, i.e., it is becoming more liquid.

basic earning power ratio (BEP) reflects the earning power of a firm's assets after giving consideration to financial leverage and tax effects.

is the firm's EPS?

Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year Trend analysis is one method of measuring changes in a firm's performance over time.

is the firm's equity multiplier?

is the firm's TIE?

is the firm's profit margin?

times-interest-earned ratio is one, but not the only, indication of a firm's ability to meet its long-term and short-term debt obligations.

Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use measures of a firm's liquidity position.

current and quick ratios always indicate that a firm is managing its liquidity position well.

is the firm's BEP?

Which of the following statements is CORRECT?

Overview

Risk and Return: Part I

Risk and Return: Part II

Bonds

Stocks

Financial Options

Forecasting

Cost of Capital

Corporate Valuation

Capital Budgeting

Cash Flows and Risk

Real Options

Cap Structure

Cap Structure II

Dividends

Ipos, Invsmt Banking

Leasing

Hybrids

Working Capital

Derivatives

Bankruptcy, Reorganization, and Liquidation

Mergers

Filters

Exam 8: Financial Analysis

is the firm's ROE?

is the firm's EBITDA coverage?

inventory turnover and current ratio are related The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength.

decline in a firm's inventory turnover ratio suggests that it is managing its inventory more efficiently and also that its liquidity position is improving, i.e., it is becoming more liquid.

basic earning power ratio (BEP) reflects the earning power of a firm's assets after giving consideration to financial leverage and tax effects.

is the firm's EPS?

Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year Trend analysis is one method of measuring changes in a firm's performance over time.

is the firm's equity multiplier?

is the firm's TIE?

is the firm's profit margin?

times-interest-earned ratio is one, but not the only, indication of a firm's ability to meet its long-term and short-term debt obligations.

Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use measures of a firm's liquidity position.

current and quick ratios always indicate that a firm is managing its liquidity position well.

is the firm's BEP?

Which of the following statements is CORRECT?

Overview

Risk and Return: Part I

Risk and Return: Part II

Bonds

Stocks

Financial Options

Forecasting

Cost of Capital

Corporate Valuation

Capital Budgeting

Cash Flows and Risk

Real Options

Cap Structure

Cap Structure II

Dividends

Ipos, Invsmt Banking

Leasing

Hybrids

Working Capital

Derivatives

Bankruptcy, Reorganization, and Liquidation

Mergers

Filters