Question 1

____ indicate the ability of the firm to meet its short-term financial obligations.

Accepted Answer

A)  Activity ratios 
B)  Liquidity ratios 
C)  Leverage ratios 
D)  Profitability ratios 
A)  Activity ratios 
B)  Liquidity ratios 
C)  Leverage ratios 
D)  Profitability ratios

Question 2

A fresh fruit wholesaler has high sales volume, with most selling prices not greatly exceeding costs. This wholesaler would normally be expected to have ____.

Accepted Answer

A)  high profit margin and high asset turnover 
B)  low profit margin and low asset turnover 
C)  low profit margin and high asset turnover 
D)  high profit margin and low asset turnover 
A)  high profit margin and high asset turnover 
B)  low profit margin and low asset turnover 
C)  low profit margin and high asset turnover 
D)  high profit margin and low asset turnover

Question 3

If a firm's price to earnings (P/E) ratio is 10, ____.

Accepted Answer

A)  it is not possible for it to be paying dividends also 
B)  its market to book ratio has to be at least 2.0 
C)  its net profit margin is positive 
D)  its return on stockholders' equity is negative 
A)  it is not possible for it to be paying dividends also 
B)  its market to book ratio has to be at least 2.0 
C)  its net profit margin is positive 
D)  its return on stockholders' equity is negative

Question 4

Return on stockholders' equity is equal to ____ times ____ times ____.

Accepted Answer

A)  net profit margin; fixed asset turnover; equity multiplier 
B)  gross profit margin; total asset turnover; equity multiplier 
C)  net profit margin; total asset turnover; equity multiplier 
D)  net profit margin; total asset turnover; debt-to-equity ratio 
A)  net profit margin; fixed asset turnover; equity multiplier 
B)  gross profit margin; total asset turnover; equity multiplier 
C)  net profit margin; total asset turnover; equity multiplier 
D)  net profit margin; total asset turnover; debt-to-equity ratio

Question 5

Given the following information, calculate the inventory for Big Show Videos: Quick ratio = 1.2; Current assets = $12,000; Current ratio = 2.5

Accepted Answer

A)  $4,800 
B)  $6,240 
C)  $7,200 
D)  $5,660 
A)  $4,800 
B)  $6,240 
C)  $7,200 
D)  $5,660

Question 6

What is the cost of sales for a firm with a gross profit margin of 30 percent, a net profit margin of 4 percent, and earnings after taxes of $20,000?

Accepted Answer

A)  $200,000 
B)  $350,000 
C)  $150,000 
D)  $125,000 
A)  $200,000 
B)  $350,000 
C)  $150,000 
D)  $125,000

Question 7

If a firm's total asset turnover ratio is 2.0, then ____.

Accepted Answer

A)  its annual sales are less than its total assets 
B)  it is possible that its fixed asset turnover ratio is 1.5 
C)  its total assets are two times its annual sales 
D)  its annual sales are two times its total assets 
A)  its annual sales are less than its total assets 
B)  it is possible that its fixed asset turnover ratio is 1.5 
C)  its total assets are two times its annual sales 
D)  its annual sales are two times its total assets

Question 8

What is the net profit margin for TJX Inc. if the current ratio = 2; total asset turnover =1.5; total assets = $100,000; and EBIT = $30,000? Assume the marginal tax rate for TJX is 40% and that interest expenses are $10,000.

Accepted Answer

A)  20% 
B)  8% 
C)  12% 
D)  6% 
A)  20% 
B)  8% 
C)  12% 
D)  6%

Question 9

Greg is interested in investing in a small company, and he thinks Good Buy Co. might be a good investment. He has been given the following information and would like to know the return on stockholder's equity. Assume Good Buy's marginal tax rate is 40%. $\begin{array}{ll}
\text { Earning before taxes } & \$ 3 \text { million } \
\text { Net profit margin } & 3.6 \% \
\text { Total liabilities } & \$ 15.0 \text { million } \
\text { Total stockhol der's equity } & \$ 10.0 \text { million }
\end{array}$

Accepted Answer

A)  12% 
B)  20% 
C)  15% 
D)  18% 
A)  12% 
B)  20% 
C)  15% 
D)  18%

Question 10

A firm's price-to-earnings ratio is 8 and its market-to-book ratio is 2. If its earnings per share are $4.00, what is the book value per share?

Accepted Answer

A)  $ 8.00 
B)  $32.00 
C)  $64.00 
D)  $16.00 
A)  $ 8.00 
B)  $32.00 
C)  $64.00 
D)  $16.00

Question 11

The financial analysis tool that takes into account the entire capital structure of the firm is the ____.

Accepted Answer

A)  EBITDA multiple 
B)  price-to-book ratio 
C)  P/E ratio 
D)  total asset turnover ratio 
A)  EBITDA multiple 
B)  price-to-book ratio 
C)  P/E ratio 
D)  total asset turnover ratio

Question 12

Primary sources of comparative financial data include ____.

Accepted Answer

A)  Dun and Bradstreet 
B)  New York Times 
C)  Richard Moore, Inc. 
D)  Framingham Financial Library 
A)  Dun and Bradstreet 
B)  New York Times 
C)  Richard Moore, Inc. 
D)  Framingham Financial Library

Question 13

The quick ratio is similar to the current ratio except it does NOT include ____.

Accepted Answer

A)  cash 
B)  accounts receivable 
C)  prepaid items 
D)  inventories 
A)  cash 
B)  accounts receivable 
C)  prepaid items 
D)  inventories

Question 14

Companies can avoid paying income taxes on inventory profits by using the ____ inventory valuation method.

Accepted Answer

A)  LIFO 
B)  FIFO 
C)  Priced out 
D)  Priced in 
A)  LIFO 
B)  FIFO 
C)  Priced out 
D)  Priced in

Question 15

A common-size income statement shows the firm's income and expense items as a percentage of ____.

Accepted Answer

A)  stockholders' equity 
B)  net sales 
C)  industry averages 
D)  total assets 
A)  stockholders' equity 
B)  net sales 
C)  industry averages 
D)  total assets

Question 16

If Power-On Inc. has a total asset turnover of 1.8, a fixed asset turnover of 3.2, a debt ratio of 0.5, and a total debt of $200,000, what would fixed assets be?

Accepted Answer

A)  $56,250 
B)  $711,111 
C)  $225,000 
D)  $62,250 
A)  $56,250 
B)  $711,111 
C)  $225,000 
D)  $62,250

Question 17

The ____ ratio measures the relative profitability of a firm's sales after the cost of sales has been deducted.

Accepted Answer

A)  gross profit margin 
B)  net profit margin 
C)  return on investment 
D)  return on stockholders' equity 
A)  gross profit margin 
B)  net profit margin 
C)  return on investment 
D)  return on stockholders' equity

Question 18

Trend analysis requires that ____.

Accepted Answer

A)  asset management ratios be excluded from the analysis 
B)  financial ratios not be used at all 
C)  the same ratio be plotted over several years 
D)  many different ratios be calculated over several years 
A)  asset management ratios be excluded from the analysis 
B)  financial ratios not be used at all 
C)  the same ratio be plotted over several years 
D)  many different ratios be calculated over several years

Question 19

Wall Mart Pictures and Decor Company has a net profit margin of 10% and its inventory turnover is 9. What is its annual cost of sales? You also know that Wall Mart's average inventory is $96,700, and its annual sales are $1,000,000.

Accepted Answer

A)  $870,000 
B)  $850,000 
C)  $870,300 
D)  $790,000 
A)  $870,000 
B)  $850,000 
C)  $870,300 
D)  $790,000

Question 20

Given the following information, determine Salem Company's fixed assets. Sales = $10,000,000
Total asset turnover = 4 times
Current ratio = 2.40
Current liabilities = $500,000
Total assets = current assets + fixed assets

Accepted Answer

A)  $1,200,000 
B)  $4,800,000 
C)  $1,300,000 
D)  Cannot be determined 
A)  $1,200,000 
B)  $4,800,000 
C)  $1,300,000 
D)  Cannot be determined

Exam 3: Evaluation of Financial Performance

____ indicate the ability of the firm to meet its short-term financial obligations.

A fresh fruit wholesaler has high sales volume, with most selling prices not greatly exceeding costs. This wholesaler would normally be expected to have ____.

If a firm's price to earnings (P/E) ratio is 10, ____.

Return on stockholders' equity is equal to ____ times ____ times ____.

Given the following information, calculate the inventory for Big Show Videos: Quick ratio = 1.2; Current assets = $12,000; Current ratio = 2.5

What is the cost of sales for a firm with a gross profit margin of 30 percent, a net profit margin of 4 percent, and earnings after taxes of $20,000?

If a firm's total asset turnover ratio is 2.0, then ____.

What is the net profit margin for TJX Inc. if the current ratio = 2; total asset turnover =1.5; total assets = $100,000; and EBIT = $30,000? Assume the marginal tax rate for TJX is 40% and that interest expenses are $10,000.

A firm's price-to-earnings ratio is 8 and its market-to-book ratio is 2. If its earnings per share are $4.00, what is the book value per share?

The financial analysis tool that takes into account the entire capital structure of the firm is the ____.

Primary sources of comparative financial data include ____.

The quick ratio is similar to the current ratio except it does NOT include ____.

Companies can avoid paying income taxes on inventory profits by using the ____ inventory valuation method.

A common-size income statement shows the firm's income and expense items as a percentage of ____.

If Power-On Inc. has a total asset turnover of 1.8, a fixed asset turnover of 3.2, a debt ratio of 0.5, and a total debt of $200,000, what would fixed assets be?

The ____ ratio measures the relative profitability of a firm's sales after the cost of sales has been deducted.

Trend analysis requires that ____.

Wall Mart Pictures and Decor Company has a net profit margin of 10% and its inventory turnover is 9. What is its annual cost of sales? You also know that Wall Mart's average inventory is $96,700, and its annual sales are $1,000,000.

Given the following information, determine Salem Company's fixed assets. Sales = $10,000,000 Total asset turnover = 4 times Current ratio = 2.40 Current liabilities = $500,000 Total assets = current assets + fixed assets

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Financial Planning and Forecasting

The Time Value of Money

Continuous Compounding and Discounting

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Mutually Exclusive Investments Having Unequal Lives

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Breakeven Analysis

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-Term Financing

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate Term Financing

Financing With Derivatives

Bond Refunding Analysis

Risk Management

International Financial Management

Corporate Restructuring

Filters

Return on stockholders' equity is equal to times times .