Question 1

Industry comparative analysis is used to compare a firm's ratios against average ratios for the S&P 500.

Accepted Answer

A) True 
 B)False

Question 2

The market value ratios indicate the financial markets' assessment of the value of a firm's securities.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a variable cost?

Accepted Answer

A)  direct materials 
B)  direct labor 
C)  delivery costs 
D)  rent 
A)  direct materials 
B)  direct labor 
C)  delivery costs 
D)  rent

Question 4

A firm would like to have a quick ratio of about 0.50.

Accepted Answer

A) True 
 B)False

Question 5

The price-to-book ratio measures the market's value of the firm relative to balance sheet equity.

Accepted Answer

A) True 
 B)False

Question 6

Asset management ratios do not measure which of the following:

Accepted Answer

A)  productivity of fixed assets in terms of sales 
B)  how current assets are used in the generation of sales 
C)  earnings generated by efficient asset management 
D)  how much sales are generated from fixed assets 
A)  productivity of fixed assets in terms of sales 
B)  how current assets are used in the generation of sales 
C)  earnings generated by efficient asset management 
D)  how much sales are generated from fixed assets

Question 7

Accounts receivable ∕ (Net sales ∕ 365)

Accepted Answer

A)  Total asset turnover 
B)  Fixed assets turnover 
C)  Average collection period 
D)  Inventory turnover 
A)  Total asset turnover 
B)  Fixed assets turnover 
C)  Average collection period 
D)  Inventory turnover

Question 8

Increases in ROE solely due to rising debt levels (that is, a rising equity multiplier) are generally viewed favorably.

Accepted Answer

A) True 
 B)False

Question 9

The P/E ratio shows how much investors are willing to pay for each dollar of the firm's EPS.

Accepted Answer

A) True 
 B)False

Question 10

Financial analysis using ratios is not useful in the firm's financial planning process.

Accepted Answer

A) True 
 B)False

Question 11

A firm with total debt to total assets of 50% and an interest coverage ratio of 0.5 times would appear to be safely utilizing financial leverage.

Accepted Answer

A) True 
 B)False

Question 12

Using the percentage of sales technique, the remaining dollar amount of asset investments determines the external financing needs (EFN).

Accepted Answer

A) True 
 B)False

Question 13

In employing DuPont analysis, the user would break the return on total assets into the profit margin, total asset turnover, and an equity multiplier.

Accepted Answer

A) True 
 B)False

Question 14

Cost ratios are one of the five basic categories of ratios.

Accepted Answer

A) True 
 B)False

Question 15

The price/earnings ratio (P/E) is calculated as:

Accepted Answer

A)  stock price divided by earnings per share 
B)  stock price times earnings per share 
C)  earnings per share divided by stock price 
D)  stock price divided by the difference between earnings per share and cash dividends per share 
A)  stock price divided by earnings per share 
B)  stock price times earnings per share 
C)  earnings per share divided by stock price 
D)  stock price divided by the difference between earnings per share and cash dividends per share

Question 16

Financial analysis using ratios can assist managers in the firm's long-term financial planning process.

Accepted Answer

A) True 
 B)False

Industry comparative analysis is used to compare a firm's ratios against average ratios for the S&P 500.

The market value ratios indicate the financial markets' assessment of the value of a firm's securities.

Which of the following is not a variable cost?

A firm would like to have a quick ratio of about 0.50.

The price-to-book ratio measures the market's value of the firm relative to balance sheet equity.

Asset management ratios do not measure which of the following:

Accounts receivable ∕ (Net sales ∕ 365)

Increases in ROE solely due to rising debt levels (that is, a rising equity multiplier) are generally viewed favorably.

The P/E ratio shows how much investors are willing to pay for each dollar of the firm's EPS.

Financial analysis using ratios is not useful in the firm's financial planning process.

A firm with total debt to total assets of 50% and an interest coverage ratio of 0.5 times would appear to be safely utilizing financial leverage.

Using the percentage of sales technique, the remaining dollar amount of asset investments determines the external financing needs (EFN).

In employing DuPont analysis, the user would break the return on total assets into the profit margin, total asset turnover, and an equity multiplier.

Cost ratios are one of the five basic categories of ratios.

The price/earnings ratio (P/E) is calculated as:

Financial analysis using ratios can assist managers in the firm's long-term financial planning process.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 14: Financial Analysis and Long-Term Financial Planning

Industry comparative analysis is used to compare a firm's ratios against average ratios for the S&P 500.

The market value ratios indicate the financial markets' assessment of the value of a firm's securities.

Which of the following is not a variable cost?

A firm would like to have a quick ratio of about 0.50.

The price-to-book ratio measures the market's value of the firm relative to balance sheet equity.

Asset management ratios do not measure which of the following:

Accounts receivable ∕ (Net sales ∕ 365)

Increases in ROE solely due to rising debt levels (that is, a rising equity multiplier) are generally viewed favorably.

The P/E ratio shows how much investors are willing to pay for each dollar of the firm's EPS.

Financial analysis using ratios is not useful in the firm's financial planning process.

A firm with total debt to total assets of 50% and an interest coverage ratio of 0.5 times would appear to be safely utilizing financial leverage.

Using the percentage of sales technique, the remaining dollar amount of asset investments determines the external financing needs (EFN).

In employing DuPont analysis, the user would break the return on total assets into the profit margin, total asset turnover, and an equity multiplier.

Cost ratios are one of the five basic categories of ratios.

The price/earnings ratio (P/E) is calculated as:

Financial analysis using ratios can assist managers in the firm's long-term financial planning process.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters