Question 1

The equity multiplier is calculated as:

Accepted Answer

A)  total assets divided by owners' equity 
B)  net income divided by owners' equity 
C)  net income divided by total assets 
D)  net sales divided by total assets 
A)  total assets divided by owners' equity 
B)  net income divided by owners' equity 
C)  net income divided by total assets 
D)  net sales divided by total assets

Question 2

The current ratio is always positive.

Accepted Answer

A) True 
 B)False

Question 3

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000. The firm should prepare to

Accepted Answer

A)  repurchase common stock totaling $230,000. 
B)  arrange for a loan of $230,000. 
C)  do nothing; the balance sheet balances. 
D)  invest in marketable securities totaling $230,000. 
A)  repurchase common stock totaling $230,000. 
B)  arrange for a loan of $230,000. 
C)  do nothing; the balance sheet balances. 
D)  invest in marketable securities totaling $230,000.

Question 4

All other things being equal, an increase in the amount fixed operating costs for a firm would:

Accepted Answer

A)  increase the degree of financial leverage 
B)  decrease the degree of financial leverage 
C)  have no impact on degree of financial leverage 
D)  not enough information given 
A)  increase the degree of financial leverage 
B)  decrease the degree of financial leverage 
C)  have no impact on degree of financial leverage 
D)  not enough information given

Question 5

The method of evaluating the firm's performance over time is known as:

Accepted Answer

A)  trend analysis 
B)  cross-sectional analysis 
C)  industry comparative analysis 
D)  Due Pont analysis 
A)  trend analysis 
B)  cross-sectional analysis 
C)  industry comparative analysis 
D)  Due Pont analysis

Question 6

Market value ratios indicate the willingness of investors to value a firm in the marketplace relative to financial statement values.

Accepted Answer

A) True 
 B)False

Question 7

Profitability ratios indicate the extent to which assets are used to support sales.

Accepted Answer

A) True 
 B)False

Question 8

If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.

Accepted Answer

A)  greater than 
B)  less than 
C)  the same as 
D)  we can't tell 
A)  greater than 
B)  less than 
C)  the same as 
D)  we can't tell

Question 9

In general, a firm's return on assets will be less than its return on equity.

Accepted Answer

A) True 
 B)False

Question 10

(Earnings before interest & taxes ∕ Total assets)

Accepted Answer

A)  Operating profit margin 
B)  Net profit margin 
C)  Operating return on assets 
D)  Return on total assets 
E)  Return on equity 
A)  Operating profit margin 
B)  Net profit margin 
C)  Operating return on assets 
D)  Return on total assets 
E)  Return on equity

Question 11

The average collection period is measured in weeks.

Accepted Answer

A) True 
 B)False

Question 12

If a firm's fixed financial costs decrease, the firm's operating breakeven point will

Accepted Answer

A)  decrease 
B)  increase 
C)  remain unchanged 
D)  change in an undetermined direction 
A)  decrease 
B)  increase 
C)  remain unchanged 
D)  change in an undetermined direction

Question 13

Which of the following is not a source of industry information?

Accepted Answer

A)  Dun and Bradstreet 
B)  Risk Management Association 
C)  The Federal Trade Commission 
D)  Financial Accounting Standards Board 
A)  Dun and Bradstreet 
B)  Risk Management Association 
C)  The Federal Trade Commission 
D)  Financial Accounting Standards Board

Question 14

Rental or lease payments are included in which one of the following ratios?

Accepted Answer

A)  interest coverage 
B)  times-interest-earned 
C)  fixed charge coverage 
D)  equity multiplier 
A)  interest coverage 
B)  times-interest-earned 
C)  fixed charge coverage 
D)  equity multiplier

Question 15

The contribution margin represents contribution of each unit sold that first goes toward paying fixed costs.

Accepted Answer

A) True 
 B)False

Question 16

A current ratio of 2.0 is desirable and it means that a firm has twice as many current liabilities as current assets.

Accepted Answer

A) True 
 B)False

Question 17

The operating break-even sales level is sensitive to all of the following variables except:

Accepted Answer

A)  fixed operating costs 
B)  sales price per unit 
C)  variable operating cost per unit 
D)  interest expense 
A)  fixed operating costs 
B)  sales price per unit 
C)  variable operating cost per unit 
D)  interest expense

Question 18

If a firm's sale price per unit decreases, the firm's operating breakeven point will

Accepted Answer

A)  decrease 
B)  increase 
C)  remain unchanged 
D)  change in an undetermined direction 
A)  decrease 
B)  increase 
C)  remain unchanged 
D)  change in an undetermined direction

Question 19

The technique of breaking return on assets and return on equity into their component parts is called Deloitte analysis, named after the big accounting firm that popularized it (Deloitte & Touche).

Accepted Answer

A) True 
 B)False

Question 20

The break-even quantity is inversely related to the level of a firm's variable costs.

Accepted Answer

A) True 
 B)False

The equity multiplier is calculated as:

The current ratio is always positive.

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000. The firm should prepare to

All other things being equal, an increase in the amount fixed operating costs for a firm would:

The method of evaluating the firm's performance over time is known as:

Market value ratios indicate the willingness of investors to value a firm in the marketplace relative to financial statement values.

Profitability ratios indicate the extent to which assets are used to support sales.

If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.

In general, a firm's return on assets will be less than its return on equity.

(Earnings before interest & taxes ∕ Total assets)

The average collection period is measured in weeks.

If a firm's fixed financial costs decrease, the firm's operating breakeven point will

Which of the following is not a source of industry information?

Rental or lease payments are included in which one of the following ratios?

The contribution margin represents contribution of each unit sold that first goes toward paying fixed costs.

A current ratio of 2.0 is desirable and it means that a firm has twice as many current liabilities as current assets.

The operating break-even sales level is sensitive to all of the following variables except:

If a firm's sale price per unit decreases, the firm's operating breakeven point will

The technique of breaking return on assets and return on equity into their component parts is called Deloitte analysis, named after the big accounting firm that popularized it (Deloitte & Touche).

The break-even quantity is inversely related to the level of a firm's variable costs.

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

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Exam 14: Financial Analysis and Long-Term Financial Planning

The equity multiplier is calculated as:

The current ratio is always positive.

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000. The firm should prepare to

All other things being equal, an increase in the amount fixed operating costs for a firm would:

The method of evaluating the firm's performance over time is known as:

Market value ratios indicate the willingness of investors to value a firm in the marketplace relative to financial statement values.

Profitability ratios indicate the extent to which assets are used to support sales.

If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.

In general, a firm's return on assets will be less than its return on equity.

(Earnings before interest & taxes ∕ Total assets)

The average collection period is measured in weeks.

If a firm's fixed financial costs decrease, the firm's operating breakeven point will

Which of the following is not a source of industry information?

Rental or lease payments are included in which one of the following ratios?

The contribution margin represents contribution of each unit sold that first goes toward paying fixed costs.

A current ratio of 2.0 is desirable and it means that a firm has twice as many current liabilities as current assets.

The operating break-even sales level is sensitive to all of the following variables except:

If a firm's sale price per unit decreases, the firm's operating breakeven point will

The technique of breaking return on assets and return on equity into their component parts is called Deloitte analysis, named after the big accounting firm that popularized it (Deloitte & Touche).

The break-even quantity is inversely related to the level of a firm's variable costs.

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

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