Question 1

The current ratio of a firm with current assets of $300,000, current liabilities of $100,000, and inventory of $100,000 is:

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 2

If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?

Accepted Answer

A)  2.0 times 
B)  1.5 times 
C)  0.5 times 
D)  .67 times 
A)  2.0 times 
B)  1.5 times 
C)  0.5 times 
D)  .67 times

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)  sell an additional $230,000 of common stock. 
A)  repurchase common stock totaling $230,000. 
B)  arrange for a loan of $230,000. 
C)  do nothing; the balance sheet balances. 
D)  sell an additional $230,000 of common stock.

Question 4

The extent to which assets are used to support sales is indicated by which of the following ratios:

Accepted Answer

A)  liquidity ratios 
B)  asset utilization ratios 
C)  financial leverage ratios 
D)  profitability ratios 
A)  liquidity ratios 
B)  asset utilization ratios 
C)  financial leverage ratios 
D)  profitability ratios

Question 5

The receivables turnover is computed by dividing annual sales, preferably credit sales, by the year-end accounts receivable.

Accepted Answer

A) True 
 B)False

Question 6

Sinking funds are used to repay investors when a new investment fails.

Accepted Answer

A) True 
 B)False

Question 7

DOL = Percent change in unit sales / Percent change in EBIT.

Accepted Answer

A) True 
 B)False

Question 8

The average collection period is calculated as the year-end accounts receivable divided by the net sales.

Accepted Answer

A) True 
 B)False

Question 9

Higher levels of fixed costs result in lower levels of operating leverage.

Accepted Answer

A) True 
 B)False

Question 10

The price/earnings ratio shows how much investors are willing to pay for each dollar of the firm's current earnings per share.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would not be considered in the fixed charge coverage ratio?

Accepted Answer

A)  sinking fund payments 
B)  dividend payments 
C)  lease payments Rent payments 
D)  rent payments 
A)  sinking fund payments 
B)  dividend payments 
C)  lease payments Rent payments 
D)  rent payments

Question 12

Internally generated funds for financing new asset investments come from profits.

Accepted Answer

A) True 
 B)False

Question 13

Return on total assets is calculated as net income divided by total assets.

Accepted Answer

A) True 
 B)False

Question 14

The quick ratio of a firm with current assets of $300,000, current liabilities of $100,000 and inventory of $100,000 is:

Accepted Answer

A)  1:1 
B)  2:1 
C)  3:1 
D)  4:1 
A)  1:1 
B)  2:1 
C)  3:1 
D)  4:1

Question 15

The numerator of the break-even equation is called the contribution margin.

Accepted Answer

A) True 
 B)False

Question 16

Financial leverage ratios indicate the extent to which borrowed funds are used to finance assets.

Accepted Answer

A) True 
 B)False

Question 17

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0. Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0. Based on this limited information firm ________ appears to be in ________ debt management position than firm ________.

Accepted Answer

A)  A, better, B 
B)  B, better, A 
C)  A, a comparable, B 
D)  B, lesser, A 
A)  A, better, B 
B)  B, better, A 
C)  A, a comparable, B 
D)  B, lesser, A

Question 18

If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a stock that is selling at $50 per share and has 10 shares of stock outstanding, then the firm has a P/E ratio of:

Accepted Answer

A)  2.00 
B)  1.00 
C)  10.0 
D)  0.20 
A)  2.00 
B)  1.00 
C)  10.0 
D)  0.20

Question 19

The five basic groups of ratios are liquidity ratios, asset management ratios, capital budgeting ratios, profitability ratios, and market value ratios.

Accepted Answer

A) True 
 B)False

Question 20

A firm with total liabilities and owners' equity of $100,000 and net sales of $50,000 would have a total asset turnover of:

Accepted Answer

A)  100 
B)  .50 
C)  2 
D)  4 
A)  100 
B)  .50 
C)  2 
D)  4

The current ratio of a firm with current assets of $300,000, current liabilities of $100,000, and inventory of $100,000 is:

If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?

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

The extent to which assets are used to support sales is indicated by which of the following ratios:

The receivables turnover is computed by dividing annual sales, preferably credit sales, by the year-end accounts receivable.

Sinking funds are used to repay investors when a new investment fails.

DOL = Percent change in unit sales / Percent change in EBIT.

The average collection period is calculated as the year-end accounts receivable divided by the net sales.

Higher levels of fixed costs result in lower levels of operating leverage.

The price/earnings ratio shows how much investors are willing to pay for each dollar of the firm's current earnings per share.

Which of the following would not be considered in the fixed charge coverage ratio?

Internally generated funds for financing new asset investments come from profits.

Return on total assets is calculated as net income divided by total assets.

The quick ratio of a firm with current assets of $300,000, current liabilities of $100,000 and inventory of $100,000 is:

The numerator of the break-even equation is called the contribution margin.

Financial leverage ratios indicate the extent to which borrowed funds are used to finance assets.

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0. Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0. Based on this limited information firm appears to be in debt management position than firm .

If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a stock that is selling at $50 per share and has 10 shares of stock outstanding, then the firm has a P/E ratio of:

The five basic groups of ratios are liquidity ratios, asset management ratios, capital budgeting ratios, profitability ratios, and market value ratios.

A firm with total liabilities and owners' equity of $100,000 and net sales of $50,000 would have a total asset turnover of:

The Financial Environment

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Federal Reserve System

Policy Makers and the Money Supply

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Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

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Managing Working Capital

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Capital Budgeting Analysis

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Exam 14: Financial Analysis and Long-Term Financial Planning

The current ratio of a firm with current assets of $300,000, current liabilities of $100,000, and inventory of $100,000 is:

If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?

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

The extent to which assets are used to support sales is indicated by which of the following ratios:

The receivables turnover is computed by dividing annual sales, preferably credit sales, by the year-end accounts receivable.

Sinking funds are used to repay investors when a new investment fails.

DOL = Percent change in unit sales / Percent change in EBIT.

The average collection period is calculated as the year-end accounts receivable divided by the net sales.

Higher levels of fixed costs result in lower levels of operating leverage.

The price/earnings ratio shows how much investors are willing to pay for each dollar of the firm's current earnings per share.

Which of the following would not be considered in the fixed charge coverage ratio?

Internally generated funds for financing new asset investments come from profits.

Return on total assets is calculated as net income divided by total assets.

The quick ratio of a firm with current assets of $300,000, current liabilities of $100,000 and inventory of $100,000 is:

The numerator of the break-even equation is called the contribution margin.

Financial leverage ratios indicate the extent to which borrowed funds are used to finance assets.

If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a stock that is selling at $50 per share and has 10 shares of stock outstanding, then the firm has a P/E ratio of:

The five basic groups of ratios are liquidity ratios, asset management ratios, capital budgeting ratios, profitability ratios, and market value ratios.

A firm with total liabilities and owners' equity of $100,000 and net sales of $50,000 would have a total asset turnover of:

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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