Question 1

A firm's net income is the most appropriate measure to determine whether the management is maximizing the firm's stock price.

Accepted Answer

A) True 
 B)False

Question 2

A company will calculate changes in its balance sheet accounts based on the:

Accepted Answer

A)  ratio analysis. 
B)  pro forma balance sheet construction. 
C)  statement of cash flows construction. 
D)  profit and loss analysis. 
E)  pro forma income statement construction 
A)  ratio analysis. 
B)  pro forma balance sheet construction. 
C)  statement of cash flows construction. 
D)  profit and loss analysis. 
E)  pro forma income statement construction

Question 3

The equity section of a firm's balance sheet contains _____.

Accepted Answer

A)  retained earnings 
B)  current assets 
C)  corporate bonds 
D)  dividends 
E)  noncash assets 
A)  retained earnings 
B)  current assets 
C)  corporate bonds 
D)  dividends 
E)  noncash assets

Question 4

The days sales outstanding (DSO) ratio of a firm identifies:

Accepted Answer

A)  the average length of time a firm must wait after making a credit sale before receiving cash. 
B)  how effectively the firm uses its plant and equipment to help generate sales. 
C)  the extent to which a firm's net operating income can safely decline. 
D)  the profit (earnings) per dollar of sales. 
E)  how much investors are willing to pay for the firm's stock for each dollar of reported profits. 
A)  the average length of time a firm must wait after making a credit sale before receiving cash. 
B)  how effectively the firm uses its plant and equipment to help generate sales. 
C)  the extent to which a firm's net operating income can safely decline. 
D)  the profit (earnings) per dollar of sales. 
E)  how much investors are willing to pay for the firm's stock for each dollar of reported profits.

Question 5

Which of the following is considered a use of cash in a cash flow statement?

Accepted Answer

A)  Increase in accrued wages 
B)  Increase in common stock 
C)  Decrease in accounts receivable 
D)  Decrease in inventory 
E)  Increase in fixed assets 
A)  Increase in accrued wages 
B)  Increase in common stock 
C)  Decrease in accounts receivable 
D)  Decrease in inventory 
E)  Increase in fixed assets

Question 6

Which of the following ratios indicate how much investors are willing to pay for the firm's stock for each dollar of reported profits?

Accepted Answer

A)  Earnings per share ratio 
B)  Market/book ratio 
C)  Price/earnings ratio 
D)  Return on equity ratio 
E)  Net profit margin ratio 
A)  Earnings per share ratio 
B)  Market/book ratio 
C)  Price/earnings ratio 
D)  Return on equity ratio 
E)  Net profit margin ratio

Question 7

Which of the following statements is true about the annual report of a company?

Accepted Answer

A)  The annual report contains four basic financial statements: the income statement; balance sheet; statement of cash flows; and statement of changes in long-term financing. 
B)  The annual report does not provide any information about a firm's future prospects. 
C)  The key importance of annual report information is that it is used by investors when they form their expectations about the firm's future earnings and dividends. 
D)  The annual report provides no relevant information for use by financial analysts or by the investing public. 
E)  The annual report is a report issued by each of the shareholders to the corporation and it contains information about the performance of the shares of the firm held by the shareholders. 
A)  The annual report contains four basic financial statements: the income statement; balance sheet; statement of cash flows; and statement of changes in long-term financing. 
B)  The annual report does not provide any information about a firm's future prospects. 
C)  The key importance of annual report information is that it is used by investors when they form their expectations about the firm's future earnings and dividends. 
D)  The annual report provides no relevant information for use by financial analysts or by the investing public. 
E)  The annual report is a report issued by each of the shareholders to the corporation and it contains information about the performance of the shares of the firm held by the shareholders.

Question 8

The amount received by a firm's stockholders if the firm were to liquidate its assets and pay off all of its outstanding debt is the firm's:

Accepted Answer

A)  net worth. 
B)  retained earnings. 
C)  cash equivalents. 
D)  accruals. 
E)  market value. 
A)  net worth. 
B)  retained earnings. 
C)  cash equivalents. 
D)  accruals. 
E)  market value.

Question 9

Ruby Enterprises Ltd. has long-term bonds worth $20 million, retained earnings of $45 million, accounts payable of $10 million, notes payable of $12 million, and inventory worth $18 million. What is the value of total liabilities of Ruby Enterprises?

Accepted Answer

A)  $42 million 
B)  $105 million 
C)  $87 million 
D)  $60 million 
E)  $85 million 
A)  $42 million 
B)  $105 million 
C)  $87 million 
D)  $60 million 
E)  $85 million

Question 10

If a company has a quick ratio of 1.0 and a current ratio of 2.0, then:

Accepted Answer

A)  the value of current assets is equal to the value of inventory. 
B)  the value of current assets is equal to the value of current liabilities. 
C)  the value of current liabilities is more than the value of current assets. 
D)  the value of current liabilities is equal to the value of inventory. 
E)  the value of inventory is more than the value of current assets. 
A)  the value of current assets is equal to the value of inventory. 
B)  the value of current assets is equal to the value of current liabilities. 
C)  the value of current liabilities is more than the value of current assets. 
D)  the value of current liabilities is equal to the value of inventory. 
E)  the value of inventory is more than the value of current assets.

Question 11

How is the book value per share calculated?

Accepted Answer

A)  Book value per share = Common equity ÷ Total number of shares outstanding 
B)  Book value per share = Total shares issued × Per share par value 
C)  Book value per share = Current assets - Current liabilities 
D)  Book value per share = Total assets ÷ Total number of shares outstanding 
E)  Book value per share = Earnings available to common stockholders ÷ Total number of shares outstanding 
A)  Book value per share = Common equity ÷ Total number of shares outstanding 
B)  Book value per share = Total shares issued × Per share par value 
C)  Book value per share = Current assets - Current liabilities 
D)  Book value per share = Total assets ÷ Total number of shares outstanding 
E)  Book value per share = Earnings available to common stockholders ÷ Total number of shares outstanding

A firm's net income is the most appropriate measure to determine whether the management is maximizing the firm's stock price.

A company will calculate changes in its balance sheet accounts based on the:

The equity section of a firm's balance sheet contains _____.

The days sales outstanding (DSO) ratio of a firm identifies:

Which of the following is considered a use of cash in a cash flow statement?

Which of the following ratios indicate how much investors are willing to pay for the firm's stock for each dollar of reported profits?

Which of the following statements is true about the annual report of a company?

The amount received by a firm's stockholders if the firm were to liquidate its assets and pay off all of its outstanding debt is the firm's:

Ruby Enterprises Ltd. has long-term bonds worth $20 million, retained earnings of $45 million, accounts payable of $10 million, notes payable of $12 million, and inventory worth $18 million. What is the value of total liabilities of Ruby Enterprises?

If a company has a quick ratio of 1.0 and a current ratio of 2.0, then:

How is the book value per share calculated?

An Overview of Managerial Finance

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters

Exam 2: Analysis of Financial Statements

A firm's net income is the most appropriate measure to determine whether the management is maximizing the firm's stock price.

A company will calculate changes in its balance sheet accounts based on the:

The equity section of a firm's balance sheet contains _____.

The days sales outstanding (DSO) ratio of a firm identifies:

Which of the following is considered a use of cash in a cash flow statement?

Which of the following ratios indicate how much investors are willing to pay for the firm's stock for each dollar of reported profits?

Which of the following statements is true about the annual report of a company?

The amount received by a firm's stockholders if the firm were to liquidate its assets and pay off all of its outstanding debt is the firm's:

Ruby Enterprises Ltd. has long-term bonds worth $20 million, retained earnings of $45 million, accounts payable of $10 million, notes payable of $12 million, and inventory worth $18 million. What is the value of total liabilities of Ruby Enterprises?

If a company has a quick ratio of 1.0 and a current ratio of 2.0, then:

How is the book value per share calculated?

An Overview of Managerial Finance

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters