Question 1

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.Williams' inventory balance is

Accepted Answer

A)  $2,000,000. 
B)  $2,400,000. 
C)  $4,000,000. 
D)  $4,800,000. 
A)  $2,000,000. 
B)  $2,400,000. 
C)  $4,000,000. 
D)  $4,800,000.

Question 2

Apollo Corp.reported the following balance sheet:
 
Apollo Corp.'s debt ratio is

Accepted Answer

A)  32.17%. 
B)  37.62%. 
C)  39.45%. 
D)  42.95%. 
A)  32.17%. 
B)  37.62%. 
C)  39.45%. 
D)  42.95%.

Question 3

Please refer to Table 4-2 for the following questions.
Table 4-2
Drummond Company
Balance Sheet
  
-Based on the information in Table 4-2,and assuming the company's stock price is $50 per share,the P/E ratio is

Accepted Answer

A)  10.89. 
B)  14.33. 
C)  24.44. 
D)  27.50. 
A)  10.89. 
B)  14.33. 
C)  24.44. 
D)  27.50.

Question 4

Which of the following transactions will increase a corporation's operating return on assets?

Accepted Answer

A)  sell stock and use the money to pay off some long-term debt 
B)  sell 10-year bonds and use the money to pay off current liabilities 
C)  negotiate a new contract that lowers raw material costs by 10% 
D)  increase sales by 10% 
A)  sell stock and use the money to pay off some long-term debt 
B)  sell 10-year bonds and use the money to pay off current liabilities 
C)  negotiate a new contract that lowers raw material costs by 10% 
D)  increase sales by 10%

Question 5

Financial ratios are useful for evaluating performance but should not be used for making financial projections.

Accepted Answer

A) True 
 B)False

Question 6

Please refer to Table 4-3 for the following questions.
Table 4-3
Emery Corporation
Balance Sheet Income Statement
  
-Based on the information in Table 4-3,assuming that the firm has no preferred stock,and paid $300,000 in common dividends,the firm's return on equity was

Accepted Answer

A)  79.43%. 
B)  61.89%. 
C)  43.34%. 
D)  33.53%. 
A)  79.43%. 
B)  61.89%. 
C)  43.34%. 
D)  33.53%.

Question 7

Seasonality is introduced into financial ratios by averaging monthly account balances,and thus it is recommended that ending account balances be used.

Accepted Answer

A) True 
 B)False

Question 8

Please refer to Table 4-5 for the following questions.
Table 4-5
Yen Inc.
Balance Sheet
   
Yen Inc.
Income Statement
For the year ended December 31, 2010
  
-Based on the information contained in Tables 4-5,what was Yen's return on common equity for 2010?

Accepted Answer

A)  50.0% 
B)  85.0% 
C)  121.4% 
D)  24.3% 
A)  50.0% 
B)  85.0% 
C)  121.4% 
D)  24.3%

Question 9

During the past year the growth corporation increased its sales from $1,000,000 to $2,000,000 and its EBIT from $250,000 to $400,000.The result of this growth will be

Accepted Answer

A)  a higher operating profit margin and higher net income. 
B)  a lower operating profit margin and lower net income. 
C)  a lower operating profit margin and higher net income. 
D)  a higher P/E ratio. 
A)  a higher operating profit margin and higher net income. 
B)  a lower operating profit margin and lower net income. 
C)  a lower operating profit margin and higher net income. 
D)  a higher P/E ratio.

Question 10

Given an accounts receivable turnover of 10 and annual credit sales of $900,000,the average collection period is

Accepted Answer

A)  18.25 days. 
B)  36.50 days. 
C)  90 days. 
D)  40.56 days. 
A)  18.25 days. 
B)  36.50 days. 
C)  90 days. 
D)  40.56 days.

Question 11

Nelson Industries has a higher debt ratio than Butler,Inc.,and Nelson also has a higher times interest earned ratio than Butler.If Nelson and Butler both have the same amount of total assets,then

Accepted Answer

A)  Nelson must have higher operating income than Butler. 
B)  if both companies have the same operating income, Butler must be paying a higher interest rate on its long-term debt than Nelson is paying. 
C)  Nelson may have more non-interest bearing liabilities, such as accounts payable, than Butler has. 
D)  if both companies have the same operating income, a mistake was made in the calculations because the company with a higher debt ratio must have a lower times interest earned ratio. 
A)  Nelson must have higher operating income than Butler. 
B)  if both companies have the same operating income, Butler must be paying a higher interest rate on its long-term debt than Nelson is paying. 
C)  Nelson may have more non-interest bearing liabilities, such as accounts payable, than Butler has. 
D)  if both companies have the same operating income, a mistake was made in the calculations because the company with a higher debt ratio must have a lower times interest earned ratio.

Question 12

Benkart Corporation has sales of $5,000,000,net income of $800,000,total assets of $2,000,000,and 100,000 shares of common stock outstanding.If Benkart's P/E ratio is 12,what is the company's current stock price?

Accepted Answer

A)  $60 per share 
B)  $96 per share 
C)  $240 per share 
D)  $360 per share 
A)  $60 per share 
B)  $96 per share 
C)  $240 per share 
D)  $360 per share

Question 13

Baker Corp.is required by a debt agreement to maintain a current ratio of at least 2.5,and Baker's current ratio now is 3.Baker wants to purchase additional inventory for its upcoming Christmas season,and will pay for the inventory with short-term debt.How much inventory can Baker purchase without violating its debt agreement if their total current assets equal $15 million?

Accepted Answer

A)  $0.50 million 
B)  $1.67 million 
C)  $4.50 million 
D)  $6.00 million 
A)  $0.50 million 
B)  $1.67 million 
C)  $4.50 million 
D)  $6.00 million

Question 14

Please refer to Table 4-3 for the following questions.
Table 4-3
Emery Corporation
Balance Sheet Income Statement
  
-Based on the information in Table 4-3,the average collection period is

Accepted Answer

A)  38.01 days. 
B)  27.36 days. 
C)  20.53 days. 
D)  17.49 days. 
A)  38.01 days. 
B)  27.36 days. 
C)  20.53 days. 
D)  17.49 days.

Question 15

Please refer to Table 4-2 for the following questions.
Table 4-2
Drummond Company
Balance Sheet
  
-Based on the information in Table 4-2,the debt ratio is

Accepted Answer

A)  28.12%. 
B)  34.74%. 
C)  45.69%. 
D)  42.03%. 
A)  28.12%. 
B)  34.74%. 
C)  45.69%. 
D)  42.03%.

Question 16

Common-sized income statements

Accepted Answer

A)  assist in the comparison of companies of different sizes. 
B)  show each income statement account as a percentage of total assets. 
C)  compare companies with the same level of total sales. 
D)  compare companies with the same level of net income. 
A)  assist in the comparison of companies of different sizes. 
B)  show each income statement account as a percentage of total assets. 
C)  compare companies with the same level of total sales. 
D)  compare companies with the same level of net income.

Question 17

Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

Accepted Answer

A) True 
 B)False

Question 18

Please refer to Table 4-2 for the following questions.
Table 4-2
Drummond Company
Balance Sheet
  
-Based on the information in Table 4-2,the return on equity is

Accepted Answer

A)  19.33%. 
B)  18.47%. 
C)  16.66%. 
D)  15.65%. 
A)  19.33%. 
B)  18.47%. 
C)  16.66%. 
D)  15.65%.

Question 19

Please refer to Table 4-3 for the following questions.
Table 4-3
Emery Corporation
Balance Sheet Income Statement
  
-Based on the information in Table 4-3,the total asset turnover is

Accepted Answer

A)  2.10 times. 
B)  2.42 times. 
C)  2.87 times. 
D)  3.25 times. 
A)  2.10 times. 
B)  2.42 times. 
C)  2.87 times. 
D)  3.25 times.

Question 20

Assume that a firm issues a six-month note to purchase inventory.Which of the following is true if the current ratio before the purchase is 1.0?

Accepted Answer

A)  The firm's current ratio must decrease. 
B)  The firm's quick ratio will stay the same. 
C)  The firm's current ratio will increase. 
D)  The firm's quick ratio might decrease. 
A)  The firm's current ratio must decrease. 
B)  The firm's quick ratio will stay the same. 
C)  The firm's current ratio will increase. 
D)  The firm's quick ratio might decrease.

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.Williams' inventory balance is

Apollo Corp.reported the following balance sheet: Apollo Corp.'s debt ratio is

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,and assuming the company's stock price is $50 per share,the P/E ratio is

Which of the following transactions will increase a corporation's operating return on assets?

Financial ratios are useful for evaluating performance but should not be used for making financial projections.

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,assuming that the firm has no preferred stock,and paid $300,000 in common dividends,the firm's return on equity was

Seasonality is introduced into financial ratios by averaging monthly account balances,and thus it is recommended that ending account balances be used.

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's return on common equity for 2010?

During the past year the growth corporation increased its sales from $1,000,000 to $2,000,000 and its EBIT from $250,000 to $400,000.The result of this growth will be

Given an accounts receivable turnover of 10 and annual credit sales of $900,000,the average collection period is

Nelson Industries has a higher debt ratio than Butler,Inc.,and Nelson also has a higher times interest earned ratio than Butler.If Nelson and Butler both have the same amount of total assets,then

Benkart Corporation has sales of $5,000,000,net income of $800,000,total assets of $2,000,000,and 100,000 shares of common stock outstanding.If Benkart's P/E ratio is 12,what is the company's current stock price?

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,the average collection period is

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,the debt ratio is

Common-sized income statements

Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,the return on equity is

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,the total asset turnover is

Assume that a firm issues a six-month note to purchase inventory.Which of the following is true if the current ratio before the purchase is 1.0?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters

Exam 4: Evaluating a Firms Financial Performance

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.Williams' inventory balance is

Apollo Corp.reported the following balance sheet: Apollo Corp.'s debt ratio is

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,and assuming the company's stock price is $50 per share,the P/E ratio is

Which of the following transactions will increase a corporation's operating return on assets?

Financial ratios are useful for evaluating performance but should not be used for making financial projections.

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,assuming that the firm has no preferred stock,and paid $300,000 in common dividends,the firm's return on equity was

Seasonality is introduced into financial ratios by averaging monthly account balances,and thus it is recommended that ending account balances be used.

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's return on common equity for 2010?

During the past year the growth corporation increased its sales from $1,000,000 to $2,000,000 and its EBIT from $250,000 to $400,000.The result of this growth will be

Given an accounts receivable turnover of 10 and annual credit sales of $900,000,the average collection period is

Nelson Industries has a higher debt ratio than Butler,Inc.,and Nelson also has a higher times interest earned ratio than Butler.If Nelson and Butler both have the same amount of total assets,then

Benkart Corporation has sales of $5,000,000,net income of $800,000,total assets of $2,000,000,and 100,000 shares of common stock outstanding.If Benkart's P/E ratio is 12,what is the company's current stock price?

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,the average collection period is

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,the debt ratio is

Common-sized income statements

Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,the return on equity is

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,the total asset turnover is

Assume that a firm issues a six-month note to purchase inventory.Which of the following is true if the current ratio before the purchase is 1.0?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters