Question 1

A firm with an equity multiplier of 4.0, will have a debt ratio of

Accepted Answer

A)  0.25 
B)  1.00 
C)  0.75 
D)  4.00 
A)  0.25 
B)  1.00 
C)  0.75 
D)  4.00 C

Question 2

In general, firm's with ____ risk and ____ earnings growth prospects will have higher P/E multiples.

Accepted Answer

A)  low, low 
B)  high, low 
C)  low, high 
D)  high, high 
A)  low, low 
B)  high, low 
C)  low, high 
D)  high, high C

Question 3

What is the return on investment for a firm that has a debt ratio of 0.65, a net profit margin of 6.5%, sales of $740,000, and a total asset turnover of 4?

Accepted Answer

A)  26.0% 
B)  16.9% 
C)  6.5% 
D)  4.6% 
A)  26.0% 
B)  16.9% 
C)  6.5% 
D)  4.6% A

Question 4

The greater the amount of financial leverage used by a firm, the greater its ____, all other things being equal.

Accepted Answer

A)  profitability 
B)  liquidity 
C)  risk 
D)  size 
A)  profitability 
B)  liquidity 
C)  risk 
D)  size

Question 5

AK, Inc. is considering issuing additional long-term debt to finance an expansion. The company currently has $20 million in 5% debt outstanding. Its earnings after-tax (EAT) are $3.0 million, and its marginal and average tax rate is 40 percent. The company is required by the debt holders to maintain its times interest earned ratio at 3.0 or greater. How much additional 10 percent debt can the company issue now and maintain its times interest earned ratio at 3.0? Assume for this calculation that earnings before interest and taxes remains at its present level.

Accepted Answer

A)  $10 million 
B)  $ 6 million 
C)  $ 1 million 
D)  $5 million 
A)  $10 million 
B)  $ 6 million 
C)  $ 1 million 
D)  $5 million

Question 6

What would be the times interest earned of a company, if its total interest charges are $20,000, sales are $220,000, and its net profit margin is 6 percent? Assume a tax rate of 40 percent.

Accepted Answer

A)  2.65 
B)  1.1 
C)  2.1 
D)  1.2 
A)  2.65 
B)  1.1 
C)  2.1 
D)  1.2

Question 7

Financial ratios can be used to analyze a firm's performance from

Accepted Answer

A)  day to day 
B)  period to period 
C)  purchase to purchase 
D)  sale to sale 
A)  day to day 
B)  period to period 
C)  purchase to purchase 
D)  sale to sale

Question 8

A component of earnings that recognizes the return that the firm is expected to earn on assets that have not been placed in services is called ____.

Accepted Answer

A)  earnings allowance 
B)  allowance for funds used during construction 
C)  capital budgeted 
D)  budgeted earnings 
A)  earnings allowance 
B)  allowance for funds used during construction 
C)  capital budgeted 
D)  budgeted earnings

Question 9

There are numerous sources which provide financial analysis via the internet. List some of those resources.

Accepted Answer

Internet data Sources for financial anal

Question 10

All of the following are users of financial information EXCEPT:

Accepted Answer

A)  customers 
B)  bankers 
C)  analysts 
D)  unions 
A)  customers 
B)  bankers 
C)  analysts 
D)  unions

Question 11

Determine the cost of sales for a firm with the following financial ratios and data: Current ratio = 3.0; Quick ratio = 2.0; Current liabilities $1,000,000; Inventory turnover 6 times

Accepted Answer

A)  $2,000,000 
B)  $6,000,000 
C)  $3,000,000 
D)  $1,000,000 
A)  $2,000,000 
B)  $6,000,000 
C)  $3,000,000 
D)  $1,000,000

Question 12

The following policy that is consistent with an increase in a firm's return on total assets is:

Accepted Answer

A)  costs increase more than revenues 
B)  the firm's net working capital (current assets minus current liabilities) position declines 
C)  the firm sells off some unused assets and pays the proceeds to existing stockholders in the form of an extra dividend 
D)  the firm's net working capital (current assets minus current liabilities) position declines, and the firm sells off some unused assets and pays the proceeds to existing stockholders in the form of an extra dividend 
A)  costs increase more than revenues 
B)  the firm's net working capital (current assets minus current liabilities) position declines 
C)  the firm sells off some unused assets and pays the proceeds to existing stockholders in the form of an extra dividend 
D)  the firm's net working capital (current assets minus current liabilities) position declines, and the firm sells off some unused assets and pays the proceeds to existing stockholders in the form of an extra dividend

Question 13

To increase the return on stockholders' equity, management could increase the ____.

Accepted Answer

A)  current ratio 
B)  price-to-earnings ratio 
C)  dividend yield 
D)  equity multiplier 
A)  current ratio 
B)  price-to-earnings ratio 
C)  dividend yield 
D)  equity multiplier

Question 14

The ____ ratio indicates the percentage of a firm's earnings that are distributed as dividends.

Accepted Answer

A)  dividend yield 
B)  payout 
C)  return on earnings 
D)  earnings 
A)  dividend yield 
B)  payout 
C)  return on earnings 
D)  earnings

Question 15

How much cash and marketable securities does Gray Day Computer Co. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000. Gray's credit sales are $98,000 and its average collection period is 40 days? (Assume 365 days per year.)

Accepted Answer

A)  $3,660 
B)  $14,440 
C)  $10,740 
D)  $12,660 
A)  $3,660 
B)  $14,440 
C)  $10,740 
D)  $12,660

Question 16

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?

Accepted Answer

A)  $16.80 
B)  $42 
C)  $3 
D)  $28 
A)  $16.80 
B)  $42 
C)  $3 
D)  $28

Question 17

When considering the quality of a firm's earnings, high quality earnings tend to be ____

Accepted Answer

A)  cash earnings 
B)  earnings derived from regularly recurring transactions 
C)  cash earnings and earnings derived from regularly recurring transactions 
D)  earnings per share 
A)  cash earnings 
B)  earnings derived from regularly recurring transactions 
C)  cash earnings and earnings derived from regularly recurring transactions 
D)  earnings per share

Question 18

The Market Value Added (MVA) is the ____.

Accepted Answer

A)  indicator of how successful a firm has been at increasing its financing its assets 
B)  return on total capital minus cost of capital 
C)  indication of an increase in operating efficiency 
D)  positively related to the present value of all expected future EVA. 
A)  indicator of how successful a firm has been at increasing its financing its assets 
B)  return on total capital minus cost of capital 
C)  indication of an increase in operating efficiency 
D)  positively related to the present value of all expected future EVA.

Question 19

The analysis of financial statements is affected by inflation because

Accepted Answer

A)  the value of long-term debt will increase 
B)  the value of fixed assets may be understated 
C)  the life of long-term assets are decreased 
D)  inventory increases 
A)  the value of long-term debt will increase 
B)  the value of fixed assets may be understated 
C)  the life of long-term assets are decreased 
D)  inventory increases

Question 20

List some earnings management tricks used by some companies.

Accepted Answer

Some of the tricks used by some companie

Exam 3: Evaluation of Financial Performance

A firm with an equity multiplier of 4.0, will have a debt ratio of

In general, firm's with ____ risk and ____ earnings growth prospects will have higher P/E multiples.

What is the return on investment for a firm that has a debt ratio of 0.65, a net profit margin of 6.5%, sales of $740,000, and a total asset turnover of 4?

The greater the amount of financial leverage used by a firm, the greater its ____, all other things being equal.

What would be the times interest earned of a company, if its total interest charges are $20,000, sales are $220,000, and its net profit margin is 6 percent? Assume a tax rate of 40 percent.

Financial ratios can be used to analyze a firm's performance from

A component of earnings that recognizes the return that the firm is expected to earn on assets that have not been placed in services is called ____.

There are numerous sources which provide financial analysis via the internet. List some of those resources.

All of the following are users of financial information EXCEPT:

Determine the cost of sales for a firm with the following financial ratios and data: Current ratio = 3.0; Quick ratio = 2.0; Current liabilities $1,000,000; Inventory turnover 6 times

The following policy that is consistent with an increase in a firm's return on total assets is:

To increase the return on stockholders' equity, management could increase the ____.

The ____ ratio indicates the percentage of a firm's earnings that are distributed as dividends.

How much cash and marketable securities does Gray Day Computer Co. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000. Gray's credit sales are $98,000 and its average collection period is 40 days? (Assume 365 days per year.)

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?

When considering the quality of a firm's earnings, high quality earnings tend to be ____

The Market Value Added (MVA) is the ____.

The analysis of financial statements is affected by inflation because

List some earnings management tricks used by some companies.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Financial Planning and Forecasting

The Time Value of Money

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-term Financing

The Management of Cash and Marketable Securities

Management of Accounts Receivable and Inventories

Lease and Intermediate-term Financing

Financing With Derivatives

Risk Management

International Financial Management

Corporate Restructuring

Continuous Compounding and Discounting

Mutually Exclusive Investments Having Unequal Lives

Breakeven Analysis

Bond Refunding Analysis

Taxes

Filters

In general, firm's with risk and earnings growth prospects will have higher P/E multiples.