Question 1

A low inventory turnover ratio might indicate that:

Accepted Answer

A) the firm is using the last-in first-out (LIFO) method of inventory valuation during inflationary periods. 
B) the cost of inventory of the firm is lower than that of the similar firms. 
C) the firm is holding excess stocks of inventory. 
D) the inventory of the firm is sold and restocked very often. 
E) the firm purchases all its inventory on credit. 
A) the firm is using the last-in first-out (LIFO) method of inventory valuation during inflationary periods. 
B) the cost of inventory of the firm is lower than that of the similar firms. 
C) the firm is holding excess stocks of inventory. 
D) the inventory of the firm is sold and restocked very often. 
E) the firm purchases all its inventory on credit.

Question 2

In which order will assets be listed in a balance sheet?

Accepted Answer

A) In ascending order of the value of the asset 
B) In alphabetical order 
C) In ascending order of the date of purchase of asset 
D) In order of liquidity 
E) In order of importance for the company 
A) In ascending order of the value of the asset 
B) In alphabetical order 
C) In ascending order of the date of purchase of asset 
D) In order of liquidity 
E) In order of importance for the company

Question 3

The Charleston Company is a relatively small, privately owned firm. Last year, the company had an after-tax income of $15,000 and 10,000 shares were outstanding. The owners were trying to determine the market value for the stock prior to taking the company public. A similar firm, which is publicly traded, had a price/earnings ratio of 5.0. Using only the information given, the market value of one share of Charleston's stock is estimated as:

Accepted Answer

A) $10.00. 
B) $7.50. 
C) $5.00. 
D) $2.50. 
E) $1.50. 
A) $10.00. 
B) $7.50. 
C) $5.00. 
D) $2.50. 
E) $1.50.

Question 4

Which of the following mathematical expressions calculates the debt ratio?

Accepted Answer

A) Debt ratio = Net operating income ÷ Total debt 
B) Debt ratio = Long-term liabilities ÷ Current liabilities 
C) Debt ratio = Sales ÷ Total liabilities 
D) Debt ratio = Total liabilities ÷ Total assets 
E) Debt ratio = Interest charges ÷ Total liabilities 
A) Debt ratio = Net operating income ÷ Total debt 
B) Debt ratio = Long-term liabilities ÷ Current liabilities 
C) Debt ratio = Sales ÷ Total liabilities 
D) Debt ratio = Total liabilities ÷ Total assets 
E) Debt ratio = Interest charges ÷ Total liabilities

Question 5

The book values of shares of stock are always equal to their market values.

Accepted Answer

A) True 
 B)False

Question 6

The funds provided by common stockholders that consist of common stock, paid-in capital, and retained earnings are referred to as the firm's:

Accepted Answer

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

Question 7

Which of the following is true about the book value and market value of a firm's debt?

Accepted Answer

A) The book value of a firm's debt generally is higher than the market value of the firm's debt. 
B) The book value of a firm's debt generally is either equal to or very close to the market value of the firm's debt. 
C) The book value of a firm's debt generally is either equal to or very close to the market value of firm's assets. 
D) The market value of a firm's debt generally is higher than the book value of firm's assets. 
E) The market value of a firm's debt must equal the market value of a firm's assets. 
A) The book value of a firm's debt generally is higher than the market value of the firm's debt. 
B) The book value of a firm's debt generally is either equal to or very close to the market value of the firm's debt. 
C) The book value of a firm's debt generally is either equal to or very close to the market value of firm's assets. 
D) The market value of a firm's debt generally is higher than the book value of firm's assets. 
E) The market value of a firm's debt must equal the market value of a firm's assets.

Question 8

The book value per share of Topaz General Ltd. is $10 per share and the company has a total of 4 million shares. Calculate the total book value of common equity of the company.

Accepted Answer

A) $4 million 
B) $10 million 
C) $400 million 
D) $40 million 
E) $100 million 
A) $4 million 
B) $10 million 
C) $400 million 
D) $40 million 
E) $100 million

Question 9

Noncash assets are expected to produce cash over time but the amount of cash they eventually produce could be higher or lower than the values at which the assets are carried on the books.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following transactions will not affect the quick ratio of a company?

Accepted Answer

A) Inventory sold on credit 
B) Cash purchase of equipment 
C) Payment for accounts payable 
D) Accounts receivable collected 
E) Bank loan repaid 
A) Inventory sold on credit 
B) Cash purchase of equipment 
C) Payment for accounts payable 
D) Accounts receivable collected 
E) Bank loan repaid

Question 11

Which of the following mathematical expressions calculates a firm's retained earnings at the end of a year?

Accepted Answer

A) Retained earnings = Beginning balance of retained earnings − Net income in the current year + Net loss in the previous year 
B) Retained earnings = Beginning balance of retained earnings + Net income in the current year + Dividends paid in the current year 
C) Retained earnings = Beginning balance of retained earnings + Net income in the current year − Dividends paid in the current year 
D) Retained earnings = Beginning balance of retained earnings − Net loss in the previous year − Dividends paid in the current year 
E) Retained earnings = Beginning balance of retained earnings − Net income in the current year + Dividends paid in the current year 
A) Retained earnings = Beginning balance of retained earnings − Net income in the current year + Net loss in the previous year 
B) Retained earnings = Beginning balance of retained earnings + Net income in the current year + Dividends paid in the current year 
C) Retained earnings = Beginning balance of retained earnings + Net income in the current year − Dividends paid in the current year 
D) Retained earnings = Beginning balance of retained earnings − Net loss in the previous year − Dividends paid in the current year 
E) Retained earnings = Beginning balance of retained earnings − Net income in the current year + Dividends paid in the current year

Question 12

A comparison of a firm's ratios with those of other firms in the same industry at the same point in time is called:

Accepted Answer

A) trend analysis. 
B) comparative (benchmarking). 
C) DuPont analysis. 
D) sensitivity analysis. 
E) cash flow analysis. 
A) trend analysis. 
B) comparative (benchmarking). 
C) DuPont analysis. 
D) sensitivity analysis. 
E) cash flow analysis.

Question 13

Which of the following is considered by analysts when comparing the operations of two firms that are financed differently?

Accepted Answer

A) Total assets 
B) Earnings before interest and taxes 
C) Net sales 
D) Gross profit 
E) Retained earnings 
A) Total assets 
B) Earnings before interest and taxes 
C) Net sales 
D) Gross profit 
E) Retained earnings

Question 14

The book value of the common stock of Zircon Global Ltd. is $34 million. If Zircon has four million shares of common stock outstanding, what is its book value per share?

Accepted Answer

A) $136.00 per share 
B) $8.50 per share 
C) $4.00 per share 
D) $0.60 per share 
E) $30.00 per share 
A) $136.00 per share 
B) $8.50 per share 
C) $4.00 per share 
D) $0.60 per share 
E) $30.00 per share

Question 15

Which of the following ratios recognizes that many firms lease rather than buy a long-term asset?

Accepted Answer

A) Fixed charge coverage ratio 
B) Times interest earned ratio 
C) Debt ratio 
D) Net profit margin 
E) Equity multiplier ratio 
A) Fixed charge coverage ratio 
B) Times interest earned ratio 
C) Debt ratio 
D) Net profit margin 
E) Equity multiplier ratio

Question 16

The proportion of a firm's funds that is provided by shareholders is equal to:

Accepted Answer

A) the debt ratio minus the times interest earned. 
B) 1 minus the debt ratio. 
C) the times interest earned plus 1. 
D) the debt ratio minus the dividends paid. 
E) the fixed charge coverage ratio minus 1. 
A) the debt ratio minus the times interest earned. 
B) 1 minus the debt ratio. 
C) the times interest earned plus 1. 
D) the debt ratio minus the dividends paid. 
E) the fixed charge coverage ratio minus 1.

Question 17

The firm's statement of retained earnings reports changes in:

Accepted Answer

A) the amount of dividends paid in the current year. 
B) the common equity accounts between balance sheet dates. 
C) the interest on debt account paid in the current year. 
D) the amount of net income earned in the current year. 
E) the amount of depreciation charged in the current year. 
A) the amount of dividends paid in the current year. 
B) the common equity accounts between balance sheet dates. 
C) the interest on debt account paid in the current year. 
D) the amount of net income earned in the current year. 
E) the amount of depreciation charged in the current year.

Question 18

A decline in the inventory turnover ratio suggests that the firm's liquidity position is improving.

Accepted Answer

A) True 
 B)False

Question 19

Retained earnings is the total amount of:

Accepted Answer

A) income that is distributed as dividends to the shareholders. 
B) debt not repaid in the current year. 
C) accumulated depreciation charged on the firm's assets. 
D) income that has been saved and reinvested in assets since the firm started business. 
E) profit retained by a firm to pay taxes. 
A) income that is distributed as dividends to the shareholders. 
B) debt not repaid in the current year. 
C) accumulated depreciation charged on the firm's assets. 
D) income that has been saved and reinvested in assets since the firm started business. 
E) profit retained by a firm to pay taxes.

Question 20

Assuming that other things are constant, the price earnings (P/E) ratio:

Accepted Answer

A) is higher for firms with high growth prospects and lower for riskier firms. 
B) is lower for firms with high growth prospects and higher for riskier firms. 
C) is not affected by the growth prospects of a firm. 
D) is equal to the market price of the share of a firm. 
E) is equal to the earnings per share of a firm. 
A) is higher for firms with high growth prospects and lower for riskier firms. 
B) is lower for firms with high growth prospects and higher for riskier firms. 
C) is not affected by the growth prospects of a firm. 
D) is equal to the market price of the share of a firm. 
E) is equal to the earnings per share of a firm.

A low inventory turnover ratio might indicate that:

In which order will assets be listed in a balance sheet?

Which of the following mathematical expressions calculates the debt ratio?

The book values of shares of stock are always equal to their market values.

The funds provided by common stockholders that consist of common stock, paid-in capital, and retained earnings are referred to as the firm's:

Which of the following is true about the book value and market value of a firm's debt?

The book value per share of Topaz General Ltd. is $10 per share and the company has a total of 4 million shares. Calculate the total book value of common equity of the company.

Noncash assets are expected to produce cash over time but the amount of cash they eventually produce could be higher or lower than the values at which the assets are carried on the books.

Which of the following transactions will not affect the quick ratio of a company?

Which of the following mathematical expressions calculates a firm's retained earnings at the end of a year?

A comparison of a firm's ratios with those of other firms in the same industry at the same point in time is called:

Which of the following is considered by analysts when comparing the operations of two firms that are financed differently?

The book value of the common stock of Zircon Global Ltd. is $34 million. If Zircon has four million shares of common stock outstanding, what is its book value per share?

Which of the following ratios recognizes that many firms lease rather than buy a long-term asset?

The proportion of a firm's funds that is provided by shareholders is equal to:

The firm's statement of retained earnings reports changes in:

A decline in the inventory turnover ratio suggests that the firm's liquidity position is improving.

Retained earnings is the total amount of:

Assuming that other things are constant, the price earnings (P/E) ratio:

An Overview of Managerial Finance

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debt Characteristics 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 low inventory turnover ratio might indicate that:

In which order will assets be listed in a balance sheet?

Which of the following mathematical expressions calculates the debt ratio?

The book values of shares of stock are always equal to their market values.

The funds provided by common stockholders that consist of common stock, paid-in capital, and retained earnings are referred to as the firm's:

Which of the following is true about the book value and market value of a firm's debt?

The book value per share of Topaz General Ltd. is $10 per share and the company has a total of 4 million shares. Calculate the total book value of common equity of the company.

Noncash assets are expected to produce cash over time but the amount of cash they eventually produce could be higher or lower than the values at which the assets are carried on the books.

Which of the following transactions will not affect the quick ratio of a company?

Which of the following mathematical expressions calculates a firm's retained earnings at the end of a year?

A comparison of a firm's ratios with those of other firms in the same industry at the same point in time is called:

Which of the following is considered by analysts when comparing the operations of two firms that are financed differently?

The book value of the common stock of Zircon Global Ltd. is $34 million. If Zircon has four million shares of common stock outstanding, what is its book value per share?

Which of the following ratios recognizes that many firms lease rather than buy a long-term asset?

The proportion of a firm's funds that is provided by shareholders is equal to:

The firm's statement of retained earnings reports changes in:

A decline in the inventory turnover ratio suggests that the firm's liquidity position is improving.

Retained earnings is the total amount of:

Assuming that other things are constant, the price earnings (P/E) ratio:

An Overview of Managerial Finance

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debt Characteristics 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