Question 1

The values or accounting numbers that are reported on the balance sheet are the same as the market values of the assets.

Accepted Answer

A) True 
 B)False

Question 2

The balance sheet is a financial statement that measures the flow of funds into and out of various accounts over time, whereas the income statement measures the financial position of the firm at a specific point in time.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following financial statements shows a firm's financing activities (how funds were generated) and investment activities (how funds were used) over a particular period of time?

Accepted Answer

A) Balance sheet 
B) Income statement 
C) Statement of retained earnings 
D) Statement of cash flows 
E) Proxy statement 
A) Balance sheet 
B) Income statement 
C) Statement of retained earnings 
D) Statement of cash flows 
E) Proxy statement

Question 4

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

Accepted Answer

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

Question 5

Which of the following mathematical expressions computes the net worth of a firm?

Accepted Answer

A) Net worth = Current assets minus current liabilities 
B) Net worth = Total assets minus current liabilities 
C) Net worth = Total liabilities minus current assets 
D) Net worth = Total assets minus total liabilities 
E) Net worth = Total liabilities minus current liabilities 
A) Net worth = Current assets minus current liabilities 
B) Net worth = Total assets minus current liabilities 
C) Net worth = Total liabilities minus current assets 
D) Net worth = Total assets minus total liabilities 
E) Net worth = Total liabilities minus current liabilities

Question 6

Which of the following ratios shows the relationship between a firm's current assets and its current liabilities?

Accepted Answer

A) Asset management ratios 
B) Liquidity ratios 
C) Debt management ratios 
D) Profitability ratios 
E) Market value ratios 
A) Asset management ratios 
B) Liquidity ratios 
C) Debt management ratios 
D) Profitability ratios 
E) Market value ratios

Question 7

Which of the following is true about a common size balance sheet?

Accepted Answer

A) The assets, liabilities, and equities are reported at their market values. 
B) The assets, liabilities, and equities are reported as percentages of common stock. 
C) The assets, liabilities, and equities are reported as percentages of total assets. 
D) The assets, liabilities, and equities are arranged in the alphabetical order. 
E) The assets, liabilities, and equities are reported as percentages of the assets, liabilities, and equities of a competing firm. 
A) The assets, liabilities, and equities are reported at their market values. 
B) The assets, liabilities, and equities are reported as percentages of common stock. 
C) The assets, liabilities, and equities are reported as percentages of total assets. 
D) The assets, liabilities, and equities are arranged in the alphabetical order. 
E) The assets, liabilities, and equities are reported as percentages of the assets, liabilities, and equities of a competing firm.

Question 8

Other things held constant, which of the following will not affect the current ratio, assuming an initial current ratio greater than 1.0?

Accepted Answer

A) Fixed assets are sold for cash. 
B) Long-term debt is issued to pay off current liabilities. 
C) Accounts receivable are collected. 
D) Cash is used to pay off accounts payable. 
E) A bank loan is obtained, and the proceeds are credited to the firm's checking account. 
A) Fixed assets are sold for cash. 
B) Long-term debt is issued to pay off current liabilities. 
C) Accounts receivable are collected. 
D) Cash is used to pay off accounts payable. 
E) A bank loan is obtained, and the proceeds are credited to the firm's checking account.

Question 9

Alumbat Corporation has $800,000 in debt outstanding, and pays an interest rate of 10 percent annually on its bank loan. Alumbat's annual sales are $3,200,000, its average tax rate is 40 percent, and its net profit margin on sales is 6 percent. If the company does not maintain a TIE ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. Alumbat's current times interest earned ratio is:

Accepted Answer

A) 2.4 times. 
B) 3.4 times. 
C) 3.6 times. 
D) 4.0 times. 
E) 5.0 times. 
A) 2.4 times. 
B) 3.4 times. 
C) 3.6 times. 
D) 4.0 times. 
E) 5.0 times.

Question 10

Which of the following changes is considered a source of cash when preparing a statement of cash flow?

Accepted Answer

A) An increase in property, plant, and equipment 
B) A decrease in accounts payable 
C) A decrease in inventories 
D) An increase in accounts receivable 
E) A decrease in accrued wages 
A) An increase in property, plant, and equipment 
B) A decrease in accounts payable 
C) A decrease in inventories 
D) An increase in accounts receivable 
E) A decrease in accrued wages

The values or accounting numbers that are reported on the balance sheet are the same as the market values of the assets.

The balance sheet is a financial statement that measures the flow of funds into and out of various accounts over time, whereas the income statement measures the financial position of the firm at a specific point in time.

Which of the following financial statements shows a firm's financing activities (how funds were generated) and investment activities (how funds were used) over a particular period of time?

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

Which of the following mathematical expressions computes the net worth of a firm?

Which of the following ratios shows the relationship between a firm's current assets and its current liabilities?

Which of the following is true about a common size balance sheet?

Other things held constant, which of the following will not affect the current ratio, assuming an initial current ratio greater than 1.0?

Which of the following changes is considered a source of cash when preparing a statement of cash flow?

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

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Exam 2: Analysis of Financial Statements

The values or accounting numbers that are reported on the balance sheet are the same as the market values of the assets.

The balance sheet is a financial statement that measures the flow of funds into and out of various accounts over time, whereas the income statement measures the financial position of the firm at a specific point in time.

Which of the following financial statements shows a firm's financing activities (how funds were generated) and investment activities (how funds were used) over a particular period of time?

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

Which of the following mathematical expressions computes the net worth of a firm?

Which of the following ratios shows the relationship between a firm's current assets and its current liabilities?

Which of the following is true about a common size balance sheet?

Other things held constant, which of the following will not affect the current ratio, assuming an initial current ratio greater than 1.0?

Which of the following changes is considered a source of cash when preparing a statement of cash flow?

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