Question 1

Which one of the following statements is most likely correct for a firm with an average collection period of 90 days?

Accepted Answer

A)  its average daily sales are low. 
B)  its average daily sales are high. 
C)  its current ratio will be high. 
D)  it is providing financing for approximately 25% of its annual sales. 
A)  its average daily sales are low. 
B)  its average daily sales are high. 
C)  its current ratio will be high. 
D)  it is providing financing for approximately 25% of its annual sales.

Question 2

What is the market price of a share of stock for a firm with 100,000 shares outstanding,a book value of equity of $3,000,000,and a market-to-book ratio of 3?

Accepted Answer

A)  $10 
B)  $30 
C)  $90 
D)  $105 
A)  $10 
B)  $30 
C)  $90 
D)  $105

Question 3

A firm's profit margin when ignoring the effects of financing is 20% with an EBIT of $1.5 million and sales of $5 million.How much did the firm pay in taxes?(Enter the answer in dollars)

Accepted Answer

A)  $50,000 
B)  $300,000 
C)  $350,000 
D)  $500,000 
A)  $50,000 
B)  $300,000 
C)  $350,000 
D)  $500,000

Question 4

ROE is equal to ROA when the firm has no debt.

Accepted Answer

A) True 
 B)False

Question 5

A firm has average daily expenses of $2.13 million and average accounts payable of $112.7 million.On average,how many days does it take the firm to pay its bills?

Accepted Answer

A)  63.47 days 
B)  52.91 days 
C)  48.19 days 
D)  59.03 days 
A)  63.47 days 
B)  52.91 days 
C)  48.19 days 
D)  59.03 days

Question 6

The inventory turnover ratio times the average days in inventory equals 365.

Accepted Answer

A) True 
 B)False

Question 7

Which one of the following will cause a reduction in the NWC turnover ratio all else held constant?

Accepted Answer

A)  a decrease in sales. 
B)  an increase in average payables. 
C)  an increase in average inventory. 
D)  an increase in the average cash balance. 
A)  a decrease in sales. 
B)  an increase in average payables. 
C)  an increase in average inventory. 
D)  an increase in the average cash balance.

Question 8

Calculate the average collection period for Dots Inc.if its accounts receivables were $550 at the beginning of a year in which the firm generated $3,000 of sales?

Accepted Answer

A)  60 days 
B)  61 days 
C)  67 days 
D)  73 days 
A)  60 days 
B)  61 days 
C)  67 days 
D)  73 days

Question 9

Which of these assets is generally considered to be the most liquid?

Accepted Answer

A)  buildings 
B)  land 
C)  finished goods inventory 
D)  accounts receivable 
A)  buildings 
B)  land 
C)  finished goods inventory 
D)  accounts receivable

Question 10

Which of the following is the least effective measure of operating performance?

Accepted Answer

A)  ROC 
B)  ROA 
C)  ROE 
D)  All of these are equally ineffective measures of operating performance. 
A)  ROC 
B)  ROA 
C)  ROE 
D)  All of these are equally ineffective measures of operating performance.

Question 11

In the past year,TVG had revenues of $3 million,cost of goods sold of $2.5 million,and depreciation expense of $200,000.The firm has a single issue of debt outstanding with a face value of $1 million,market value of $.92 million,and a coupon rate of 8%.What is the firm's times interest earned ratio?(Use value in dollars)

Accepted Answer

A)  3.75 
B)  2.98 
C)  2.80 
D)  3.40 
A)  3.75 
B)  2.98 
C)  2.80 
D)  3.40

Question 12

A firm with no leases has a long-term debt-equity ratio of 50%.This means that the book value of equity:

Accepted Answer

A)  equals the book value of long-term debt. 
B)  is less than the book value of long-term debt. 
C)  is greater than the book value of long-term debt. 
D)  is unknown in relation to the book value of long-term debt. 
A)  equals the book value of long-term debt. 
B)  is less than the book value of long-term debt. 
C)  is greater than the book value of long-term debt. 
D)  is unknown in relation to the book value of long-term debt.

Question 13

The income statement of a firm shows the value of its assets and liabilities over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 14

What are the annual sales for a firm with $400,000 in debt,a total debt ratio of .4,and an asset turnover of 3?

Accepted Answer

A)  $333,333 
B)  $1,200,000 
C)  $1,800,000 
D)  $3,000,000 
A)  $333,333 
B)  $1,200,000 
C)  $1,800,000 
D)  $3,000,000

Question 15

A retail store with zero net working capital has:

Accepted Answer

A)  no cash or marketable securities. 
B)  insufficient inventory. 
C)  no current debt. 
D)  a quick ratio that is less than 1. 
A)  no cash or marketable securities. 
B)  insufficient inventory. 
C)  no current debt. 
D)  a quick ratio that is less than 1.

Question 16

If a firm's total debt ratio is greater than .5,then:

Accepted Answer

A)  its current liabilities are quite high. 
B)  its debt-equity ratio exceeds 1.0. 
C)  it has too few total assets. 
D)  it has more long-term debt than equity. 
A)  its current liabilities are quite high. 
B)  its debt-equity ratio exceeds 1.0. 
C)  it has too few total assets. 
D)  it has more long-term debt than equity.

Question 17

A total debt ratio of .35:

Accepted Answer

A)  indicates that the firm is financed with 35% long-term debt. 
B)  would exist if a firm had liabilities of $700 and assets of $2,000. 
C)  indicates that 35 cents of every dollar of capital is in the form of short-term debt. 
D)  indicates that 35 cents of every dollar of capital is in the form of long-term debt. 
A)  indicates that the firm is financed with 35% long-term debt. 
B)  would exist if a firm had liabilities of $700 and assets of $2,000. 
C)  indicates that 35 cents of every dollar of capital is in the form of short-term debt. 
D)  indicates that 35 cents of every dollar of capital is in the form of long-term debt.

Exam 4: Measuring Corporate Performance

Which one of the following statements is most likely correct for a firm with an average collection period of 90 days?

What is the market price of a share of stock for a firm with 100,000 shares outstanding,a book value of equity of $3,000,000,and a market-to-book ratio of 3?

A firm's profit margin when ignoring the effects of financing is 20% with an EBIT of $1.5 million and sales of $5 million.How much did the firm pay in taxes?(Enter the answer in dollars)

ROE is equal to ROA when the firm has no debt.

A firm has average daily expenses of $2.13 million and average accounts payable of $112.7 million.On average,how many days does it take the firm to pay its bills?

The inventory turnover ratio times the average days in inventory equals 365.

Which one of the following will cause a reduction in the NWC turnover ratio all else held constant?

Calculate the average collection period for Dots Inc.if its accounts receivables were $550 at the beginning of a year in which the firm generated $3,000 of sales?

Which of these assets is generally considered to be the most liquid?

Which of the following is the least effective measure of operating performance?

A firm with no leases has a long-term debt-equity ratio of 50%.This means that the book value of equity:

The income statement of a firm shows the value of its assets and liabilities over a specified period of time.

What are the annual sales for a firm with $400,000 in debt,a total debt ratio of .4,and an asset turnover of 3?

A retail store with zero net working capital has:

If a firm's total debt ratio is greater than .5,then:

A total debt ratio of .35:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

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