Question 1

A firm's current ratio is above the industry average; however, the firm's quick ratio is below the industry average.These ratios suggest that the firm

Accepted Answer

A) has relatively more total current assets and even more inventory than other firms in the industry. 
B) is very efficient at managing inventories. 
C) has liquidity that is superior to the average firm in the industry. 
D) is near technical insolvency. 
A) has relatively more total current assets and even more inventory than other firms in the industry. 
B) is very efficient at managing inventories. 
C) has liquidity that is superior to the average firm in the industry. 
D) is near technical insolvency.

Question 2

A firm has a market to book value ratio that is equivalent to the industry average and an ROE that is less than the industry average, which implies

Accepted Answer

A) the firm has a higher P/E ratio than other firms in the industry. 
B) the firm is more likely to avoid insolvency in the short run than other firms in the industry. 
C) the firm is more profitable than other firms in the industry. 
D) the firm is utilizing its assets more efficiently than other firms in the industry. 
A) the firm has a higher P/E ratio than other firms in the industry. 
B) the firm is more likely to avoid insolvency in the short run than other firms in the industry. 
C) the firm is more profitable than other firms in the industry. 
D) the firm is utilizing its assets more efficiently than other firms in the industry.

Question 3

The financial statements of Midwest Tours are given below.   Refer to the financial statements of Midwest Tours.The firm's return on equity ratio for 2009 is

Accepted Answer

A) 12.24%. 
B) 14.63%. 
C) 15.50%. 
D) 14.50%. 
E) 16.9%. 
A) 12.24%. 
B) 14.63%. 
C) 15.50%. 
D) 14.50%. 
E) 16.9%.

Question 4

One problem with comparing financial ratios prepared by different reporting agencies is

Accepted Answer

A) some agencies receive financial information later than others. 
B) agencies vary in their policies as to what is included in specific calculations. 
C) some agencies are careless in their reporting. 
D) some firms are more conservative in their accounting practices. 
E) None of the options 
A) some agencies receive financial information later than others. 
B) agencies vary in their policies as to what is included in specific calculations. 
C) some agencies are careless in their reporting. 
D) some firms are more conservative in their accounting practices. 
E) None of the options

Question 5

The financial statements of Midwest Tours are given below.   Refer to the financial statements of Midwest Tours.The firm's fixed asset turnover ratio for 2009 is

Accepted Answer

A) 1.45. 
B) 1.63. 
C) 1.20. 
D) 1.58. 
A) 1.45. 
B) 1.63. 
C) 1.20. 
D) 1.58.

Question 6

Fundamental analysis uses

Accepted Answer

A) earnings and dividends prospects. 
B) relative strength. 
C) price momentum. 
D) earnings and dividends prospects and relative strength. 
E) earnings and dividends prospects and price momentum. 
A) earnings and dividends prospects. 
B) relative strength. 
C) price momentum. 
D) earnings and dividends prospects and relative strength. 
E) earnings and dividends prospects and price momentum.

Question 7

The financial statements of Black Barn Company are given below.   Refer to the financial statements of Black Barn Company.The firm's current ratio for 2009 is

Accepted Answer

A) 2.31. 
B) 1.87. 
C) 2.22. 
D) 2.46. 
A) 2.31. 
B) 1.87. 
C) 2.22. 
D) 2.46.

Question 8

To create a common size balance sheet ____________ all items on the balance sheet by ____________.

Accepted Answer

A) multiply; owners' equity 
B) multiply; total assets 
C) divide; owners' equity 
D) divide; total assets 
E) multiply; debt 
A) multiply; owners' equity 
B) multiply; total assets 
C) divide; owners' equity 
D) divide; total assets 
E) multiply; debt

Question 9

If you wish to compute economic earnings and are trying to decide how to account for inventory,

Accepted Answer

A) FIFO is better than LIFO. 
B) LIFO is better than FIFO. 
C) FIFO and LIFO are equally good. 
D) FIFO and LIFO are equally bad. 
E) None of the options 
A) FIFO is better than LIFO. 
B) LIFO is better than FIFO. 
C) FIFO and LIFO are equally good. 
D) FIFO and LIFO are equally bad. 
E) None of the options

Question 10

The financial statements of Black Barn Company are given below.   Refer to the financial statements of Black Barn Company.The firm's return on sales ratio for 2009 is

Accepted Answer

A) 15.5%. 
B) 14.6%. 
C) 14.0%. 
D) 15.0%. 
E) 16.5%. 
A) 15.5%. 
B) 14.6%. 
C) 14.0%. 
D) 15.0%. 
E) 16.5%.

Question 11

A firm has an ROA of 14%, a debt/equity ratio of 0.8, a tax rate of 35%, and the interest rate on the debt is 10%.The firm's ROE is

Accepted Answer

A) 11.18%. 
B) 8.97%. 
C) 11.54%. 
D) 12.62%. 
A) 11.18%. 
B) 8.97%. 
C) 11.54%. 
D) 12.62%.

Question 12

Common size income statements make it easier to compare firms

Accepted Answer

A) that use different inventory valuation methods (FIFO vs.LIFO). 
B) in different industries. 
C) with different degree of leverage. 
D) of different sizes. 
A) that use different inventory valuation methods (FIFO vs.LIFO). 
B) in different industries. 
C) with different degree of leverage. 
D) of different sizes.

Question 13

__________ provides a snapshot of the financial condition of the firm at a particular time.

Accepted Answer

A) The balance sheet 
B) The income statement 
C) The statement of cash flows 
D) All of the options 
E) None of the options 
A) The balance sheet 
B) The income statement 
C) The statement of cash flows 
D) All of the options 
E) None of the options

Question 14

______ is a measure of what the firm would have earned if it didn't have any obligations to creditors or tax authorities.

Accepted Answer

A) Net Sales 
B) Operating Income 
C) Net Income 
D) Non-operating Income 
E) Earnings before interest and taxes 
A) Net Sales 
B) Operating Income 
C) Net Income 
D) Non-operating Income 
E) Earnings before interest and taxes

Question 15

FOX Company has a ratio of (total debt/total assets) that is above the industry average, and a ratio of (long term debt/equity) that is below the industry average.These ratios suggest that the firm

Accepted Answer

A) utilizes assets effectively. 
B) has too much equity in the capital structure. 
C) has relatively high current liabilities. 
D) has a relatively low dividend payout ratio. 
E) None of the options 
A) utilizes assets effectively. 
B) has too much equity in the capital structure. 
C) has relatively high current liabilities. 
D) has a relatively low dividend payout ratio. 
E) None of the options

Question 16

The financial statements of Midwest Tours are given below.   Refer to the financial statements of Midwest Tours.The firm's times interest earned ratio for 2009 is

Accepted Answer

A) 2.897. 
B) 2.719. 
C) 3.375. 
D) 3.462. 
A) 2.897. 
B) 2.719. 
C) 3.375. 
D) 3.462.

Question 17

The financial statements of Snapit Company are given below.   Refer to the financial statements of Snapit Company.The firm's average collection period for 2009 is _______ days.

Accepted Answer

A) 47.91 
B) 48.53 
C) 46.06 
D) 47.65 
E) None of the options 
A) 47.91 
B) 48.53 
C) 46.06 
D) 47.65 
E) None of the options

Question 18

The P/E ratio that is based on a firm's financial statements and reported in the newspaper stock listings is different from the P/E ratio derived from the dividend discount model (DDM) because

Accepted Answer

A) the DDM uses a different price in the numerator. 
B) the DDM uses different earnings measures in the denominator. 
C) the prices reported are not accurate. 
D) the people who construct the ratio from financial statements have inside information. 
E) They are not different-this is a "trick" question. 
A) the DDM uses a different price in the numerator. 
B) the DDM uses different earnings measures in the denominator. 
C) the prices reported are not accurate. 
D) the people who construct the ratio from financial statements have inside information. 
E) They are not different-this is a "trick" question.

Question 19

The financial statements of Black Barn Company are given below.   Refer to the financial statements of Black Barn Company.The firm's leverage ratio for 2009 is

Accepted Answer

A) 1.65. 
B) 1.89. 
C) 2.64. 
D) 1.31. 
E) 1.56. 
A) 1.65. 
B) 1.89. 
C) 2.64. 
D) 1.31. 
E) 1.56.

Question 20

The financial statements of Midwest Tours are given below.   Refer to the financial statements of Midwest Tours.The firm's market to book value for 2009 is

Accepted Answer

A) 0.24. 
B) 0.95. 
C) 0.71. 
D) 1.12. 
A) 0.24. 
B) 0.95. 
C) 0.71. 
D) 1.12.

Exam 19: Financial Statement Analysis

A firm's current ratio is above the industry average; however, the firm's quick ratio is below the industry average.These ratios suggest that the firm

A firm has a market to book value ratio that is equivalent to the industry average and an ROE that is less than the industry average, which implies

The financial statements of Midwest Tours are given below. Refer to the financial statements of Midwest Tours.The firm's return on equity ratio for 2009 is

One problem with comparing financial ratios prepared by different reporting agencies is

The financial statements of Midwest Tours are given below. Refer to the financial statements of Midwest Tours.The firm's fixed asset turnover ratio for 2009 is

Fundamental analysis uses

The financial statements of Black Barn Company are given below. Refer to the financial statements of Black Barn Company.The firm's current ratio for 2009 is

To create a common size balance sheet ____________ all items on the balance sheet by ____________.

If you wish to compute economic earnings and are trying to decide how to account for inventory,

The financial statements of Black Barn Company are given below. Refer to the financial statements of Black Barn Company.The firm's return on sales ratio for 2009 is

A firm has an ROA of 14%, a debt/equity ratio of 0.8, a tax rate of 35%, and the interest rate on the debt is 10%.The firm's ROE is

Common size income statements make it easier to compare firms

__________ provides a snapshot of the financial condition of the firm at a particular time.

______ is a measure of what the firm would have earned if it didn't have any obligations to creditors or tax authorities.

FOX Company has a ratio of (total debt/total assets) that is above the industry average, and a ratio of (long term debt/equity) that is below the industry average.These ratios suggest that the firm

The financial statements of Midwest Tours are given below. Refer to the financial statements of Midwest Tours.The firm's times interest earned ratio for 2009 is

The financial statements of Snapit Company are given below. Refer to the financial statements of Snapit Company.The firm's average collection period for 2009 is _______ days.

The P/E ratio that is based on a firm's financial statements and reported in the newspaper stock listings is different from the P/E ratio derived from the dividend discount model (DDM) because

The financial statements of Black Barn Company are given below. Refer to the financial statements of Black Barn Company.The firm's leverage ratio for 2009 is

The financial statements of Midwest Tours are given below. Refer to the financial statements of Midwest Tours.The firm's market to book value for 2009 is

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

To create a common size balance sheet all items on the balance sheet by .