Question 1

Which ratio measures the operating return on the firm's assets irrespective of financial leverage and taxes?

Accepted Answer

A) basic earning power ratio 
B) profit margin 
C) return on assets 
D) operating leverage return 
A) basic earning power ratio 
B) profit margin 
C) return on assets 
D) operating leverage return

Question 2

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm's cash coverage ratio?

Accepted Answer

A) 1.00 times 
B) 1.67 times 
C) 2.33 times 
D) 2.45 times 
A) 1.00 times 
B) 1.67 times 
C) 2.33 times 
D) 2.45 times

Question 3

You have located the following information on Maize Company: debt ratio = 20 percent, capital intensity ratio = 1.25 times, profit margin = 12 percent, and dividend payout ratio = 10 percent. What is the sustainable growth rate for Maize?

Accepted Answer

A) 1.20 percent 
B) 10.10 percent 
C) 12.11 percent 
D) 73.26 percent 
A) 1.20 percent 
B) 10.10 percent 
C) 12.11 percent 
D) 73.26 percent

Question 4

Saddle and Bridle reported a profit margin of 12 percent, total asset turnover ratio of 2 times, debt-to?-equity ratio of 1.9 times, net income of $1 million, and dividends paid to common stockholders of $250,000. The firm has no preferred stock outstanding. What is Saddle and Bridle's internal growth rate?

Accepted Answer

A) 13.64 percent 
B) 18.00 percent 
C) 24.00 percent 
D) 21.95 percent 
A) 13.64 percent 
B) 18.00 percent 
C) 24.00 percent 
D) 21.95 percent

Question 5

You are thinking of investing in Wave Runnerz, Inc. You have only the following information on the firm at year-end 2013: net income = $10 million, total debt = $65 million, and debt ratio = 35 percent. What is Wave Runnerz's ROE for 2018?

Accepted Answer

A) 8.28 percent 
B) 15.38 percent 
C) 28.57 percent 
D) 43.96 percent 
A) 8.28 percent 
B) 15.38 percent 
C) 28.57 percent 
D) 43.96 percent

Question 6

Use the following information to calculate current assets: sales = $100 million, capital intensity ratio = 0.5 times, debt ratio = 30 percent, and fixed asset turnover ratio = 5 times.

Accepted Answer

A) $10m 
B) $15m 
C) $30m 
D) $50m 
A) $10m 
B) $15m 
C) $30m 
D) $50m

Question 7

Which of the following refer to ratios that measure the relationship between a firm's liquid (or current) assets and its current liabilities?

Accepted Answer

A) cross-section 
B) internal-growth 
C) liquidity 
D) market value 
A) cross-section 
B) internal-growth 
C) liquidity 
D) market value

Question 8

A firm ended the year with an average collection period of 20 days. The firm's credit sales were $50 million. What is the firm's year-end balance in accounts receivable?

Accepted Answer

A) $1.46 million 
B) $2.50 million 
C) $2.74 million 
D) $4.00 million 
A) $1.46 million 
B) $2.50 million 
C) $2.74 million 
D) $4.00 million

Question 9

A firm reported an ROE of 19 percent. The firm's debt ratio was 45 percent, sales were $12 million, and the capital intensity ratio was 1.1 times. Calculate the net income for the firm.

Accepted Answer

A) 0.34 million 
B) 1.38 million 
C) 1.93 million 
D) 2.06 million 
A) 0.34 million 
B) 1.38 million 
C) 1.93 million 
D) 2.06 million

Question 10

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?

Accepted Answer

A) $551,781 
B) $619,304 
C) $692,098 
D) $759,021 
A) $551,781 
B) $619,304 
C) $692,098 
D) $759,021

Question 11

You are thinking of investing in Tikki's Torches, Inc. You have only the following information on the firm at year-end 2018: net income = $500,000, total debt = $12 million, and debt ratio = 40 percent. What is Tikki's ROE for 2018?

Accepted Answer

A) 1.67 percent 
B) 2.78 percent 
C) 4.17 percent 
D) 10.42 percent 
A) 1.67 percent 
B) 2.78 percent 
C) 4.17 percent 
D) 10.42 percent

Question 12

Which of the following measures the operating return on the firm's assets, irrespective of financial leverage and taxes?

Accepted Answer

A) basic earnings power ratio 
B) profit margin 
C) return on assets 
D) return on equity 
A) basic earnings power ratio 
B) profit margin 
C) return on assets 
D) return on equity

Question 13

Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets?

Accepted Answer

A) debt management ratios 
B) equity ratios 
C) financial ratios 
D) liquidity ratios 
A) debt management ratios 
B) equity ratios 
C) financial ratios 
D) liquidity ratios

Question 14

A firm has a debt ratio of 45 percent, capital intensity ratio is 1.3 times, profit margin is 10 percent, and dividend payout ratio is 30 percent. Calculate the sustainable growth rate for the firm.

Accepted Answer

A) 1.56 percent 
B) 2.96 percent 
C) 3.05 percent 
D) 4.79 percent 
A) 1.56 percent 
B) 2.96 percent 
C) 3.05 percent 
D) 4.79 percent

Question 15

Which of the following is unlikely to have a high capital intensity ratio?

Accepted Answer

A) railroad 
B) automobile manufacturer 
C) law firm 
D) shipbuilder 
A) railroad 
B) automobile manufacturer 
C) law firm 
D) shipbuilder

Question 16

A firm that is efficient in inventory management will have

Accepted Answer

A) a high inventory turnover ratio and a low days sales in inventory ratio. 
B) a low inventory turnover ratio and a low days sales in inventory ratio. 
C) a high inventory turnover ratio and a high days sales in inventory ratio. 
D) a low inventory turnover ratio and a high days sales in inventory ratio. 
A) a high inventory turnover ratio and a low days sales in inventory ratio. 
B) a low inventory turnover ratio and a low days sales in inventory ratio. 
C) a high inventory turnover ratio and a high days sales in inventory ratio. 
D) a low inventory turnover ratio and a high days sales in inventory ratio.

Question 17

Which is true? Ratio analysis

Accepted Answer

A) can provide useful information on a firm's current position but should never be used to forecast future performance. 
B) can provide useful information on a firm's current position and hint at future performance. 
C) can provide useful information on a firm's past but not current position. 
D) can provide useful information on a firm's past and current position, but should never be used to forecast future performance. 
A) can provide useful information on a firm's current position but should never be used to forecast future performance. 
B) can provide useful information on a firm's current position and hint at future performance. 
C) can provide useful information on a firm's past but not current position. 
D) can provide useful information on a firm's past and current position, but should never be used to forecast future performance.

Question 18

Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2018. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?

Accepted Answer

A) $34.48m 
B) $65.52m 
C) $52.63m 
D) $100m 
A) $34.48m 
B) $65.52m 
C) $52.63m 
D) $100m

Question 19

Calculate the times interest earned ratio using the following information. Sales = $1.5 million, cost of goods sold = $800,000, depreciation expense = $100,000, addition to retained earnings = $85,000, dividends per share = $1.2, tax rate = 30 percent, and number of shares of common stock outstanding = 100,000. Assume the firm has no preferred stock.

Accepted Answer

A) 2.25 times 
B) 1.25 times 
C) 1.95 times 
D) 2.75 times 
A) 2.25 times 
B) 1.25 times 
C) 1.95 times 
D) 2.75 times

Question 20

To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks?

Accepted Answer

A) competitive analysis 
B) cross-industry analysis 
C) time-industry analysis 
D) time series analysis 
A) competitive analysis 
B) cross-industry analysis 
C) time-industry analysis 
D) time series analysis

Which ratio measures the operating return on the firm's assets irrespective of financial leverage and taxes?

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm's cash coverage ratio?

You have located the following information on Maize Company: debt ratio = 20 percent, capital intensity ratio = 1.25 times, profit margin = 12 percent, and dividend payout ratio = 10 percent. What is the sustainable growth rate for Maize?

You are thinking of investing in Wave Runnerz, Inc. You have only the following information on the firm at year-end 2013: net income = $10 million, total debt = $65 million, and debt ratio = 35 percent. What is Wave Runnerz's ROE for 2018?

Use the following information to calculate current assets: sales = $100 million, capital intensity ratio = 0.5 times, debt ratio = 30 percent, and fixed asset turnover ratio = 5 times.

Which of the following refer to ratios that measure the relationship between a firm's liquid (or current) assets and its current liabilities?

A firm ended the year with an average collection period of 20 days. The firm's credit sales were $50 million. What is the firm's year-end balance in accounts receivable?

A firm reported an ROE of 19 percent. The firm's debt ratio was 45 percent, sales were $12 million, and the capital intensity ratio was 1.1 times. Calculate the net income for the firm.

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?

You are thinking of investing in Tikki's Torches, Inc. You have only the following information on the firm at year-end 2018: net income = $500,000, total debt = $12 million, and debt ratio = 40 percent. What is Tikki's ROE for 2018?

Which of the following measures the operating return on the firm's assets, irrespective of financial leverage and taxes?

Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets?

A firm has a debt ratio of 45 percent, capital intensity ratio is 1.3 times, profit margin is 10 percent, and dividend payout ratio is 30 percent. Calculate the sustainable growth rate for the firm.

Which of the following is unlikely to have a high capital intensity ratio?

A firm that is efficient in inventory management will have

Which is true? Ratio analysis

Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2018. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?

To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 3: Analyzing Financial Statements

Which ratio measures the operating return on the firm's assets irrespective of financial leverage and taxes?

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm's cash coverage ratio?

You have located the following information on Maize Company: debt ratio = 20 percent, capital intensity ratio = 1.25 times, profit margin = 12 percent, and dividend payout ratio = 10 percent. What is the sustainable growth rate for Maize?

You are thinking of investing in Wave Runnerz, Inc. You have only the following information on the firm at year-end 2013: net income = $10 million, total debt = $65 million, and debt ratio = 35 percent. What is Wave Runnerz's ROE for 2018?

Use the following information to calculate current assets: sales = $100 million, capital intensity ratio = 0.5 times, debt ratio = 30 percent, and fixed asset turnover ratio = 5 times.

Which of the following refer to ratios that measure the relationship between a firm's liquid (or current) assets and its current liabilities?

A firm ended the year with an average collection period of 20 days. The firm's credit sales were $50 million. What is the firm's year-end balance in accounts receivable?

A firm reported an ROE of 19 percent. The firm's debt ratio was 45 percent, sales were $12 million, and the capital intensity ratio was 1.1 times. Calculate the net income for the firm.

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?

You are thinking of investing in Tikki's Torches, Inc. You have only the following information on the firm at year-end 2018: net income = $500,000, total debt = $12 million, and debt ratio = 40 percent. What is Tikki's ROE for 2018?

Which of the following measures the operating return on the firm's assets, irrespective of financial leverage and taxes?

Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets?

A firm has a debt ratio of 45 percent, capital intensity ratio is 1.3 times, profit margin is 10 percent, and dividend payout ratio is 30 percent. Calculate the sustainable growth rate for the firm.

Which of the following is unlikely to have a high capital intensity ratio?

A firm that is efficient in inventory management will have

Which is true? Ratio analysis

Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2018. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?

To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters