Question 1

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 2

Which one of these changes indicates an improvement in a firm's asset management efficiency?

Accepted Answer

A)  An increase in the amount of assets per dollar of sales 
B)  An increase in the inventory turnover rate 
C)  A decrease in the receivables turnover rate 
D)  An increase in the average days in inventory 
A)  An increase in the amount of assets per dollar of sales 
B)  An increase in the inventory turnover rate 
C)  A decrease in the receivables turnover rate 
D)  An increase in the average days in inventory

Question 3

When a firm's long-term debt-equity ratio is .98,the firm:

Accepted Answer

A)  has too much long-term debt in relation to leases. 
B)  has less long-term debt than equity. 
C)  is nearing insolvency. 
D)  has as much in long-term liabilities as in equity. 
A)  has too much long-term debt in relation to leases. 
B)  has less long-term debt than equity. 
C)  is nearing insolvency. 
D)  has as much in long-term liabilities as in equity.

Question 4

What must happen to asset turnover to leave ROE unchanged from its original 16% level if the operating profit margin is reduced from 8% to 6% and the leverage ratio increases from 1.2 to 1.6? Asset turnover must:

Accepted Answer

A)  remain constant. 
B)  increase from 1.46 to 2.33. 
C)  decrease from 1.74 to 1.67. 
D)  increase from 1.38 to 1.67. 
A)  remain constant. 
B)  increase from 1.46 to 2.33. 
C)  decrease from 1.74 to 1.67. 
D)  increase from 1.38 to 1.67.

Question 5

A company has total assets of $1,000,current liabilities of $130,and total liabilities of $350.If debt is the only long-term liability,what is the long-term debt ratio?

Accepted Answer

A)  0.19 
B)  0.25 
C)  0.36 
D)  0.31 
A)  0.19 
B)  0.25 
C)  0.36 
D)  0.31

Question 6

The current ratio is a good proxy for a firm's:

Accepted Answer

A)  liquidity. 
B)  efficiency. 
C)  degree of leverage. 
D)  profitability. 
A)  liquidity. 
B)  efficiency. 
C)  degree of leverage. 
D)  profitability.

Question 7

If a company uses cash to pay off some of its accounts payables,what effect will this have on its liquidity ratios,given that the ratios exceeded 1 before the payoff?

Accepted Answer

A)  The quick ratio and current ratio will both increase. 
B)  The quick ratio and current ratio will both decrease. 
C)  The quick ratio will increase but the current ratio will remain unchanged. 
D)  The current ratio will increase but the quick ratio will remain unchanged. 
A)  The quick ratio and current ratio will both increase. 
B)  The quick ratio and current ratio will both decrease. 
C)  The quick ratio will increase but the current ratio will remain unchanged. 
D)  The current ratio will increase but the quick ratio will remain unchanged.

Question 8

An all-equity firm reports a net profit margin of 10% on sales of $3 million.If the tax rate is 40%,what is the pretax profit

Accepted Answer

A)  $100,000 
B)  $300,000 
C)  $500,000 
D)  $800,000 
A)  $100,000 
B)  $300,000 
C)  $500,000 
D)  $800,000

Question 9

The difference between the current and quick ratios is that inventory has been subtracted from current assets.

Accepted Answer

A) True 
 B)False

Question 10

A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

Accepted Answer

A)  Current ratio will increase to 5.0. 
B)  Net working capital will increase to $500,000. 
C)  Current ratio will decrease. 
D)  Net working capital will not change. 
A)  Current ratio will increase to 5.0. 
B)  Net working capital will increase to $500,000. 
C)  Current ratio will decrease. 
D)  Net working capital will not change.

Question 11

What is primarily responsible for the potential distortion among the ROA of different firms when net income is used in the numerator of ROA?

Accepted Answer

A)  Firms have different dividend payout ratios. 
B)  Some firms use fully depreciated assets. 
C)  Financial leverage varies among firms. 
D)  Unprofitable firms will not have any tax liability. 
A)  Firms have different dividend payout ratios. 
B)  Some firms use fully depreciated assets. 
C)  Financial leverage varies among firms. 
D)  Unprofitable firms will not have any tax liability.

Question 12

After-tax operating income for a leveraged firm is defined as:

Accepted Answer

A)  net income + after-tax interest. 
B)  EBIT × (1 − tax rate). 
C)  net income + depreciation. 
D)  profit margin × sales. 
A)  net income + after-tax interest. 
B)  EBIT × (1 − tax rate). 
C)  net income + depreciation. 
D)  profit margin × sales.

Question 13

By how much must a firm reduce its assets in order to improve ROA from 10% to 12% if the firm's operating profit margin is 5% on sales of $4 million? Assume that the reduction in assets has no effect on sales or profit margin

Accepted Answer

A)  $240,000 
B)  $333,333 
C)  $400,000 
D)  $516,167 
A)  $240,000 
B)  $333,333 
C)  $400,000 
D)  $516,167

Question 14

Lease obligations are included in certain leverage ratios because leases:

Accepted Answer

A)  require the payment of interest. 
B)  represent long-term fixed obligations. 
C)  must be financed through a bank. 
D)  are perpetual obligations. 
A)  require the payment of interest. 
B)  represent long-term fixed obligations. 
C)  must be financed through a bank. 
D)  are perpetual obligations.

Question 15

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 16

The use of financial leverage will be detrimental to a firm's ROE if the:

Accepted Answer

A)  firm currently has no long-term debt. 
B)  firm's current ratio is greater than 1. 
C)  interest expense exceeds the tax liability. 
D)  interest rate on debt exceeds the firm's ROA. 
A)  firm currently has no long-term debt. 
B)  firm's current ratio is greater than 1. 
C)  interest expense exceeds the tax liability. 
D)  interest rate on debt exceeds the firm's ROA.

Question 17

A firm's after-tax operating income was $1,000,000 in 2016.It started the year with total capital of $8,000,000 and raised an additional $1 million of capital during the year.The additional capital raised during 2016 only started to affect the operating income in 2017.Which value best represents the return on capital for 2016?

Accepted Answer

A)  12.5% 
B)  11.8% 
C)  11.1% 
D)  10.0% 
A)  12.5% 
B)  11.8% 
C)  11.1% 
D)  10.0%

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

Which one of these changes indicates an improvement in a firm's asset management efficiency?

When a firm's long-term debt-equity ratio is .98,the firm:

What must happen to asset turnover to leave ROE unchanged from its original 16% level if the operating profit margin is reduced from 8% to 6% and the leverage ratio increases from 1.2 to 1.6? Asset turnover must:

A company has total assets of $1,000,current liabilities of $130,and total liabilities of $350.If debt is the only long-term liability,what is the long-term debt ratio?

The current ratio is a good proxy for a firm's:

If a company uses cash to pay off some of its accounts payables,what effect will this have on its liquidity ratios,given that the ratios exceeded 1 before the payoff?

An all-equity firm reports a net profit margin of 10% on sales of $3 million.If the tax rate is 40%,what is the pretax profit

The difference between the current and quick ratios is that inventory has been subtracted from current assets.

A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

What is primarily responsible for the potential distortion among the ROA of different firms when net income is used in the numerator of ROA?

After-tax operating income for a leveraged firm is defined as:

By how much must a firm reduce its assets in order to improve ROA from 10% to 12% if the firm's operating profit margin is 5% on sales of $4 million? Assume that the reduction in assets has no effect on sales or profit margin

Lease obligations are included in certain leverage ratios because leases:

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

The use of financial leverage will be detrimental to a firm's ROE if the:

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 Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers,Acquisitions,and Corporate Control

International Financial Management

Options

Risk Management

Filters

Exam 4: Measuring Corporate Performance

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

Which one of these changes indicates an improvement in a firm's asset management efficiency?

When a firm's long-term debt-equity ratio is .98,the firm:

What must happen to asset turnover to leave ROE unchanged from its original 16% level if the operating profit margin is reduced from 8% to 6% and the leverage ratio increases from 1.2 to 1.6? Asset turnover must:

A company has total assets of $1,000,current liabilities of $130,and total liabilities of $350.If debt is the only long-term liability,what is the long-term debt ratio?

The current ratio is a good proxy for a firm's:

If a company uses cash to pay off some of its accounts payables,what effect will this have on its liquidity ratios,given that the ratios exceeded 1 before the payoff?

An all-equity firm reports a net profit margin of 10% on sales of $3 million.If the tax rate is 40%,what is the pretax profit

The difference between the current and quick ratios is that inventory has been subtracted from current assets.

A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

What is primarily responsible for the potential distortion among the ROA of different firms when net income is used in the numerator of ROA?

After-tax operating income for a leveraged firm is defined as:

By how much must a firm reduce its assets in order to improve ROA from 10% to 12% if the firm's operating profit margin is 5% on sales of $4 million? Assume that the reduction in assets has no effect on sales or profit margin

Lease obligations are included in certain leverage ratios because leases:

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

The use of financial leverage will be detrimental to a firm's ROE if the:

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 Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers,Acquisitions,and Corporate Control

International Financial Management

Options

Risk Management

Filters