Question 1

A firm has a P/E ratio of 24 and a ROE of 12%. Its market-to-book-value ratio is ________.

Accepted Answer

A) 2.88 
B) 2.00 
C) 1.75 
D) 0.69 
A) 2.88 
B) 2.00 
C) 1.75 
D) 0.69

Question 2

Which of the following assets is most liquid?

Accepted Answer

A) Cash equivalents 
B) Receivables 
C) Inventories 
D) Plant and equipment 
A) Cash equivalents 
B) Receivables 
C) Inventories 
D) Plant and equipment

Question 3

Which of the following would result in a cash inflow under the heading 'Cash flow from investing' in the statement of cash flows?

Accepted Answer

A) Purchase of capital equipment 
B) Payments to suppliers for inventory 
C) Collections on receivables 
D) Sale of production machinery 
A) Purchase of capital equipment 
B) Payments to suppliers for inventory 
C) Collections on receivables 
D) Sale of production machinery

Question 4

A firm has a ROE of 20% and a market-to-book ratio of 2.38. Its P/E ratio is ________.

Accepted Answer

A) 8.40 
B) 11.90 
C) 17.62 
D) 47.60 
A) 8.40 
B) 11.90 
C) 17.62 
D) 47.60

Question 5

Economic Value Added (EVA) is:

Accepted Answer

A) The difference between the return on assets and the opportunity cost of capital times the capital base 
B) ROA x ROE 
C) A measure of the firm's abnormal return 
D) Largest for high-growth firms 
A) The difference between the return on assets and the opportunity cost of capital times the capital base 
B) ROA x ROE 
C) A measure of the firm's abnormal return 
D) Largest for high-growth firms

Question 6

The highest possible value for the interest burden ratio is ________ and this occurs when the firm ________.

Accepted Answer

A) 0; uses as much debt as possible 
B) 1; uses debt to the point where ROA = interest cost of debt 
C) 1; uses no interest bearing debt 
D) -1; pays down its existing debts 
A) 0; uses as much debt as possible 
B) 1; uses debt to the point where ROA = interest cost of debt 
C) 1; uses no interest bearing debt 
D) -1; pays down its existing debts

Question 7

Look at the following table of data for Key Biscuit Company:   What must have caused the firm's ROE to drop?

Accepted Answer

A) The firm began using more debt as a percentage of financing. 
B) The firm began using less debt as a percentage of financing. 
C) The compound leverage ratio was less than 1. 
D) The operating ROA was declining. 
A) The firm began using more debt as a percentage of financing. 
B) The firm began using less debt as a percentage of financing. 
C) The compound leverage ratio was less than 1. 
D) The operating ROA was declining.

Question 8

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013.   What is the net cash provided by or used in investing activities of Haven Hardware?

Accepted Answer

A) ($12 000) 
B) ($62 000) 
C) $12 000 
D) $164 000 
A) ($12 000) 
B) ($62 000) 
C) $12 000 
D) $164 000

Question 9

A firm has a tax burden of 0.7, a leverage ratio of 1.3, an interest burden of 0.8, and a return on sales ratio of 10%. The firm generates $2.28 in sales per dollar of assets. What is the firm's ROE?

Accepted Answer

A) 12.4% 
B) 14.5% 
C) 16.6% 
D) 17.8% 
A) 12.4% 
B) 14.5% 
C) 16.6% 
D) 17.8%

Question 10

Benjamin Graham thought that the benefits from detailed analysis of a firm's financial statements had ________ over his long professional life.

Accepted Answer

A) increased greatly 
B) increased slightly 
C) remained constant 
D) decreased 
A) increased greatly 
B) increased slightly 
C) remained constant 
D) decreased

Question 11

The process of decomposing ROE into a series of component ratios is called ________.

Accepted Answer

A) DuPont analysis 
B) technical analysis 
C) comparative analysis 
D) liquidity analysis 
A) DuPont analysis 
B) technical analysis 
C) comparative analysis 
D) liquidity analysis

Question 12

If a firm has an ROA of 8%, a debt/equity ratio of 0.5, its ROE is ________.

Accepted Answer

A) 4% 
B) 6% 
C) 8% 
D) 12% 
A) 4% 
B) 6% 
C) 8% 
D) 12%

Question 13

The financial statements of Burnaby Mountain Trading Company are given below.   Note: The common shares are trading in the share market for $27 each.
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's current ratio for 2008 is ________.

Accepted Answer

A) 1.30 
B) 1.50 
C) 1.69 
D) 2.83 
A) 1.30 
B) 1.50 
C) 1.69 
D) 2.83

Question 14

The financial statements of Burnaby Mountain Trading Company are given below.   Note: The common shares are trading in the share market for $27 each.
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's quick ratio for 2008 is ________.

Accepted Answer

A) 1.30 
B) 1.50 
C) 1.69 
D) 2.83 
A) 1.30 
B) 1.50 
C) 1.69 
D) 2.83

Question 15

Operating ROA can be found as the product of ________.

Accepted Answer

A) Return on sales x ATO 
B) Tax burden x Interest burden 
C) Interest burden x Leverage ratio 
D) ROE x Dividend payout ratio 
A) Return on sales x ATO 
B) Tax burden x Interest burden 
C) Interest burden x Leverage ratio 
D) ROE x Dividend payout ratio

A firm has a P/E ratio of 24 and a ROE of 12%. Its market-to-book-value ratio is ________.

Which of the following assets is most liquid?

Which of the following would result in a cash inflow under the heading 'Cash flow from investing' in the statement of cash flows?

A firm has a ROE of 20% and a market-to-book ratio of 2.38. Its P/E ratio is ________.

Economic Value Added (EVA) is:

The highest possible value for the interest burden ratio is and this occurs when the firm .

Look at the following table of data for Key Biscuit Company: What must have caused the firm's ROE to drop?

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the net cash provided by or used in investing activities of Haven Hardware?

A firm has a tax burden of 0.7, a leverage ratio of 1.3, an interest burden of 0.8, and a return on sales ratio of 10%. The firm generates $2.28 in sales per dollar of assets. What is the firm's ROE?

Benjamin Graham thought that the benefits from detailed analysis of a firm's financial statements had ________ over his long professional life.

The process of decomposing ROE into a series of component ratios is called ________.

If a firm has an ROA of 8%, a debt/equity ratio of 0.5, its ROE is ________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's current ratio for 2008 is ________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's quick ratio for 2008 is ________.

Operating ROA can be found as the product of ________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Managed Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis and Behavioral Finance

Bond Prices and Yields

Managing Bond Portfolios

Equity Valuation

Macroeconomic and Industry Analysis

Options and Risk Management

Futures and Risk Management

Investors and the Investment Process

Hedge Funds

Portfolio Performance Evaluation

Filters

Exam 13: Financial Statement Analysis

A firm has a P/E ratio of 24 and a ROE of 12%. Its market-to-book-value ratio is ________.

Which of the following assets is most liquid?

Which of the following would result in a cash inflow under the heading 'Cash flow from investing' in the statement of cash flows?

A firm has a ROE of 20% and a market-to-book ratio of 2.38. Its P/E ratio is ________.

Economic Value Added (EVA) is:

The highest possible value for the interest burden ratio is ________ and this occurs when the firm ________.

Look at the following table of data for Key Biscuit Company: What must have caused the firm's ROE to drop?

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the net cash provided by or used in investing activities of Haven Hardware?

A firm has a tax burden of 0.7, a leverage ratio of 1.3, an interest burden of 0.8, and a return on sales ratio of 10%. The firm generates $2.28 in sales per dollar of assets. What is the firm's ROE?

Benjamin Graham thought that the benefits from detailed analysis of a firm's financial statements had ________ over his long professional life.

The process of decomposing ROE into a series of component ratios is called ________.

If a firm has an ROA of 8%, a debt/equity ratio of 0.5, its ROE is ________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's current ratio for 2008 is ________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's quick ratio for 2008 is ________.

Operating ROA can be found as the product of ________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Managed Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis and Behavioral Finance

Bond Prices and Yields

Managing Bond Portfolios

Equity Valuation

Macroeconomic and Industry Analysis

Options and Risk Management

Futures and Risk Management

Investors and the Investment Process

Hedge Funds

Portfolio Performance Evaluation

Filters

The highest possible value for the interest burden ratio is and this occurs when the firm .