Question 1

__________ of the cash flow generated by the firm's operations,investments and financial activities.

Accepted Answer

A) The balance sheet is a report 
B) The income statement is a report 
C) The statement of cash flows is a report 
D) The auditor's statement of financial condition 
E) None of the above is a report 
A) The balance sheet is a report 
B) The income statement is a report 
C) The statement of cash flows is a report 
D) The auditor's statement of financial condition 
E) None of the above is a report

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 
E) none of the above 
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 
E) none of the above

Question 3

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

Accepted Answer

A) 3.15 
B) 3.63 
C) 3.69 
D) 2.58 
E) 4.20 
A) 3.15 
B) 3.63 
C) 3.69 
D) 2.58 
E) 4.20

Question 4

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to __________ income,and the level of interest expense reported tends to __________ income.

Accepted Answer

A) understate, overstate 
B) understate, understate 
C) overstate, understate 
D) overstate, overstate 
E) There is no discernable pattern. 
A) understate, overstate 
B) understate, understate 
C) overstate, understate 
D) overstate, overstate 
E) There is no discernable pattern.

Question 5

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

Accepted Answer

A) 1.98 
B) 2.47 
C) 0.65 
D) 1.53 
E) none of the above 
A) 1.98 
B) 2.47 
C) 0.65 
D) 1.53 
E) none of the above

Question 6

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 above 
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 above

Question 7

Economic value added (EVA)is also known as

Accepted Answer

A) excess capacity. 
B) excess income. 
C) value of assets. 
D) accounting value added. 
E) residual income. 
A) excess capacity. 
B) excess income. 
C) value of assets. 
D) accounting value added. 
E) residual income.

Question 8

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

Accepted Answer

A) 1.69 
B) 1.52 
C) 1.23 
D) 1.07 
E) 1.00 
A) 1.69 
B) 1.52 
C) 1.23 
D) 1.07 
E) 1.00

Question 9

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

Accepted Answer

A) 16.90% 
B) 15.63% 
C) 14.00% 
D) 15.00% 
E) 16.24% 
A) 16.90% 
B) 15.63% 
C) 14.00% 
D) 15.00% 
E) 16.24%

Question 10

To create a common size income statement ____________ all items on the income statement by ____________.

Accepted Answer

A) multiply; net income 
B) multiply; total revenue 
C) divide; net income 
D) divide; total revenue 
E) multiply; COGS 
A) multiply; net income 
B) multiply; total revenue 
C) divide; net income 
D) divide; total revenue 
E) multiply; COGS

Question 11

A firm has a (net profit / pretax profit ratio)of 0.625,a leverage ratio of 1.2,a (pretax profit / EBIT)of 0.9,an ROE of 17.82%,a current ratio of 8,and a return on sales ratio of 8%.The firm's asset turnover is _________.

Accepted Answer

A) 0.3 
B) 1.3 
C) 2.3 
D) 3.3 
E) none of the above 
A) 0.3 
B) 1.3 
C) 2.3 
D) 3.3 
E) none of the above

Question 12

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 
E) none of the above 
A) 2.31 
B) 1.87 
C) 2.22 
D) 2.46 
E) none of the above

Question 13

Publicly traded firms must prepare audited financial statements according to generally accepted accounting principles (GAAP).How do comparability problems arise?

Accepted Answer

. Many accounts may be valued by more th

Question 14

Comparability problems arise because

Accepted Answer

A) firms may use different generally accepted accounting principles. 
B) inflation may affect firms differently due to accounting conventions used. 
C) financial analysts do not know how to compare financial statements. 
D) A and B. 
E) A and C. 
A) firms may use different generally accepted accounting principles. 
B) inflation may affect firms differently due to accounting conventions used. 
C) financial analysts do not know how to compare financial statements. 
D) A and B. 
E) A and C.

Question 15

In periods of inflation,accounting depreciation is __________ relative to replacement cost and real economic income is________.

Accepted Answer

A) overstated, overstated 
B) overstated, understated 
C) understated, overstated 
D) understated, understated 
E) correctly,correctly 
A) overstated, overstated 
B) overstated, understated 
C) understated, overstated 
D) understated, understated 
E) correctly,correctly

Question 16

Common size financial statements make it easier to compare firms ____________.

Accepted Answer

A) of different sizes 
B) in different industries 
C) with different degree of leverage 
D) that use different inventory valuation methods (FIFO vs.LIFO) 
E) none of the above 
A) of different sizes 
B) in different industries 
C) with different degree of leverage 
D) that use different inventory valuation methods (FIFO vs.LIFO) 
E) none of the above

Question 17

The financial statements of Snapit Company are given below.  
-Refer to the financial statements of Snapit Company.The firm's times interest earned ratio for 2009 is __________.

Accepted Answer

A) 2.26 
B) 3.16 
C) 3.84 
D) 3.31 
E) none of the above 
A) 2.26 
B) 3.16 
C) 3.84 
D) 3.31 
E) none of the above

Question 18

Which of the following would best explain a situation where the ratio of (net income/total equity)of a firm is higher than the industry average,while the ratio of (net income/total assets)is lower than the industry average?

Accepted Answer

A) The firm's net profit margin is higher than the industry average. 
B) The firm's asset turnover is higher than the industry average. 
C) The firm's equity multiplier must be lower than the industry average. 
D) The firm's debt ratio is higher than the industry average. 
E) None of the above. 
A) The firm's net profit margin is higher than the industry average. 
B) The firm's asset turnover is higher than the industry average. 
C) The firm's equity multiplier must be lower than the industry average. 
D) The firm's debt ratio is higher than the industry average. 
E) None of the above.

Question 19

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 20

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 
E) none of the above 
A) 1.45 
B) 1.63 
C) 1.20 
D) 1.58 
E) none of the above

Exam 19: Futures Markets

__________ of the cash flow generated by the firm's operations,investments and financial activities.

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

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to __________ income,and the level of interest expense reported tends to __________ income.

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

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 _________.

Economic value added (EVA)is also known as

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

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

To create a common size income statement ____________ all items on the income statement by ____________.

A firm has a (net profit / pretax profit ratio)of 0.625,a leverage ratio of 1.2,a (pretax profit / EBIT)of 0.9,an ROE of 17.82%,a current ratio of 8,and a return on sales ratio of 8%.The firm's asset turnover is _________.

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 _____.

Publicly traded firms must prepare audited financial statements according to generally accepted accounting principles (GAAP).How do comparability problems arise?

Comparability problems arise because

In periods of inflation,accounting depreciation is __________ relative to replacement cost and real economic income is________.

Common size financial statements make it easier to compare firms ____________.

The financial statements of Snapit Company are given below. -Refer to the financial statements of Snapit Company.The firm's times interest earned ratio for 2009 is __________.

Which of the following would best explain a situation where the ratio of (net income/total equity)of a firm is higher than the industry average,while the ratio of (net income/total assets)is lower than the industry average?

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

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 __________.

The Investment Environment

Asset Classes and Financial Instruments

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and 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

Options Markets: Introduction

Option Valuation

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

Filters

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of high inflation,the level of reported depreciation tends to income,and the level of interest expense reported tends to income.

To create a common size income statement all items on the income statement by .

In periods of inflation,accounting depreciation is __ relative to replacement cost and real economic income is.

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