Question 1

If the interest rate on debt is higher than ROA,then a firm will __________ by increasing the use of debt in the capital structure.

Accepted Answer

A) increase the ROE 
B) not change the ROE 
C) decrease the ROE 
D) change the ROE in an indeterminable manner 
E) none of the above 
A) increase the ROE 
B) not change the ROE 
C) decrease the ROE 
D) change the ROE in an indeterminable manner 
E) none of the above

Question 2

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

Accepted Answer

A) 1.86 
B) 0.63 
C) 0.86 
D) 1.63 
E) none of the above 
A) 1.86 
B) 0.63 
C) 0.86 
D) 1.63 
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 P/E ratio for 2009 is _____.

Accepted Answer

A) 8.88 
B) 7.63 
C) 7.88 
D) 7.32 
E) none of the above 
A) 8.88 
B) 7.63 
C) 7.88 
D) 7.32 
E) none of the above

Question 4

Suppose that Chicken Express,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Chicken Express has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Chicken Express's Net Profit will be ________ and its ROE will be ________.

Accepted Answer

A) lower, lower 
B) higher, higher 
C) higher, lower 
D) lower, higher 
E) It is impossible to predict. 
A) lower, lower 
B) higher, higher 
C) higher, lower 
D) lower, higher 
E) It is impossible to predict.

Question 5

Return on total assets is the product of _______.

Accepted Answer

A) interest rates and pre-tax profits 
B) the debt-equity ratio and P/E ratio 
C) the after-tax profit margin and the asset turnover ratio 
D) sales and fixed assets 
E) none of the above 
A) interest rates and pre-tax profits 
B) the debt-equity ratio and P/E ratio 
C) the after-tax profit margin and the asset turnover ratio 
D) sales and fixed assets 
E) none of the above

Question 6

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

Accepted Answer

A) 4.64 
B) 4.16 
C) 4.41 
D) 4.87 
E) none of the above 
A) 4.64 
B) 4.16 
C) 4.41 
D) 4.87 
E) none of the above

Question 7

A firm has a lower quick (or acid test)ratio than the industry average,which implies

Accepted Answer

A) the firm has a lower P/E ratio than other firms in the industry. 
B) the firm is less likely to avoid insolvency in the short run than other firms in the industry. 
C) the firm may be more profitable than other firms in the industry. 
D) A and B. 
E) B and C. 
A) the firm has a lower P/E ratio than other firms in the industry. 
B) the firm is less likely to avoid insolvency in the short run than other firms in the industry. 
C) the firm may be more profitable than other firms in the industry. 
D) A and B. 
E) B and C.

Question 8

A firm has a lower asset turnover ratio than the industry average,which implies

Accepted Answer

A) the firm has a lower P/E ratio than other firms in the industry. 
B) the firm is less likely to avoid insolvency in the short run than other firms in the industry. 
C) the firm is less profitable than other firms in the industry. 
D) the firm is utilizing assets less efficiently than other firms in the industry. 
E) the firm has lower spending on new fixed assets than other firms in the industry. 
A) the firm has a lower P/E ratio than other firms in the industry. 
B) the firm is less likely to avoid insolvency in the short run than other firms in the industry. 
C) the firm is less profitable than other firms in the industry. 
D) the firm is utilizing assets less efficiently than other firms in the industry. 
E) the firm has lower spending on new fixed assets than other firms in the industry.

Question 9

A study by Speidell and Bavishi (1992)found that when accounting statements of foreign firms were restated on a common accounting basis,

Accepted Answer

A) the original and restated P/E ratios were quite similar. 
B) the original and restated P/E ratios varied considerably. 
C) most variation was explained by tax differences. 
D) most firms were consistent in their treatment of goodwill. 
E) none of the above. 
A) the original and restated P/E ratios were quite similar. 
B) the original and restated P/E ratios varied considerably. 
C) most variation was explained by tax differences. 
D) most firms were consistent in their treatment of goodwill. 
E) none of the above.

Question 10

The financial statements of Snapit Company are given below.  
-Refer to the financial statements of Snapit Company.The firm's fixed asset turnover ratio for 2009 is _____.

Accepted Answer

A) 4.60 
B) 3.61 
C) 3.16 
D) 5.46 
E) none of the above 
A) 4.60 
B) 3.61 
C) 3.16 
D) 5.46 
E) none of the above

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% 
E) none of the above 
A) 11.18% 
B) 8.97% 
C) 11.54% 
D) 12.62% 
E) none of the above

Question 12

During periods of inflation,the use of FIFO (rather than LIFO)as the method of accounting for inventories causes ________.

Accepted Answer

A) higher reported sales 
B) higher incomes taxes 
C) lower ending inventory 
D) B and C 
E) none of the above 
A) higher reported sales 
B) higher incomes taxes 
C) lower ending inventory 
D) B and C 
E) none of the above

Question 13

A firm has a (net profit/pretax profit)ratio of 0.6,a leverage ratio of 2,a (pretax profit/EBIT)of 0.6,an asset turnover ratio of 2.5,a current ratio of 1.5,and a return on sales ratio of 4%.The firm's ROE is _________.

Accepted Answer

A) 4.2% 
B) 5.2% 
C) 6.2% 
D) 7.2% 
E) none of the above 
A) 4.2% 
B) 5.2% 
C) 6.2% 
D) 7.2% 
E) none of the above

Question 14

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 above 
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 above

Question 15

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

Accepted Answer

A) 59.31 
B) 55.05 
C) 61.31 
D) 49.05 
E) none of the above 
A) 59.31 
B) 55.05 
C) 61.31 
D) 49.05 
E) none of the above

Question 16

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

Accepted Answer

A) 8.86 
B) 7.17 
C) 9.66 
D) 6.86 
E) none of the above 
A) 8.86 
B) 7.17 
C) 9.66 
D) 6.86 
E) none of the above

Question 17

__________ of the profitability of the firm over a period of time such as a year.

Accepted Answer

A) The balance sheet is a summary 
B) The income statement is a summary 
C) That statement of cash flows is a summary 
D) The audit report is a summary 
E) None of the above is a summary 
A) The balance sheet is a summary 
B) The income statement is a summary 
C) That statement of cash flows is a summary 
D) The audit report is a summary 
E) None of the above is a summary

Question 18

______ 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 19

In an increasingly globalized investment environment,comparability problems become even greater.Discuss some of the problems for the investor who wishes to have an internationally diversified portfolio.

Accepted Answer

Firms in other countries are not require

Question 20

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%

Exam 19: Futures Markets

If the interest rate on debt is higher than ROA,then a firm will __________ by increasing the use of debt in the capital structure.

The financial statements of Midwest Tours are given below. -Refer to the financial statements of Midwest Tours.The firm's asset turnover 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 P/E ratio for 2009 is _____.

Suppose that Chicken Express,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Chicken Express has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Chicken Express's Net Profit will be ________ and its ROE will be ________.

Return on total assets is the product of _______.

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

A firm has a lower quick (or acid test)ratio than the industry average,which implies

A firm has a lower asset turnover ratio than the industry average,which implies

A study by Speidell and Bavishi (1992)found that when accounting statements of foreign firms were restated on a common accounting basis,

The financial statements of Snapit Company are given below. -Refer to the financial statements of Snapit Company.The firm's fixed asset turnover 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 _________.

During periods of inflation,the use of FIFO (rather than LIFO)as the method of accounting for inventories causes ________.

A firm has a (net profit/pretax profit)ratio of 0.6,a leverage ratio of 2,a (pretax profit/EBIT)of 0.6,an asset turnover ratio of 2.5,a current ratio of 1.5,and a return on sales ratio of 4%.The firm's ROE is _________.

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 average collection period 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 times interest earned ratio for 2009 is _____.

__________ of the profitability of the firm over a period of time such as a year.

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

In an increasingly globalized investment environment,comparability problems become even greater.Discuss some of the problems for the investor who wishes to have an internationally diversified portfolio.

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 __________.

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

Suppose that Chicken Express,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Chicken Express has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Chicken Express's Net Profit will be and its ROE will be .