Question 1

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.William's inventory balance is

Accepted Answer

A)  $2,000,000. 
B)  $2,400,000. 
C)  $4,000,000. 
D)  $4,800,000. 
A)  $2,000,000. 
B)  $2,400,000. 
C)  $4,000,000. 
D)  $4,800,000.

Question 2

DuPont analysis indicates that the return on equity may be boosted above the return on assets by using leverage (debt).

Accepted Answer

A) True 
 B)False

Question 3

Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

Accepted Answer

A)  Return on equity 
B)  The acid test ratio 
C)  The operating profit margin 
D)  The fixed asset turnover 
A)  Return on equity 
B)  The acid test ratio 
C)  The operating profit margin 
D)  The fixed asset turnover

Question 4

Ratios are used to standardize financial information,thereby making it easier to interpret.

Accepted Answer

A) True 
 B)False

Question 5

Financial ratios are useful for measuring performance because maximizing the return on equity for common shareholders is the primary goal of financial managers.

Accepted Answer

A) True 
 B)False

Question 6

Secular Electric has total equity of $560,000; sales of $2,250,000; current assets of $700,000; and total liabilities of $435,000.What is Secular Electric's total asset turnover?

Accepted Answer

A)  4.02 
B)  3.21 
C)  2.26 
D)  5.51 
A)  4.02 
B)  3.21 
C)  2.26 
D)  5.51

Question 7

Borrowing more money will always increase a company's return on equity because the company is using financial leverage,but it also adds to the riskiness of the company.

Accepted Answer

A) True 
 B)False

Question 8

Please refer to Table 4-1 for the following questions.
Table 4-1
Stewart Company
Balance Sheet
  
-Based on the information in Table 4-1,the debt ratio is

Accepted Answer

A)  24.1%. 
B)  32.6%. 
C)  45.0%. 
D)  55.2%. 
A)  24.1%. 
B)  32.6%. 
C)  45.0%. 
D)  55.2%.

Question 9

Please refer to Table 4-3 for the following questions.
Table 4-3
Emery Corporation
  
-Based on the information in Table 4-3,the debt ratio is

Accepted Answer

A)  18.38%. 
B)  40.24%. 
C)  48.48%. 
D)  53.43%. 
A)  18.38%. 
B)  40.24%. 
C)  48.48%. 
D)  53.43%.

Question 10

Complete the following balance sheet using the information given.Round account balances to the nearest dollar.

Accepted Answer

1.Solve for common equity using ROE: Com

Question 11

Roxbury has sales of $2,250,000; a gross profit of $825,000; total operating costs of $620,000; income taxes of $74,800; total assets of $995,000; and interest expense of $18,000.What is Roxbury's times interest earned ratio?

Accepted Answer

A)  1.3 
B)  11.4 
C)  8.1 
D)  45.8 
A)  1.3 
B)  11.4 
C)  8.1 
D)  45.8

Question 12

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

Accepted Answer

A)  $745.23 
B)  $1,232.88 
C)  $22,222.22 
D)  $1,893.45 
A)  $745.23 
B)  $1,232.88 
C)  $22,222.22 
D)  $1,893.45

Question 13

Kaylor Corporation increased its financial leverage during 2010 by taking out a loan and using the proceeds to buy back common stock.At the end of 2010,the corporation reported higher earnings per share and higher return on equity.However,its stock price declined.Discuss why this may happen.

Accepted Answer

Financial leverage is a double-edged swo

Question 14

Please refer to Table 4-1 for the following questions.
Table 4-1
Stewart Company
Balance Sheet
  
-Based on the information in Table 4-1,the acid-test ratio is

Accepted Answer

A)  1.71. 
B)  1.67. 
C)  1.02. 
D)  0.98. 
A)  1.71. 
B)  1.67. 
C)  1.02. 
D)  0.98.

Question 15

Which of the following ratios would be the best way to determine how customers are paying for their purchases?

Accepted Answer

A)  Inventory turnover 
B)  Total asset turnover 
C)  Current ratio 
D)  Average collection period 
A)  Inventory turnover 
B)  Total asset turnover 
C)  Current ratio 
D)  Average collection period

Question 16

Which of the following is true if a firm wishes to collect its accounts faster by imposing stricter credit terms on its customers?

Accepted Answer

A)  the firm's average collection period is likely to fall 
B)  the firm's accounts receivable turnover might rise 
C)  the firm's sales might decrease 
D)  all of the above 
A)  the firm's average collection period is likely to fall 
B)  the firm's accounts receivable turnover might rise 
C)  the firm's sales might decrease 
D)  all of the above

Question 17

Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

Accepted Answer

A) True 
 B)False

Question 18

The acid-test ratio of a firm would be unaffected by which of the following?

Accepted Answer

A)  several short-term loans are consolidated and paid off using long-term debt 
B)  equipment is purchased, financed by a long-term debt issue 
C)  additional inventory is purchased for cash 
D)  large accounts receivable balances are collected 
A)  several short-term loans are consolidated and paid off using long-term debt 
B)  equipment is purchased, financed by a long-term debt issue 
C)  additional inventory is purchased for cash 
D)  large accounts receivable balances are collected

Question 19

Please refer to Table 4-3 for the following questions.
Table 4-3
Emery Corporation
  
-Based on the information in Table 4-3,the total asset turnover is

Accepted Answer

A)  2.10 times. 
B)  2.42 times. 
C)  2.87 times. 
D)  3.25 times. 
A)  2.10 times. 
B)  2.42 times. 
C)  2.87 times. 
D)  3.25 times.

Question 20

Lorna Doom Inc.has an annual interest expense of $30,000 and pays income tax equal to 40 percent of taxable income (EBT).Lorna Doom's times-interest-earned ratio is 4.2.What is Lorna Doom's net income?

Accepted Answer

A)  $96,000 
B)  $57,000 
C)  $126,000 
D)  $57,600 
A)  $96,000 
B)  $57,000 
C)  $126,000 
D)  $57,600

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.William's inventory balance is

DuPont analysis indicates that the return on equity may be boosted above the return on assets by using leverage (debt).

Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

Ratios are used to standardize financial information,thereby making it easier to interpret.

Financial ratios are useful for measuring performance because maximizing the return on equity for common shareholders is the primary goal of financial managers.

Secular Electric has total equity of $560,000; sales of $2,250,000; current assets of $700,000; and total liabilities of $435,000.What is Secular Electric's total asset turnover?

Borrowing more money will always increase a company's return on equity because the company is using financial leverage,but it also adds to the riskiness of the company.

Please refer to Table 4-1 for the following questions. Table 4-1 Stewart Company Balance Sheet -Based on the information in Table 4-1,the debt ratio is

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation -Based on the information in Table 4-3,the debt ratio is

Complete the following balance sheet using the information given.Round account balances to the nearest dollar.

Roxbury has sales of $2,250,000; a gross profit of $825,000; total operating costs of $620,000; income taxes of $74,800; total assets of $995,000; and interest expense of $18,000.What is Roxbury's times interest earned ratio?

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

Kaylor Corporation increased its financial leverage during 2010 by taking out a loan and using the proceeds to buy back common stock.At the end of 2010,the corporation reported higher earnings per share and higher return on equity.However,its stock price declined.Discuss why this may happen.

Please refer to Table 4-1 for the following questions. Table 4-1 Stewart Company Balance Sheet -Based on the information in Table 4-1,the acid-test ratio is

Which of the following ratios would be the best way to determine how customers are paying for their purchases?

Which of the following is true if a firm wishes to collect its accounts faster by imposing stricter credit terms on its customers?

Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

The acid-test ratio of a firm would be unaffected by which of the following?

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation -Based on the information in Table 4-3,the total asset turnover is

Lorna Doom Inc.has an annual interest expense of $30,000 and pays income tax equal to 40 percent of taxable income (EBT).Lorna Doom's times-interest-earned ratio is 4.2.What is Lorna Doom's net income?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Current Asset Management

International Business Finance

Filters

Exam 4: Evaluating a Firms Financial Performance

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.William's inventory balance is

DuPont analysis indicates that the return on equity may be boosted above the return on assets by using leverage (debt).

Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

Ratios are used to standardize financial information,thereby making it easier to interpret.

Financial ratios are useful for measuring performance because maximizing the return on equity for common shareholders is the primary goal of financial managers.

Secular Electric has total equity of $560,000; sales of $2,250,000; current assets of $700,000; and total liabilities of $435,000.What is Secular Electric's total asset turnover?

Borrowing more money will always increase a company's return on equity because the company is using financial leverage,but it also adds to the riskiness of the company.

Please refer to Table 4-1 for the following questions. Table 4-1 Stewart Company Balance Sheet -Based on the information in Table 4-1,the debt ratio is

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation -Based on the information in Table 4-3,the debt ratio is

Complete the following balance sheet using the information given.Round account balances to the nearest dollar.

Roxbury has sales of $2,250,000; a gross profit of $825,000; total operating costs of $620,000; income taxes of $74,800; total assets of $995,000; and interest expense of $18,000.What is Roxbury's times interest earned ratio?

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

Kaylor Corporation increased its financial leverage during 2010 by taking out a loan and using the proceeds to buy back common stock.At the end of 2010,the corporation reported higher earnings per share and higher return on equity.However,its stock price declined.Discuss why this may happen.

Please refer to Table 4-1 for the following questions. Table 4-1 Stewart Company Balance Sheet -Based on the information in Table 4-1,the acid-test ratio is

Which of the following ratios would be the best way to determine how customers are paying for their purchases?

Which of the following is true if a firm wishes to collect its accounts faster by imposing stricter credit terms on its customers?

Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

The acid-test ratio of a firm would be unaffected by which of the following?

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation -Based on the information in Table 4-3,the total asset turnover is

Lorna Doom Inc.has an annual interest expense of $30,000 and pays income tax equal to 40 percent of taxable income (EBT).Lorna Doom's times-interest-earned ratio is 4.2.What is Lorna Doom's net income?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Current Asset Management

International Business Finance

Filters