Question 1

The DuPont Identity expresses the firm's ROE in terms of:

Accepted Answer

A) profitability,asset efficiency,and leverage. 
B) valuation,leverage,and interest coverage. 
C) profitability,margins,and valuation. 
D) equity,assets,and liabilities. 
A) profitability,asset efficiency,and leverage. 
B) valuation,leverage,and interest coverage. 
C) profitability,margins,and valuation. 
D) equity,assets,and liabilities. A

Question 2

The Sarbanes-Oxley Act (SOX)stiffened penalties for providing false information by:

Accepted Answer

A) requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B) imposing large compliance costs on small companies. 
C) requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D) putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits. 
A) requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B) imposing large compliance costs on small companies. 
C) requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D) putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits. A

Question 3

Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.If EBIT is 41.2 and tax rate is 35%,its Return on Invested Capital in 2009 is closest to:

Accepted Answer

A) 0.104 
B) 0.064 
C) 0.038 
D) 0.068 
A) 0.104 
B) 0.064 
C) 0.038 
D) 0.068 D

Question 4

The firm's revenues and expenses over a period of time are reported on the firm's:

Accepted Answer

A) income statement or statement of financial performance. 
B) income statement or statement of financial position. 
C) balance sheet or statement of financial performance. 
D) balance sheet or statement of financial position. 
A) income statement or statement of financial performance. 
B) income statement or statement of financial position. 
C) balance sheet or statement of financial performance. 
D) balance sheet or statement of financial position.

Question 5

Luther's EBIT coverage ratio for the year ending December 31,2008 is closest to:

Accepted Answer

A) 1.64 
B) 1.78 
C) 1.98 
D) 2.19 
A) 1.64 
B) 1.78 
C) 1.98 
D) 2.19

Question 6

If on December 31,2008 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Accepted Answer

market-to-book = market value

Question 7

Use the information for the question(s)below.
In November 2009,Perrigo Co.(PRGO)had a share price of $39.20.They had 91.33 million shares outstanding,a market-to-book ratio of 3.76.In addition,PRGO had $845.01 million in outstanding debt,$163.82 million in net income,and cash of $257.09 million.
-Perrigo's market capitalization is closest to:

Accepted Answer

A) $952.16 million 
B) $3580.14 million 
C) $4168.06 million 
D) $4425.15 million 
A) $952.16 million 
B) $3580.14 million 
C) $4168.06 million 
D) $4425.15 million

Question 8

If Moon Corporation has depreciation or amortization expense,which of the following is TRUE?

Accepted Answer

A) Its EBITDA /Interest Coverage ratio will be greater than its EBIT/Interest Coverage ratio. 
B) Its EBITDA /Interest Coverage ratio will be less than its EBIT/Interest Coverage ratio. 
C) Its EBITDA /Interest Coverage ratio will be equal to its EBIT/Interest Coverage ratio. 
D) Not enough information to answer the question. 
A) Its EBITDA /Interest Coverage ratio will be greater than its EBIT/Interest Coverage ratio. 
B) Its EBITDA /Interest Coverage ratio will be less than its EBIT/Interest Coverage ratio. 
C) Its EBITDA /Interest Coverage ratio will be equal to its EBIT/Interest Coverage ratio. 
D) Not enough information to answer the question.

Question 9

Zoe Dental Implements has gross property,plant and equipment totaling $1.4 million,depreciation expense this year of $200,000,and accumulated depreciation of $750,000.What is the book value of Zoe's property,plant and equipment?

Accepted Answer

A) $1.4 million 
B) $1.2 million 
C) $550,000 
D) $650,000 
A) $1.4 million 
B) $1.2 million 
C) $550,000 
D) $650,000

Question 10

Use the information for the question(s)below.
In November 2009,Perrigo Co.(PRGO)had a share price of $39.20.They had 91.33 million shares outstanding,a market-to-book ratio of 3.76.In addition,PRGO had $845.01 million in outstanding debt,$163.82 million in net income,and cash of $257.09 million.
-Perrigo's market debt to equity ratio is closest to:

Accepted Answer

A) 0.24 
B) 0.50 
C) 0.75 
D) 0.89 
A) 0.24 
B) 0.50 
C) 0.75 
D) 0.89

Question 11

Luther's return on assets (ROA)for the year ending December 31,2009 is closest to:

Accepted Answer

A) 1.6% 
B) 6.7% 
C) 2.3% 
D) 2.6% 
A) 1.6% 
B) 6.7% 
C) 2.3% 
D) 2.6%

Question 12

On the balance sheet,short-term debt appears:

Accepted Answer

A) in the Stockholders' Equity section. 
B) in the Operating Expenses section. 
C) in the Current Assets section. 
D) in the Current Liabilities section. 
A) in the Stockholders' Equity section. 
B) in the Operating Expenses section. 
C) in the Current Assets section. 
D) in the Current Liabilities section.

Question 13

Which of the following is NOT a section on the cash flow statement?

Accepted Answer

A) Income generating activities 
B) Investing activities 
C) Operating activities 
D) Financing activities 
A) Income generating activities 
B) Investing activities 
C) Operating activities 
D) Financing activities

Question 14

What is the role of an auditor in financial statement analysis?

Accepted Answer

Key points:
1.To ensure that the annual

Question 15

The Sarbanes-Oxley Act (SOX)overhauled incentives and the independence in the auditing process by:

Accepted Answer

A) requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B) imposing large compliance costs on small companies. 
C) requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D) putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits. 
A) requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B) imposing large compliance costs on small companies. 
C) requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D) putting strict limits on the amount of non-audit fees (consulting or otherwise)that an accounting firm can earn from a firm that it audits.

Question 16

In addition to the balance sheet,income statement,and the statement of cash flows,a firm's complete financial statements will include all of the following EXCEPT:

Accepted Answer

A) Management discussion and analysis. 
B) Notes to the financial statements. 
C) Securities and Exchange Commission's (SE
C) commentary. 
D) Statement of stockholders' equity. 
A) Management discussion and analysis. 
B) Notes to the financial statements. 
C) Securities and Exchange Commission's (SE
C) commentary. 
D) Statement of stockholders' equity.

Question 17

Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.Its Debt-to-Enterprise Value Ratio in 2009 is closest to:

Accepted Answer

A) 0.696 
B) 0.37 
C) 0.255 
D) 0.654 
A) 0.696 
B) 0.37 
C) 0.255 
D) 0.654

Question 18

The firm's assets and liabilities at a given point in time are reported on the firm's:

Accepted Answer

A) income statement or statement of financial performance. 
B) income statement or statement of financial position. 
C) balance sheet or statement of financial performance. 
D) balance sheet or statement of financial position. 
A) income statement or statement of financial performance. 
B) income statement or statement of financial position. 
C) balance sheet or statement of financial performance. 
D) balance sheet or statement of financial position.

Question 19

If Firm A and Firm B are in the same industry and use the same production method,and Firm A's asset turnover is higher than that of Firm B,then all else equal we can conclude:

Accepted Answer

A) Firm A is more efficient than Firm B. 
B) Firm A has a lower dollar amount of assets than Firm B. 
C) Firm A has higher sales than Firm B. 
D) Firm A has a lower ROE than Firm B. 
A) Firm A is more efficient than Firm B. 
B) Firm A has a lower dollar amount of assets than Firm B. 
C) Firm A has higher sales than Firm B. 
D) Firm A has a lower ROE than Firm B.

Question 20

Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities?

Accepted Answer

A) Add dividends paid 
B) Add any increase in long term borrowing 
C) Add any increase in short-term borrowing 
D) Add proceeds from the sale of stock 
A) Add dividends paid 
B) Add any increase in long term borrowing 
C) Add any increase in short-term borrowing 
D) Add proceeds from the sale of stock

Exam 2: Introduction to Financial Statement Analysis

The DuPont Identity expresses the firm's ROE in terms of:

The Sarbanes-Oxley Act (SOX)stiffened penalties for providing false information by:

Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.If EBIT is 41.2 and tax rate is 35%,its Return on Invested Capital in 2009 is closest to:

The firm's revenues and expenses over a period of time are reported on the firm's:

Luther's EBIT coverage ratio for the year ending December 31,2008 is closest to:

If on December 31,2008 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

If Moon Corporation has depreciation or amortization expense,which of the following is TRUE?

Zoe Dental Implements has gross property,plant and equipment totaling $1.4 million,depreciation expense this year of $200,000,and accumulated depreciation of $750,000.What is the book value of Zoe's property,plant and equipment?

Luther's return on assets (ROA)for the year ending December 31,2009 is closest to:

On the balance sheet,short-term debt appears:

Which of the following is NOT a section on the cash flow statement?

What is the role of an auditor in financial statement analysis?

The Sarbanes-Oxley Act (SOX)overhauled incentives and the independence in the auditing process by:

In addition to the balance sheet,income statement,and the statement of cash flows,a firm's complete financial statements will include all of the following EXCEPT:

Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.Its Debt-to-Enterprise Value Ratio in 2009 is closest to:

The firm's assets and liabilities at a given point in time are reported on the firm's:

If Firm A and Firm B are in the same industry and use the same production method,and Firm A's asset turnover is higher than that of Firm B,then all else equal we can conclude:

Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities?

The Corporation

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

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