Question 1

A firm has a total debt ratio of .47.This means the firm has 47 cents in debt for every:

Accepted Answer

A) $1 in total equity. 
B) $.53 in total assets. 
C) $1 in current assets. 
D) $.53 in total equity. 
E) $1 in fixed assets. 
A) $1 in total equity. 
B) $.53 in total assets. 
C) $1 in current assets. 
D) $.53 in total equity. 
E) $1 in fixed assets.

Question 2

A capital intensity ratio of 1.03 means a firm has $1.03 in:

Accepted Answer

A) total debt for every $1 in equity. 
B) equity for every $1 in total debt. 
C) sales for every $1 in total assets. 
D) total assets for every $1 in sales. 
E) long-term assets for every $1 in short-term assets. 
A) total debt for every $1 in equity. 
B) equity for every $1 in total debt. 
C) sales for every $1 in total assets. 
D) total assets for every $1 in sales. 
E) long-term assets for every $1 in short-term assets.

Question 3

If a firm produces a return on assets of 15 percent and also a return on equity of 15 percent,then the firm:

Accepted Answer

A) has no debt of any kind. 
B) is using its assets as efficiently as possible. 
C) pays all its earnings out in dividends. 
D) also has a current ratio of 15. 
E) has an equity multiplier of 2. 
A) has no debt of any kind. 
B) is using its assets as efficiently as possible. 
C) pays all its earnings out in dividends. 
D) also has a current ratio of 15. 
E) has an equity multiplier of 2.

Question 4

Joe's has old,fully depreciated equipment.Moe's just purchased all new equipment which will be depreciated over eight years.If Joe's and Moe's have the same sales,costs,tax rate,and enterprise value,then:

Accepted Answer

A) Joe's will have a lower profit margin. 
B) Joe's will have a lower return on equity. 
C) Moe's will have a higher net income. 
D) Moe's and Joe's will have the same EV multiple. 
E) Moe's will have a lower EV multiple. 
A) Joe's will have a lower profit margin. 
B) Joe's will have a lower return on equity. 
C) Moe's will have a higher net income. 
D) Moe's and Joe's will have the same EV multiple. 
E) Moe's will have a lower EV multiple.

Question 5

Catherine's Consulting paid dividends of $3,300 and total equity of $39,450.The debt-equity ratio is 1 and the plowback ratio is 40 percent.What is the return on assets?

Accepted Answer

A) 6.24 percent 
B) 6.09 percent 
C) 7.23 percent 
D) 6.97 percent 
E) 5.72 percent 
A) 6.24 percent 
B) 6.09 percent 
C) 7.23 percent 
D) 6.97 percent 
E) 5.72 percent

Question 6

The equity multiplier is measured as total:

Accepted Answer

A) equity divided by total assets. 
B) equity plus total debt. 
C) assets minus total equity,divided by total assets. 
D) assets plus total equity,divided by total debt. 
E) assets divided by total equity. 
A) equity divided by total assets. 
B) equity plus total debt. 
C) assets minus total equity,divided by total assets. 
D) assets plus total equity,divided by total debt. 
E) assets divided by total equity.

Question 7

Which one of the following is most apt to cause a profitable,stable firm to have a higher price-earnings ratio?

Accepted Answer

A) Slow industry outlook 
B) Very low current earnings 
C) Low market share 
D) Low prospect of firm growth 
E) Low investor opinion of firm 
A) Slow industry outlook 
B) Very low current earnings 
C) Low market share 
D) Low prospect of firm growth 
E) Low investor opinion of firm

Question 8

Which one of the following statements is correct if a firm has a receivables turnover of 10?

Accepted Answer

A) It takes the firm 10 days to collect payment from its customers. 
B) It takes the firm 36.5 days to sell its inventory and collect the payment from the sale. 
C) It takes the firm an average of 36.5 days to sell its items. 
D) The firm collects its credit sales in an average of 36.5 days. 
E) The firm has ten times more in accounts receivable than it does in cash. 
A) It takes the firm 10 days to collect payment from its customers. 
B) It takes the firm 36.5 days to sell its inventory and collect the payment from the sale. 
C) It takes the firm an average of 36.5 days to sell its items. 
D) The firm collects its credit sales in an average of 36.5 days. 
E) The firm has ten times more in accounts receivable than it does in cash.

Question 9

Frederico's has a net income of $29,600,a total asset turnover of 1.4,total assets of $318,600,and a debt-equity ratio of .35.What is the return on equity?

Accepted Answer

A) 16.72 percent 
B) 8.40 percent 
C) 12.54 percent 
D) 14.67 percent 
E) 17.56 percent 
A) 16.72 percent 
B) 8.40 percent 
C) 12.54 percent 
D) 14.67 percent 
E) 17.56 percent

Question 10

Narrow Falls Lumber has total assets of $913,600,total debt of $424,500,net sales of $848,600,and net income of $94,000.The tax rate is 21 percent and the dividend payout ratio is 30 percent.What is the firm's sustainable growth rate?

Accepted Answer

A) 13.97 percent 
B) 14.46 percent 
C) 15.54 percent 
D) 12.63 percent 
E) 14.91 percent 
A) 13.97 percent 
B) 14.46 percent 
C) 15.54 percent 
D) 12.63 percent 
E) 14.91 percent

Question 11

From a cash flow position,which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Accepted Answer

A) Times interest earned ratio 
B) Cash coverage ratio 
C) Cash ratio 
D) Quick ratio 
E) Interval measure 
A) Times interest earned ratio 
B) Cash coverage ratio 
C) Cash ratio 
D) Quick ratio 
E) Interval measure

Question 12

Browning's has a debt-equity ratio of .47.What is the equity multiplier?

Accepted Answer

A) 1.47 
B) .53 
C) 2.13 
D) 1.13 
E) 1.53 
A) 1.47 
B) .53 
C) 2.13 
D) 1.13 
E) 1.53

Question 13

Deep Falls Timber has net sales of $642,100,net income of $50,800,dividends paid of $12,700,total assets of $658,000,and total equity of $444,400.What is the internal growth rate?

Accepted Answer

A) 5.83 percent 
B) 6.24 percent 
C) 6.15 percent 
D) 5.18 percent 
E) 7.70 percent 
A) 5.83 percent 
B) 6.24 percent 
C) 6.15 percent 
D) 5.18 percent 
E) 7.70 percent

Question 14

The financial ratio measured as net income divided by sales is known as the firm's:

Accepted Answer

A) profit margin. 
B) return on assets. 
C) return on equity. 
D) asset turnover. 
E) earnings before interest and taxes. 
A) profit margin. 
B) return on assets. 
C) return on equity. 
D) asset turnover. 
E) earnings before interest and taxes.

Question 15

Mountain Top Markets has total assets of $48,700,net working capital of $1,100,and retained earnings of $21,200.The firm has 12,500 shares of stock outstanding with a par value of $1 per share and a market value of $7.10 per share.The stock was originally issued to the firm's founders at par value.What is the market-to-book ratio?

Accepted Answer

A) 3.19 
B) 2.22 
C) 2.78 
D) 3.03 
E) 2.63 
A) 3.19 
B) 2.22 
C) 2.78 
D) 3.03 
E) 2.63

Question 16

Home Systems has sales of $312,800,cost of goods sold of $218,400,inventory of $46,300,and accounts receivable of $62,700.How many days,on average,does it take the firm to both sell its inventory and collect payment on the sale?

Accepted Answer

A) 142.10 
B) 96.37 
C) 178.21 
D) 150.54 
E) 124.03 
A) 142.10 
B) 96.37 
C) 178.21 
D) 150.54 
E) 124.03

Question 17

The market-to-book ratio is measured as the:

Accepted Answer

A) market price per share divided by the par value per share. 
B) net income per share divided by the market price per share. 
C) market price per share divided by the net income per share. 
D) market price per share divided by the dividends per share. 
E) market value per share divided by the book value per share. 
A) market price per share divided by the par value per share. 
B) net income per share divided by the market price per share. 
C) market price per share divided by the net income per share. 
D) market price per share divided by the dividends per share. 
E) market value per share divided by the book value per share.

Question 18

Enterprise value is based on the:

Accepted Answer

A) market value of interest-bearing debt plus the market value of equity minus cash. 
B) book values of debt and assets,other than cash. 
C) market value of equity plus the book value of total debt minus cash. 
D) book value of debt plus the market value of equity. 
E) book values of debt and equity less cash. 
A) market value of interest-bearing debt plus the market value of equity minus cash. 
B) book values of debt and assets,other than cash. 
C) market value of equity plus the book value of total debt minus cash. 
D) book value of debt plus the market value of equity. 
E) book values of debt and equity less cash.

Question 19

Black Stone Mills has an enterprise value ratio of 9.8,a profit margin of 6.5 percent,sales of $946,200,costs of $631,400,depreciation of $17,900,interest expense of $4,500,and a total tax rate of 23 percent.What is the value of the enterprise?

Accepted Answer

A) $3,102,900 
B) $3,085,040 
C) $2,748,300 
D) $3,206,780 
E) $2,918,640 
A) $3,102,900 
B) $3,085,040 
C) $2,748,300 
D) $3,206,780 
E) $2,918,640

Question 20

Which one of these ratios measures the efficiency at which a firm employs its assets?

Accepted Answer

A) Profit margin 
B) Return on equity 
C) Equity multiplier 
D) P/E ratio 
E) Total asset turnover 
A) Profit margin 
B) Return on equity 
C) Equity multiplier 
D) P/E ratio 
E) Total asset turnover

Exam 3: Financial Statements and Cash Flow

A firm has a total debt ratio of .47.This means the firm has 47 cents in debt for every:

A capital intensity ratio of 1.03 means a firm has $1.03 in:

If a firm produces a return on assets of 15 percent and also a return on equity of 15 percent,then the firm:

Joe's has old,fully depreciated equipment.Moe's just purchased all new equipment which will be depreciated over eight years.If Joe's and Moe's have the same sales,costs,tax rate,and enterprise value,then:

Catherine's Consulting paid dividends of $3,300 and total equity of $39,450.The debt-equity ratio is 1 and the plowback ratio is 40 percent.What is the return on assets?

The equity multiplier is measured as total:

Which one of the following is most apt to cause a profitable,stable firm to have a higher price-earnings ratio?

Which one of the following statements is correct if a firm has a receivables turnover of 10?

Frederico's has a net income of $29,600,a total asset turnover of 1.4,total assets of $318,600,and a debt-equity ratio of .35.What is the return on equity?

Narrow Falls Lumber has total assets of $913,600,total debt of $424,500,net sales of $848,600,and net income of $94,000.The tax rate is 21 percent and the dividend payout ratio is 30 percent.What is the firm's sustainable growth rate?

From a cash flow position,which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Browning's has a debt-equity ratio of .47.What is the equity multiplier?

Deep Falls Timber has net sales of $642,100,net income of $50,800,dividends paid of $12,700,total assets of $658,000,and total equity of $444,400.What is the internal growth rate?

The financial ratio measured as net income divided by sales is known as the firm's:

Home Systems has sales of $312,800,cost of goods sold of $218,400,inventory of $46,300,and accounts receivable of $62,700.How many days,on average,does it take the firm to both sell its inventory and collect payment on the sale?

The market-to-book ratio is measured as the:

Enterprise value is based on the:

Black Stone Mills has an enterprise value ratio of 9.8,a profit margin of 6.5 percent,sales of $946,200,costs of $631,400,depreciation of $17,900,interest expense of $4,500,and a total tax rate of 23 percent.What is the value of the enterprise?

Which one of these ratios measures the efficiency at which a firm employs its assets?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

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