Question 1

Which of the following ratios usually reflects investors opinions of the future prospects for the firm?

Accepted Answer

A) Dividend yield 
B) Book value per share 
C) Price/earnings ratio 
D) Earnings per share 
E) Dividend payout 
A) Dividend yield 
B) Book value per share 
C) Price/earnings ratio 
D) Earnings per share 
E) Dividend payout

Question 2

Which of the following ratios represents dividends per common share in relation to market price per common share?

Accepted Answer

A) Dividend payout 
B) Dividend yield 
C) Price/earnings 
D) Book value per share 
E) Percentage of earnings retained 
A) Dividend payout 
B) Dividend yield 
C) Price/earnings 
D) Book value per share 
E) Percentage of earnings retained

Question 3

Match the ratio that goes with each formula.
-$\frac{\text { Market Price per Share }}{\text { Diluted Earnings per Share }}$

Accepted Answer

A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share 
A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share

Question 4

Nonrecurring items such as extraordinary income and disposal of a segment require separate earnings per share disclosure.

Accepted Answer

A) True 
 B)False

Question 5

The price/earnings ratio:

Accepted Answer

A) measures the past earning ability of the firm. 
B) is a gauge of future earning power as seen by investors. 
C) relates price to dividends. 
D) relates price to total net income. 
E) All of the answers are correct. 
A) measures the past earning ability of the firm. 
B) is a gauge of future earning power as seen by investors. 
C) relates price to dividends. 
D) relates price to total net income. 
E) All of the answers are correct.

Question 6

Dawn Alive reported the following for 2012. $\begin{array}{llcc}
  \text {Ending market price  } &\$40.75  \
 \text { Earnings per share: } &\
 \text { Basic } &2.50\
 \text { Diluted } &2.08\
 \text { Dividends per share } &1.10\
\end{array}$

The price/earnings ratio and dividend payout were:

Accepted Answer

A) 19.59 and 52.88% 
B) 16.30 and 52.88% 
C) 16.30 and 44.00% 
D) 19.59 and 44.00% 
E) 37.04 and 52.88% 
A) 19.59 and 52.88% 
B) 16.30 and 52.88% 
C) 16.30 and 44.00% 
D) 19.59 and 44.00% 
E) 37.04 and 52.88%

Question 7

Good Boss Inc.had the following pattern of results related to stock appreciation rights. $\begin{array}{llcc}
  \text {Shares in the plan  } &20,000  \
 \text {Option price  } &\$15.00\
 \text { Market price- } &\
 \text { end year 1 } &\$20.00\
 \text { end year 2 } &
\$18.00\
 \text {end year 3  } &\$22.00\
\end{array}$

The compensation expense would be:
$\begin{array}{llcc}
 &\underline{\text { Year1} } &\underline{\text {  Year2} }& \underline{\text { Year3 }} \
 \text { I. } &\$100,000&\$-0-&\$40,000\
 \text {II.  } &100,000&60,000&40,000\
 \text {III.  } &100,000&(40,000)&80,000\
 \text { IV. } &400,000&-0-&40,000\

\end{array}$

Accepted Answer

A) I 
B) II 
C) III 
D) IV 
E) none of the answers are correct 
A) I 
B) II 
C) III 
D) IV 
E) none of the answers are correct

Question 8

Stock appreciation rights give the employee compensation at a future date,based on the market price at the date of exercise in excess of a pre-established dollar market.

Accepted Answer

A) True 
 B)False

Question 9

Book value per share measures the current value of the net assets on a per share basis.

Accepted Answer

A) True 
 B)False

Question 10

If financial leverage is used,a rise in EBIT will cause a lessor rise in net income.

Accepted Answer

A) True 
 B)False

Question 11

Match the ratio that goes with each formula.
-$\frac { \text { Net Income - All Dividends}  } { \text { Net Income}}$

Accepted Answer

A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share 
A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share

Question 12

Match the ratio that goes with each formula.
-$\frac{\text { Dividends per Common Share }}{\text { Diluted Earnings per Share }}$

Accepted Answer

A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share 
A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share

Question 13

The ratio percentage of earnings retained is the same as that termed:

Accepted Answer

A) dividend yield. 
B) dividend payout. 
C) this year's retained earnings to net income. 
D) return on common equity. 
E) book value. 
A) dividend yield. 
B) dividend payout. 
C) this year's retained earnings to net income. 
D) return on common equity. 
E) book value.

Question 14

When a stock split occurs,earnings per share must be adjusted retroactively.

Accepted Answer

A) True 
 B)False

Question 15

Using financial leverage results in a fixed change that can materially affect the earnings available to the common shareholders.

Accepted Answer

A) True 
 B)False

Question 16

When market value is below book value,this relationship indicates that the investors view the company as having strong future potential.

Accepted Answer

A) True 
 B)False

Question 17

SFAS No.123(R)results in greater international comparability in the accounting for share-based transactions.

Accepted Answer

A) True 
 B)False

Question 18

What is the effect of the exercise of stock options?

Accepted Answer

A) They generate cash to the issuing firm and therefore increase profit per share. 
B) They are an expense at the time of exercise.This lowers net income. 
C) They increase debt and lower borrowing capacity but have no effect on profit. 
D) They increase the number of shares outstanding. 
E) They have no immediate effect on profitability. 
A) They generate cash to the issuing firm and therefore increase profit per share. 
B) They are an expense at the time of exercise.This lowers net income. 
C) They increase debt and lower borrowing capacity but have no effect on profit. 
D) They increase the number of shares outstanding. 
E) They have no immediate effect on profitability.

Question 19

A firm has a degree of financial leverage of 1.20.If earnings before interest and tax increase by 20%,then net income:

Accepted Answer

A) will not necessarily change. 
B) will increase by 20%. 
C) will decrease by 24%. 
D) will decrease by 20%. 
E) None of the answers are correct. 
A) will not necessarily change. 
B) will increase by 20%. 
C) will decrease by 24%. 
D) will decrease by 20%. 
E) None of the answers are correct.

Question 20

A firm might have a low dividend payout ratio if it were planning a major expansion.

Accepted Answer

A) True 
 B)False

Which of the following ratios usually reflects investors opinions of the future prospects for the firm?

Which of the following ratios represents dividends per common share in relation to market price per common share?

Match the ratio that goes with each formula. - $\frac{\text { Market Price per Share }}{\text { Diluted Earnings per Share }}$

Nonrecurring items such as extraordinary income and disposal of a segment require separate earnings per share disclosure.

The price/earnings ratio:

Dawn Alive reported the following for 2012. Ending market price \4 0.75 Earnings per share: Basic 2.50 Diluted 2.08 Dividends per share 1.10 The price/earnings ratio and dividend payout were:

Stock appreciation rights give the employee compensation at a future date,based on the market price at the date of exercise in excess of a pre-established dollar market.

Book value per share measures the current value of the net assets on a per share basis.

If financial leverage is used,a rise in EBIT will cause a lessor rise in net income.

Match the ratio that goes with each formula. - $\frac { \text { Net Income - All Dividends} } { \text { Net Income}}$

Match the ratio that goes with each formula. - $\frac{\text { Dividends per Common Share }}{\text { Diluted Earnings per Share }}$

The ratio percentage of earnings retained is the same as that termed:

When a stock split occurs,earnings per share must be adjusted retroactively.

Using financial leverage results in a fixed change that can materially affect the earnings available to the common shareholders.

When market value is below book value,this relationship indicates that the investors view the company as having strong future potential.

SFAS No.123(R)results in greater international comparability in the accounting for share-based transactions.

What is the effect of the exercise of stock options?

A firm has a degree of financial leverage of 1.20.If earnings before interest and tax increase by 20%,then net income:

A firm might have a low dividend payout ratio if it were planning a major expansion.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 9: For the Investor

Which of the following ratios usually reflects investors opinions of the future prospects for the firm?

Which of the following ratios represents dividends per common share in relation to market price per common share?

Match the ratio that goes with each formula. - Market Price per Share Diluted Earnings per Share \frac{\text { Market Price per Share }}{\text { Diluted Earnings per Share }} Diluted Earnings per Share Market Price per Share ​

Nonrecurring items such as extraordinary income and disposal of a segment require separate earnings per share disclosure.

The price/earnings ratio:

Dawn Alive reported the following for 2012. Ending market price \4 0.75 Earnings per share: Basic 2.50 Diluted 2.08 Dividends per share 1.10 The price/earnings ratio and dividend payout were:

Stock appreciation rights give the employee compensation at a future date,based on the market price at the date of exercise in excess of a pre-established dollar market.

Book value per share measures the current value of the net assets on a per share basis.

If financial leverage is used,a rise in EBIT will cause a lessor rise in net income.

Match the ratio that goes with each formula. - Net Income - All Dividends Net Income\frac { \text { Net Income - All Dividends} } { \text { Net Income}} Net Income Net Income - All Dividends​

Match the ratio that goes with each formula. - Dividends per Common Share Diluted Earnings per Share \frac{\text { Dividends per Common Share }}{\text { Diluted Earnings per Share }} Diluted Earnings per Share Dividends per Common Share ​

The ratio percentage of earnings retained is the same as that termed:

When a stock split occurs,earnings per share must be adjusted retroactively.

Using financial leverage results in a fixed change that can materially affect the earnings available to the common shareholders.

When market value is below book value,this relationship indicates that the investors view the company as having strong future potential.

SFAS No.123(R)results in greater international comparability in the accounting for share-based transactions.

What is the effect of the exercise of stock options?

A firm has a degree of financial leverage of 1.20.If earnings before interest and tax increase by 20%,then net income:

A firm might have a low dividend payout ratio if it were planning a major expansion.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Match the ratio that goes with each formula. - $\frac{\text { Market Price per Share }}{\text { Diluted Earnings per Share }}$

Match the ratio that goes with each formula. - $\frac { \text { Net Income - All Dividends} } { \text { Net Income}}$

Match the ratio that goes with each formula. - $\frac{\text { Dividends per Common Share }}{\text { Diluted Earnings per Share }}$