Question 1

The net profit margin is an example of a market value ratio.

Accepted Answer

A) True 
 B)False

Question 2

The market value ratios indicate the financial markets' assessment of the value of a firm's securities.

Accepted Answer

A) True 
 B)False

Question 3

What would be the return on total assets of a firm if net income is $50,000, total sales are $100,000, and total assets are $175,000?

Accepted Answer

A) 35% 
B) 28.6% 
C) 57.14% 
D) not enough information available 
A) 35% 
B) 28.6% 
C) 57.14% 
D) not enough information available

Question 4

Financial analysis using ratios can assist managers in the firm's long-term financial planning process.

Accepted Answer

A) True 
 B)False

Question 5

The degree of operating leverage (DOL) can be measured by the percent change in operating income (EBIT) divided by percent change in:

Accepted Answer

A) fixed costs 
B) variable costs 
C) unit sales 
D) total costs 
A) fixed costs 
B) variable costs 
C) unit sales 
D) total costs

Question 6

The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.

Accepted Answer

A) True 
 B)False

Question 7

Which group of ratios might be most interesting to potential creditors of a firm?

Accepted Answer

A) asset utilization ratios 
B) profitability ratios 
C) leverage ratios 
D) market value ratios 
A) asset utilization ratios 
B) profitability ratios 
C) leverage ratios 
D) market value ratios

Question 8

The five basic groups of ratios are liquidity ratios, asset management ratios, capital budgeting ratios, profitability ratios, and market value ratios.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is false?

Accepted Answer

A) time series analysis evaluates a firm's performance over time. 
B) industry comparative analysis compares a firm's ratios against average ratios against average ratios for other companies in the industry. 
C) the average collection period is calculated as the year-end accounts receivable divided by the net sales. 
D) all the above statements are correct. 
A) time series analysis evaluates a firm's performance over time. 
B) industry comparative analysis compares a firm's ratios against average ratios against average ratios for other companies in the industry. 
C) the average collection period is calculated as the year-end accounts receivable divided by the net sales. 
D) all the above statements are correct.

Question 10

The method of calculating return on assets which highlights the importance of sales, profit margin, and asset turnover is known as:

Accepted Answer

A) the Gordon model 
B) cost-volume profit analysis 
C) DuPont analysis 
D) break-even analysis 
A) the Gordon model 
B) cost-volume profit analysis 
C) DuPont analysis 
D) break-even analysis

Question 11

The profitability ratio that measures the return that shareholders earned on their investment equity they invested in the firm is the:

Accepted Answer

A) operating profit margin 
B) return on equity 
C) net profit margin 
D) return on assets 
A) operating profit margin 
B) return on equity 
C) net profit margin 
D) return on assets

Question 12

Trend or time series analysis is used to compare the performance of different firms at the same point in time.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following ratios is not a component in the return on equity using DuPont analysis?

Accepted Answer

A) asset turnover 
B) profit margin 
C) equity multiplier 
D) current ratio 
A) asset turnover 
B) profit margin 
C) equity multiplier 
D) current ratio

Question 14

Which one of the following ratios indicates the average number of days that sales are outstanding?

Accepted Answer

A) average payment period 
B) average collection period 
C) quick ratio 
D) interest coverage 
A) average payment period 
B) average collection period 
C) quick ratio 
D) interest coverage

Question 15

If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.

Accepted Answer

A) greater than 
B) less than 
C) the same as 
D) we can't tell 
A) greater than 
B) less than 
C) the same as 
D) we can't tell

Question 16

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity.

Accepted Answer

A) an increase 
B) a decrease 
C) no change 
D) an undetermined change 
A) an increase 
B) a decrease 
C) no change 
D) an undetermined change

Question 17

An analyst should be careful when conducting ratio analysis to ensure that

Accepted Answer

A) the overall performance of the firm is not judged on a single ratio. 
B) the dates of the financial statements being compared are the same. 
C) audited statements are being used. 
D) the same accounting procedures were used. 
E) all of the above 
A) the overall performance of the firm is not judged on a single ratio. 
B) the dates of the financial statements being compared are the same. 
C) audited statements are being used. 
D) the same accounting procedures were used. 
E) all of the above

Question 18

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is

Accepted Answer

A) $125,495 
B) $112,425 
C) $108,995 
D) none of the above 
A) $125,495 
B) $112,425 
C) $108,995 
D) none of the above

Question 19

If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?

Accepted Answer

A) 2.0 times 
B) 1.5 times 
C) 0.5 times 
D) .67 times 
A) 2.0 times 
B) 1.5 times 
C) 0.5 times 
D) .67 times

Question 20

Which of the following is not a variable cost?

Accepted Answer

A) CEO Salary 
B) rent 
C) mortgage payments 
D) property taxes 
E) none of the above are variable costs 
A) CEO Salary 
B) rent 
C) mortgage payments 
D) property taxes 
E) none of the above are variable costs

The net profit margin is an example of a market value ratio.

The market value ratios indicate the financial markets' assessment of the value of a firm's securities.

What would be the return on total assets of a firm if net income is $50,000, total sales are $100,000, and total assets are $175,000?

Financial analysis using ratios can assist managers in the firm's long-term financial planning process.

The degree of operating leverage (DOL) can be measured by the percent change in operating income (EBIT) divided by percent change in:

The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.

Which group of ratios might be most interesting to potential creditors of a firm?

The five basic groups of ratios are liquidity ratios, asset management ratios, capital budgeting ratios, profitability ratios, and market value ratios.

Which of the following statements is false?

The method of calculating return on assets which highlights the importance of sales, profit margin, and asset turnover is known as:

The profitability ratio that measures the return that shareholders earned on their investment equity they invested in the firm is the:

Trend or time series analysis is used to compare the performance of different firms at the same point in time.

Which of the following ratios is not a component in the return on equity using DuPont analysis?

Which one of the following ratios indicates the average number of days that sales are outstanding?

If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity.

An analyst should be careful when conducting ratio analysis to ensure that

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is

If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?

Which of the following is not a variable cost?

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 14: Financial Analysis and Long-Term Financial Planning

The net profit margin is an example of a market value ratio.

The market value ratios indicate the financial markets' assessment of the value of a firm's securities.

What would be the return on total assets of a firm if net income is $50,000, total sales are $100,000, and total assets are $175,000?

Financial analysis using ratios can assist managers in the firm's long-term financial planning process.

The degree of operating leverage (DOL) can be measured by the percent change in operating income (EBIT) divided by percent change in:

The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.

Which group of ratios might be most interesting to potential creditors of a firm?

The five basic groups of ratios are liquidity ratios, asset management ratios, capital budgeting ratios, profitability ratios, and market value ratios.

Which of the following statements is false?

The method of calculating return on assets which highlights the importance of sales, profit margin, and asset turnover is known as:

The profitability ratio that measures the return that shareholders earned on their investment equity they invested in the firm is the:

Trend or time series analysis is used to compare the performance of different firms at the same point in time.

Which of the following ratios is not a component in the return on equity using DuPont analysis?

Which one of the following ratios indicates the average number of days that sales are outstanding?

If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity.

An analyst should be careful when conducting ratio analysis to ensure that

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is

If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?

Which of the following is not a variable cost?

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters