Question 1

A firm that is efficient in inventory management will have:

Accepted Answer

A) a high inventory turnover ratio and a low days sales in inventory ratio. 
B) a low inventory turnover ratio and a low days sales in inventory ratio. 
C) a high inventory turnover ratio and a high days sales in inventory ratio. 
D) a low inventory turnover ratio and a high days sales in inventory ratio. 
A) a high inventory turnover ratio and a low days sales in inventory ratio. 
B) a low inventory turnover ratio and a low days sales in inventory ratio. 
C) a high inventory turnover ratio and a high days sales in inventory ratio. 
D) a low inventory turnover ratio and a high days sales in inventory ratio.

Question 2

Sustainable Growth Rate You have located the following information on Greenwich Company: debt ratio = 60 percent,capital intensity ratio = 0.75 times,profit margin = 13.5 percent,and dividend payout ratio = 80 percent.What is the sustainable growth rate for Greenwich?

Accepted Answer

A) 2.70 percent 
B) 10.80 percent 
C) 25.00 percent 
D) 9.89 percent 
A) 2.70 percent 
B) 10.80 percent 
C) 25.00 percent 
D) 9.89 percent

Question 3

A corporation has a total asset turnover of 2 times,ROA of 12 percent and EM of 1.17.What is this firm's profit margin and debt ratio?

Accepted Answer

A) Profit margin: 2 percent; Debt ratio: 19.45 percent 
B) Profit margin: 3 percent; Debt ratio: 31.81 percent 
C) Profit margin: 4 percent; Debt ratio: 12.94 percent 
D) Profit margin: 6 percent; Debt ratio: 14.53 percent 
A) Profit margin: 2 percent; Debt ratio: 19.45 percent 
B) Profit margin: 3 percent; Debt ratio: 31.81 percent 
C) Profit margin: 4 percent; Debt ratio: 12.94 percent 
D) Profit margin: 6 percent; Debt ratio: 14.53 percent

Question 4

Sustainable Growth Rate You have located the following information on Tyler Company: debt ratio = 50 percent,capital intensity ratio = 1.5 times,profit margin = 9 percent,and dividend payout ratio = 40 percent.What is the sustainable growth rate for Tyler?

Accepted Answer

A) 12.00 percent 
B) 7.76 percent 
C) 20.00 percent 
D) 30.00 percent 
A) 12.00 percent 
B) 7.76 percent 
C) 20.00 percent 
D) 30.00 percent

Question 5

Which ratio measures how many days inventory is held before the final product is sold?

Accepted Answer

A) Inventory turnover 
B) Days' sales in inventory 
C) Total asset turnover 
D) Inventory intensity ratio 
A) Inventory turnover 
B) Days' sales in inventory 
C) Total asset turnover 
D) Inventory intensity ratio

Question 6

Which of the following statements is correct?

Accepted Answer

A) The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities. 
B) Holding extremely high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm. 
C) The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt. 
D) The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio. 
A) The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities. 
B) Holding extremely high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm. 
C) The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt. 
D) The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio.

Question 7

Which ratio measures the overall return on the firm's assets inclusive of financial leverage and taxes?

Accepted Answer

A) ROA 
B) ROE 
C) Basic earning power 
D) Profit margin 
A) ROA 
B) ROE 
C) Basic earning power 
D) Profit margin

Question 8

Which is true? Ratio analysis:

Accepted Answer

A) can provide useful information on a firm's current position but should never be used to forecast future performance. 
B) can provide useful information on a firm's current position and hint at future performance. 
C) can provide useful information on a firm's past but not current position. 
D) can provide useful information on a firm's past and current position, but should never be used to forecast future performance. 
A) can provide useful information on a firm's current position but should never be used to forecast future performance. 
B) can provide useful information on a firm's current position and hint at future performance. 
C) can provide useful information on a firm's past but not current position. 
D) can provide useful information on a firm's past and current position, but should never be used to forecast future performance.

Question 9

Asset Management Ratios Rachets R Us Corp.reported sales for 2013 of $200,000.Rachets R Us listed $25,000 of inventory on its balance sheet.Using a 365-day year,how many days did Rachets R Us's inventory stay on the premises? How many times per year did Rachets R Us's inventory turnover?

Accepted Answer

A) 0.125 days, 8 times, respectively 
B) 0.125 days, 5 times, respectively 
C) 45.625 days, 8 times, respectively 
D) 45.625 days, 5 times respectively 
A) 0.125 days, 8 times, respectively 
B) 0.125 days, 5 times, respectively 
C) 45.625 days, 8 times, respectively 
D) 45.625 days, 5 times respectively

Question 10

Calculate the times interest earned ratio using the following information.Sales = $1.5 million,cost of goods sold = $800,000,depreciation expense = $100,000,addition to retained earnings = $85,000,dividends per share = $1.2,tax rate = 30 percent,and number of shares of common stock outstanding = 100,000.Assume the firm has no preferred stock.

Accepted Answer

A) 2.25 times 
B) 1.25 times 
C) 1.95 times 
D) 2.75 times 
A) 2.25 times 
B) 1.25 times 
C) 1.95 times 
D) 2.75 times

Question 11

Debt Management Ratios Calculate the times interest earned ratio for Tierre's Ts,Inc.using the following information.Sales = $200,000,cost of goods sold = $50,000,depreciation expense = $13,000,addition to retained earnings = $70,000,dividends per share = $0.50,tax rate = 30 percent,and number of shares of common stock outstanding = 1,000.Tierre's Ts has no preferred stock outstanding.

Accepted Answer

A) 0.1814 
B) 0.4854 
C) 0.685 
D) 3.7756 
A) 0.1814 
B) 0.4854 
C) 0.685 
D) 3.7756

Question 12

Sustainable Growth Rate You have located the following information on Maize Company: debt ratio = 20 percent,capital intensity ratio = 1.25 times,profit margin = 12 percent,and dividend payout ratio = 10 percent.What is the sustainable growth rate for Maize?

Accepted Answer

A) 1.20 percent 
B) 10.10 percent 
C) 12.11 percent 
D) 73.26 percent 
A) 1.20 percent 
B) 10.10 percent 
C) 12.11 percent 
D) 73.26 percent

Question 13

Differentiate between time series and cross-section ratio analysis.

Accepted Answer

When managers,analysts,or investors revi

Question 14

Which of these statements is true?

Accepted Answer

A) In general, the lower the total asset turnover and the lower the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
B) In general, the lower the total asset turnover and the higher the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
C) In general, the higher the total asset turnover and the lower the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
D) In general, the higher the total asset turnover and the higher the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
A) In general, the lower the total asset turnover and the lower the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
B) In general, the lower the total asset turnover and the higher the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
C) In general, the higher the total asset turnover and the lower the capital intensity ratio, the more efficient the overall asset management of the firm will be. 
D) In general, the higher the total asset turnover and the higher the capital intensity ratio, the more efficient the overall asset management of the firm will be.

Question 15

Internal Growth Rate Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent.What is the internal growth rate?

Accepted Answer

A) 1.19 percent 
B) 13.64 percent 
C) 25.40 percent 
D) 33.33 percent 
A) 1.19 percent 
B) 13.64 percent 
C) 25.40 percent 
D) 33.33 percent

Question 16

Market Value Ratios You are considering an investment in Taylor's Hot Rods,Corp.During the last year the firm's income statement listed addition to retained earnings = $2.5 million and common stock dividends = $1.2 million.Taylor's year-end balance sheet shows common stockholders' equity = $10 million with 2 million shares of common stock outstanding.The common stock's market price per share = $45.00.What is Taylor's Hot Rods' book value per share and earnings per share? Calculate the market-to-book ratio and PE ratio.

Accepted Answer

Book value per share = $10m/2m

Question 17

Debt Management Ratios Nicole's Neon Signs,Inc.reported a debt to equity ratio of 1.9 times at the end of 2013.If the firm's total assets at year-end are $100 million,how much of their assets is financed with equity?

Accepted Answer

A) $34.48m 
B) $65.52m 
C) $52.63m 
D) $100m 
A) $34.48m 
B) $65.52m 
C) $52.63m 
D) $100m

Question 18

Which of the following statements is correct?

Accepted Answer

A) Performing cross-sectional ratio analysis refers to assessing how a firm performed over a certain section of time. 
B) Performing cross-sectional analysis is easy since industries are usually clustered with firms that are identical. 
C) Time-series analysis is useless in assessing improvement or deterioration of ratios since the data is historical. 
D) To interpret financial ratios, users should analyze the performance of the firm over time and the performance of the firm against one or more companies in the same industry. 
A) Performing cross-sectional ratio analysis refers to assessing how a firm performed over a certain section of time. 
B) Performing cross-sectional analysis is easy since industries are usually clustered with firms that are identical. 
C) Time-series analysis is useless in assessing improvement or deterioration of ratios since the data is historical. 
D) To interpret financial ratios, users should analyze the performance of the firm over time and the performance of the firm against one or more companies in the same industry.

Question 19

Debt Management Ratios Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2013.If the firm's total debt at year-end was $10 million,how much equity does Trina's Trikes have?

Accepted Answer

A) $2 million 
B) $5 million 
C) $10 million 
D) $20 million 
A) $2 million 
B) $5 million 
C) $10 million 
D) $20 million

Question 20

Liquidity Ratios You have the following information on Marco's Polo Shop: total liabilities and equity = $205 million,current liabilities = $45 million,inventory = $60 million,and quick ratio = 2.4 times.Using this information,what is the balance for fixed assets on Marco Polo's balance sheet?

Accepted Answer

A) $37m 
B) $97m 
C) $145m 
D) $157m 
A) $37m 
B) $97m 
C) $145m 
D) $157m

A firm that is efficient in inventory management will have:

Sustainable Growth Rate You have located the following information on Greenwich Company: debt ratio = 60 percent,capital intensity ratio = 0.75 times,profit margin = 13.5 percent,and dividend payout ratio = 80 percent.What is the sustainable growth rate for Greenwich?

A corporation has a total asset turnover of 2 times,ROA of 12 percent and EM of 1.17.What is this firm's profit margin and debt ratio?

Sustainable Growth Rate You have located the following information on Tyler Company: debt ratio = 50 percent,capital intensity ratio = 1.5 times,profit margin = 9 percent,and dividend payout ratio = 40 percent.What is the sustainable growth rate for Tyler?

Which ratio measures how many days inventory is held before the final product is sold?

Which of the following statements is correct?

Which ratio measures the overall return on the firm's assets inclusive of financial leverage and taxes?

Which is true? Ratio analysis:

Asset Management Ratios Rachets R Us Corp.reported sales for 2013 of $200,000.Rachets R Us listed $25,000 of inventory on its balance sheet.Using a 365-day year,how many days did Rachets R Us's inventory stay on the premises? How many times per year did Rachets R Us's inventory turnover?

Sustainable Growth Rate You have located the following information on Maize Company: debt ratio = 20 percent,capital intensity ratio = 1.25 times,profit margin = 12 percent,and dividend payout ratio = 10 percent.What is the sustainable growth rate for Maize?

Differentiate between time series and cross-section ratio analysis.

Which of these statements is true?

Internal Growth Rate Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent.What is the internal growth rate?

Debt Management Ratios Nicole's Neon Signs,Inc.reported a debt to equity ratio of 1.9 times at the end of 2013.If the firm's total assets at year-end are $100 million,how much of their assets is financed with equity?

Which of the following statements is correct?

Debt Management Ratios Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2013.If the firm's total debt at year-end was $10 million,how much equity does Trina's Trikes have?

Liquidity Ratios You have the following information on Marco's Polo Shop: total liabilities and equity = $205 million,current liabilities = $45 million,inventory = $60 million,and quick ratio = 2.4 times.Using this information,what is the balance for fixed assets on Marco Polo's balance sheet?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 3: Analyzing Financial Statements

A firm that is efficient in inventory management will have:

Sustainable Growth Rate You have located the following information on Greenwich Company: debt ratio = 60 percent,capital intensity ratio = 0.75 times,profit margin = 13.5 percent,and dividend payout ratio = 80 percent.What is the sustainable growth rate for Greenwich?

A corporation has a total asset turnover of 2 times,ROA of 12 percent and EM of 1.17.What is this firm's profit margin and debt ratio?

Sustainable Growth Rate You have located the following information on Tyler Company: debt ratio = 50 percent,capital intensity ratio = 1.5 times,profit margin = 9 percent,and dividend payout ratio = 40 percent.What is the sustainable growth rate for Tyler?

Which ratio measures how many days inventory is held before the final product is sold?

Which of the following statements is correct?

Which ratio measures the overall return on the firm's assets inclusive of financial leverage and taxes?

Which is true? Ratio analysis:

Asset Management Ratios Rachets R Us Corp.reported sales for 2013 of $200,000.Rachets R Us listed $25,000 of inventory on its balance sheet.Using a 365-day year,how many days did Rachets R Us's inventory stay on the premises? How many times per year did Rachets R Us's inventory turnover?

Sustainable Growth Rate You have located the following information on Maize Company: debt ratio = 20 percent,capital intensity ratio = 1.25 times,profit margin = 12 percent,and dividend payout ratio = 10 percent.What is the sustainable growth rate for Maize?

Differentiate between time series and cross-section ratio analysis.

Which of these statements is true?

Internal Growth Rate Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent.What is the internal growth rate?

Debt Management Ratios Nicole's Neon Signs,Inc.reported a debt to equity ratio of 1.9 times at the end of 2013.If the firm's total assets at year-end are $100 million,how much of their assets is financed with equity?

Which of the following statements is correct?

Debt Management Ratios Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2013.If the firm's total debt at year-end was $10 million,how much equity does Trina's Trikes have?

Liquidity Ratios You have the following information on Marco's Polo Shop: total liabilities and equity = $205 million,current liabilities = $45 million,inventory = $60 million,and quick ratio = 2.4 times.Using this information,what is the balance for fixed assets on Marco Polo's balance sheet?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters