Question 1

Which of the following statements is correct?

Accepted Answer

A)  A low average payment period and a high accounts payable turnover are a sign of good management. 
B)  A high average payment period and a low accounts payable turnover are a sign of good management. 
C)  A high average payment period and a high accounts payable turnover are a sign of good management. 
D)  A low average payment period and a low accounts payable turnover are a sign of good management. 
A)  A low average payment period and a high accounts payable turnover are a sign of good management. 
B)  A high average payment period and a low accounts payable turnover are a sign of good management. 
C)  A high average payment period and a high accounts payable turnover are a sign of good management. 
D)  A low average payment period and a low accounts payable turnover are a sign of good management.

Question 2

Which of these can be used by interested parties to identify changes in corporate performance?

Accepted Answer

A)  common-size financial statements 
B)  industrialized financial statements 
C)  sanitized financial statements 
A)  common-size financial statements 
B)  industrialized financial statements 
C)  sanitized financial statements

Question 3

The maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings is called the

Accepted Answer

A)  internal growth rate. 
B)  retention rate. 
C)  sustainable growth rate. 
D)  operating expansion rate. 
A)  internal growth rate. 
B)  retention rate. 
C)  sustainable growth rate. 
D)  operating expansion rate.

Question 4

Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?

Accepted Answer

A)  times interest earned 
B)  basic earning power 
C)  fixed-charge coverage ratio 
D)  ROA 
A)  times interest earned 
B)  basic earning power 
C)  fixed-charge coverage ratio 
D)  ROA

Question 5

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.

Question 6

Which of the following measures the number of days accounts receivable are held before the firm collects cash from the sale?

Accepted Answer

A)  accounts receivable turnover 
B)  average collection period 
C)  average payment period 
D)  accounts payable turnover 
A)  accounts receivable turnover 
B)  average collection period 
C)  average payment period 
D)  accounts payable turnover

Question 7

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 8

Which of the following activities will increase a firm's current ratio?

Accepted Answer

A)  purchase inventory using cash 
B)  buy equipment with a short-term bank loan 
C)  accrued wages and taxes increase 
D)  none of these statements will increase a firm's current ratio 
A)  purchase inventory using cash 
B)  buy equipment with a short-term bank loan 
C)  accrued wages and taxes increase 
D)  none of these statements will increase a firm's current ratio

Question 9

Green Products,Inc.has current liabilities = $40 million,current ratio = 2.4 times,inventory turnover ratio = 8 times,average collection period = 40 days,and sales = $320 million.What is the value of their cash and marketable securities?

Accepted Answer

A)  $20.93m. 
B)  $56.00m. 
C)  $75.07m. 
D)  $96.00m. 
A)  $20.93m. 
B)  $56.00m. 
C)  $75.07m. 
D)  $96.00m.

Question 10

Use the following information to calculate current assets: sales = $12 million,capital intensity ratio = 4 times,debt ratio = 45 percent,and fixed asset turnover ratio = 2.5 times.

Accepted Answer

A)  $4.8m 
B)  $21.6m 
C)  $43.2m 
D)  $48m 
A)  $4.8m 
B)  $21.6m 
C)  $43.2m 
D)  $48m

Question 11

Fancy Paws' year-end price on its common stock is $20.The firm has a profit margin of 12 percent,total assets of $20 million,a total asset turnover ratio of 0.5,no preferred stock,and there are 2 million shares of common stock outstanding.What is the PE ratio for Fancy Paws?

Accepted Answer

A)  3.33 
B)  8.33 
C)  10.00 
D)  33.33 
A)  3.33 
B)  8.33 
C)  10.00 
D)  33.33

Question 12

Ernie's Mufflers has current liabilities of $45 million.Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets.Ernie's current ratio = 1.5 times.What is the value of inventory listed on the firm's balance sheet?

Accepted Answer

A)  $13.75m. 
B)  $20.25m. 
C)  $30.375m. 
D)  $33.75m. 
A)  $13.75m. 
B)  $20.25m. 
C)  $30.375m. 
D)  $33.75m.

Question 13

A firm ended the year with an average collection period of 50 days.The firm's credit sales were $11 million.What is the firm's year-end balance in accounts receivable?

Accepted Answer

A)  $1.27 million 
B)  $0.85 million 
C)  $1.51 million 
D)  $2.05 million 
A)  $1.27 million 
B)  $0.85 million 
C)  $1.51 million 
D)  $2.05 million

Question 14

Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes?

Accepted Answer

A)  times interest earned 
B)  fixed-charge coverage ratio 
C)  cash coverage ratio 
D)  operating coverage ratio 
A)  times interest earned 
B)  fixed-charge coverage ratio 
C)  cash coverage ratio 
D)  operating coverage ratio

Question 15

A firm has EBIT of $400,000 and depreciation expense of $20,000.Fixed charges total $50,000.Interest expense totals $7,000.What is the firm's fixed-charge coverage ratio?

Accepted Answer

A)  7.60 times 
B)  8.00 times 
C)  8.40 times 
D)  8.54 times 
A)  7.60 times 
B)  8.00 times 
C)  8.40 times 
D)  8.54 times

Question 16

You are considering a stock investment in one of two firms (A and B), both of which operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2 million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in equity. Calculate the equity multiplier for the two firms.

Accepted Answer

A)  Firm A: 15 times; Firm B: 1.00 times 
B)  Firm A: 10 times; Firm B: 1.11 times 
C)  Firm A: 10 times; Firm B: 9.99 times 
D)  Firm A: 20 times; Firm B: 1.11 times 
A)  Firm A: 15 times; Firm B: 1.00 times 
B)  Firm A: 10 times; Firm B: 1.11 times 
C)  Firm A: 10 times; Firm B: 9.99 times 
D)  Firm A: 20 times; Firm B: 1.11 times

Question 17

Zoe's Dog Toys,Inc.reported a debt to equity ratio of 0.5 times at the end of 2018.If the firm's total assets at year-end are $50 million,how much of their assets is financed with equity?

Accepted Answer

A)  $16.67m 
B)  $25m 
C)  $33.33m 
D)  $50m 
A)  $16.67m 
B)  $25m 
C)  $33.33m 
D)  $50m

Question 18

You are thinking of investing in Ski Sports,Inc.You have only the following information on the firm at year-end 2018: net income = $50,000,total debt = $1 million,and debt ratio = 70 percent.What is Ski's ROE for 2018?

Accepted Answer

A)  2.94 percent 
B)  3.49 percent 
C)  7.14 percent 
D)  11.67 percent 
A)  2.94 percent 
B)  3.49 percent 
C)  7.14 percent 
D)  11.67 percent

Question 19

A firm has EBIT of $1,000,000 and depreciation expense of $400,000.Fixed charges total $600,000.Interest expense totals $70,000.What is the firm's cash coverage ratio?

Accepted Answer

A)  1.00 times 
B)  1.67 times 
C)  2.33 times 
D)  2.45 times 
A)  1.00 times 
B)  1.67 times 
C)  2.33 times 
D)  2.45 times

Question 20

The top part of Rammy's Inc.'s 2018 balance sheet is listed as follows (in millions of dollars).   What are Mars,Inc.'s current ratio,quick ratio,and cash ratio for 2018?

Accepted Answer

A)  1.74242, 0.30303, 0.07576 
B)  7.1875, 1.25, 0.3125 
C)  1.43939, 0.30303, 0.07576 
D)  19.16667, 3.33333, 0.83333 
A)  1.74242, 0.30303, 0.07576 
B)  7.1875, 1.25, 0.3125 
C)  1.43939, 0.30303, 0.07576 
D)  19.16667, 3.33333, 0.83333

Which of the following statements is correct?

Which of these can be used by interested parties to identify changes in corporate performance?

The maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings is called the

Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?

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?

Which of the following measures the number of days accounts receivable are held before the firm collects cash from the sale?

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?

Which of the following activities will increase a firm's current ratio?

Green Products,Inc.has current liabilities = $40 million,current ratio = 2.4 times,inventory turnover ratio = 8 times,average collection period = 40 days,and sales = $320 million.What is the value of their cash and marketable securities?

Use the following information to calculate current assets: sales = $12 million,capital intensity ratio = 4 times,debt ratio = 45 percent,and fixed asset turnover ratio = 2.5 times.

Fancy Paws' year-end price on its common stock is $20.The firm has a profit margin of 12 percent,total assets of $20 million,a total asset turnover ratio of 0.5,no preferred stock,and there are 2 million shares of common stock outstanding.What is the PE ratio for Fancy Paws?

Ernie's Mufflers has current liabilities of $45 million.Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets.Ernie's current ratio = 1.5 times.What is the value of inventory listed on the firm's balance sheet?

A firm ended the year with an average collection period of 50 days.The firm's credit sales were $11 million.What is the firm's year-end balance in accounts receivable?

Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes?

A firm has EBIT of $400,000 and depreciation expense of $20,000.Fixed charges total $50,000.Interest expense totals $7,000.What is the firm's fixed-charge coverage ratio?

Zoe's Dog Toys,Inc.reported a debt to equity ratio of 0.5 times at the end of 2018.If the firm's total assets at year-end are $50 million,how much of their assets is financed with equity?

You are thinking of investing in Ski Sports,Inc.You have only the following information on the firm at year-end 2018: net income = $50,000,total debt = $1 million,and debt ratio = 70 percent.What is Ski's ROE for 2018?

A firm has EBIT of $1,000,000 and depreciation expense of $400,000.Fixed charges total $600,000.Interest expense totals $70,000.What is the firm's cash coverage ratio?

The top part of Rammy's Inc.'s 2018 balance sheet is listed as follows (in millions of dollars). What are Mars,Inc.'s current ratio,quick ratio,and cash ratio for 2018?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

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 Management and Policies

Filters

Exam 3: Analyzing Financial Statements

Which of the following statements is correct?

Which of these can be used by interested parties to identify changes in corporate performance?

The maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings is called the

Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?

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?

Which of the following measures the number of days accounts receivable are held before the firm collects cash from the sale?

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?

Which of the following activities will increase a firm's current ratio?

Green Products,Inc.has current liabilities = $40 million,current ratio = 2.4 times,inventory turnover ratio = 8 times,average collection period = 40 days,and sales = $320 million.What is the value of their cash and marketable securities?

Use the following information to calculate current assets: sales = $12 million,capital intensity ratio = 4 times,debt ratio = 45 percent,and fixed asset turnover ratio = 2.5 times.

Fancy Paws' year-end price on its common stock is $20.The firm has a profit margin of 12 percent,total assets of $20 million,a total asset turnover ratio of 0.5,no preferred stock,and there are 2 million shares of common stock outstanding.What is the PE ratio for Fancy Paws?

Ernie's Mufflers has current liabilities of $45 million.Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets.Ernie's current ratio = 1.5 times.What is the value of inventory listed on the firm's balance sheet?

A firm ended the year with an average collection period of 50 days.The firm's credit sales were $11 million.What is the firm's year-end balance in accounts receivable?

Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes?

A firm has EBIT of $400,000 and depreciation expense of $20,000.Fixed charges total $50,000.Interest expense totals $7,000.What is the firm's fixed-charge coverage ratio?

Zoe's Dog Toys,Inc.reported a debt to equity ratio of 0.5 times at the end of 2018.If the firm's total assets at year-end are $50 million,how much of their assets is financed with equity?

You are thinking of investing in Ski Sports,Inc.You have only the following information on the firm at year-end 2018: net income = $50,000,total debt = $1 million,and debt ratio = 70 percent.What is Ski's ROE for 2018?

A firm has EBIT of $1,000,000 and depreciation expense of $400,000.Fixed charges total $600,000.Interest expense totals $70,000.What is the firm's cash coverage ratio?

The top part of Rammy's Inc.'s 2018 balance sheet is listed as follows (in millions of dollars). What are Mars,Inc.'s current ratio,quick ratio,and cash ratio for 2018?

Introduction to Financial Management

Reviewing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

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 Management and Policies

Filters