Question 1

Which ratio measures a firm's ability to pay short-term obligations with its available cash and market securities?

Accepted Answer

A)  cash 
B)  current 
C)  internal-growth 
D)  quick or acid-test 
A)  cash 
B)  current 
C)  internal-growth 
D)  quick or acid-test

Question 2

Which ratio assesses how efficiently a firm uses its fixed assets?

Accepted Answer

A)  capital intensity ratio 
B)  current ratio 
C)  average collection period 
D)  fixed asset turnover 
A)  capital intensity ratio 
B)  current ratio 
C)  average collection period 
D)  fixed asset turnover

Question 3

Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities?

Accepted Answer

A)  cross-section 
B)  current 
C)  internal-growth 
D)  quick or acid-test 
A)  cross-section 
B)  current 
C)  internal-growth 
D)  quick or acid-test

Question 4

You have located the following information on Rock Company: debt ratio = 40 percent,capital intensity ratio = 2.25 times,profit margin = 8 percent,and dividend payout ratio = 25 percent.What is the sustainable growth rate for Rock?

Accepted Answer

A)  3.56 percent 
B)  6.00 percent 
C)  4.65 percent 
D)  8.00 percent 
A)  3.56 percent 
B)  6.00 percent 
C)  4.65 percent 
D)  8.00 percent

Question 5

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 6

Which of the following statements is correct?

Accepted Answer

A)  The use of debt in the capital structure results in tax benefits to the firm. 
B)  Debt is referred to as "financial leverage" because it magnifies returns to shareholders. 
C)  Debt management ratios evaluate whether a firm is financing its assets with a reasonable amount of debt versus equity financing. 
D)  All of these choices are correct. 
A)  The use of debt in the capital structure results in tax benefits to the firm. 
B)  Debt is referred to as "financial leverage" because it magnifies returns to shareholders. 
C)  Debt management ratios evaluate whether a firm is financing its assets with a reasonable amount of debt versus equity financing. 
D)  All of these choices are correct.

Question 7

You have the following information on Universe It Ts,Inc.: sales to working capital = 10 times,profit margin = 25 percent,net income available to common stockholders = $3 million,and current liabilities = $1 million.What is the firm's balance of current assets?

Accepted Answer

A)  $1.075m 
B)  $1.2m 
C)  $2.2m 
D)  $5m 
A)  $1.075m 
B)  $1.2m 
C)  $2.2m 
D)  $5m

Question 8

You are considering investing in Lenny's Lube,Inc.You have been able to locate the following information on the firm: total assets = $20 million,accounts receivable = $6 million,ACP = 20 days,net income = $5 million,and debt-to-equity ratio = 2.5 times.What is the ROE for the firm?

Accepted Answer

A)  2.5000 percent 
B)  13.9882 percent 
C)  35.0000 percent 
D)  87.50 percent 
A)  2.5000 percent 
B)  13.9882 percent 
C)  35.0000 percent 
D)  87.50 percent

Question 9

You are considering a stock investment in one of two firms (LotsofDebt,Inc.and LotsofEquity,Inc.),both of which operate in the same industry.LotsofDebt,Inc.finances its $100 million in assets with $90 million in debt and $10 million in equity.LotsofEquity,Inc.finances its $100 million in assets with $10 million in debt and $90 million in equity.What are the debt ratio,equity multiplier,and debt-to-equity ratio for the two firms?

Accepted Answer

A)  LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively 
B)  LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively 
C)  LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively 
D)  LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively 
A)  LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively 
B)  LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively 
C)  LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively 
D)  LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively

Question 10

PJ's Ice Cream Parlour has asked you to help piece together financial information on the firm for the most current year.Managers give you the following information: sales = $50 million,total debt = $20 million,debt ratio = 50 percent,and ROE = 12 percent.Using this information,what is PJ's ROA?

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  10 percent 
D)  12 percent 
A)  4 percent 
B)  6 percent 
C)  10 percent 
D)  12 percent

Question 11

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 12

Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2018.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 13

Which of these statements is true?

Accepted Answer

A)  The age of a firm's cash will affect the current ratio level. 
B)  The age of a firm's accounts receivable will affect the current ratio level. 
C)  The age of a firm's fixed assets will affect the fixed asset turnover ratio level. 
D)  The age of a firm's fixed assets will affect the current ratio level. 
A)  The age of a firm's cash will affect the current ratio level. 
B)  The age of a firm's accounts receivable will affect the current ratio level. 
C)  The age of a firm's fixed assets will affect the fixed asset turnover ratio level. 
D)  The age of a firm's fixed assets will affect the current ratio level.

Question 14

A firm reported a profit margin of 8.5 percent,total asset turnover of 0.85 times,debt-to-equity ratio of 0.90 times,net income of $550,000,and dividends paid to common stockholders of $100,000.The firm has no preferred stock outstanding.What is the firm's internal growth rate?

Accepted Answer

A)  3.61 percent 
B)  6.29 percent 
C)  5.91 percent 
D)  11.04 percent 
A)  3.61 percent 
B)  6.29 percent 
C)  5.91 percent 
D)  11.04 percent

Question 15

You are thinking of investing in Tikki's Torches,Inc.You have only the following information on the firm at year-end 2018: net income = $500,000,total debt = $12 million,and debt ratio = 40 percent.What is Tikki's ROE for 2018?

Accepted Answer

A)  1.67 percent 
B)  2.78 percent 
C)  4.17 percent 
D)  10.42 percent 
A)  1.67 percent 
B)  2.78 percent 
C)  4.17 percent 
D)  10.42 percent

Question 16

An investor wanting large returns will be interested in companies that have

Accepted Answer

A)  high ROAs. 
B)  high ROEs. 
C)  high current ratios. 
D)  high times interest earned. 
A)  high ROAs. 
B)  high ROEs. 
C)  high current ratios. 
D)  high times interest earned.

Question 17

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 fixed-charge 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 18

A firm has a profit margin of 12 percent; total asset turnover of 0.55 and an equity multiplier of 2.2.What is the firm's ROA and ROE?

Accepted Answer

A)  ROA = 6.6 percent; ROE = 14.52 percent 
B)  ROA = 7.2 percent; ROE = 15.84 percent 
C)  ROA = 9.5 percent; ROE = 20.9 percent 
D)  ROA = 8.1 percent; ROE = 17.82 percent 
A)  ROA = 6.6 percent; ROE = 14.52 percent 
B)  ROA = 7.2 percent; ROE = 15.84 percent 
C)  ROA = 9.5 percent; ROE = 20.9 percent 
D)  ROA = 8.1 percent; ROE = 17.82 percent

Question 19

All of the following are users of financial ratios EXCEPT

Accepted Answer

A)  managers. 
B)  investors. 
C)  analysts. 
D)  auditors. 
A)  managers. 
B)  investors. 
C)  analysts. 
D)  auditors.

Question 20

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 cash 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

Which ratio measures a firm's ability to pay short-term obligations with its available cash and market securities?

Which ratio assesses how efficiently a firm uses its fixed assets?

Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities?

You have located the following information on Rock Company: debt ratio = 40 percent,capital intensity ratio = 2.25 times,profit margin = 8 percent,and dividend payout ratio = 25 percent.What is the sustainable growth rate for Rock?

A firm that is efficient in inventory management will have

Which of the following statements is correct?

You have the following information on Universe It Ts,Inc.: sales to working capital = 10 times,profit margin = 25 percent,net income available to common stockholders = $3 million,and current liabilities = $1 million.What is the firm's balance of current assets?

You are considering investing in Lenny's Lube,Inc.You have been able to locate the following information on the firm: total assets = $20 million,accounts receivable = $6 million,ACP = 20 days,net income = $5 million,and debt-to-equity ratio = 2.5 times.What is the ROE for the firm?

PJ's Ice Cream Parlour has asked you to help piece together financial information on the firm for the most current year.Managers give you the following information: sales = $50 million,total debt = $20 million,debt ratio = 50 percent,and ROE = 12 percent.Using this information,what is PJ's ROA?

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?

Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2018.If the firm's total debt at year-end was $10 million,how much equity does Trina's Trikes have?

Which of these statements is true?

A firm reported a profit margin of 8.5 percent,total asset turnover of 0.85 times,debt-to-equity ratio of 0.90 times,net income of $550,000,and dividends paid to common stockholders of $100,000.The firm has no preferred stock outstanding.What is the firm's internal growth rate?

You are thinking of investing in Tikki's Torches,Inc.You have only the following information on the firm at year-end 2018: net income = $500,000,total debt = $12 million,and debt ratio = 40 percent.What is Tikki's ROE for 2018?

An investor wanting large returns will be interested in companies that have

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 fixed-charge coverage ratio?

A firm has a profit margin of 12 percent; total asset turnover of 0.55 and an equity multiplier of 2.2.What is the firm's ROA and ROE?

All of the following are users of financial ratios EXCEPT

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 cash coverage ratio?

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 ratio measures a firm's ability to pay short-term obligations with its available cash and market securities?

Which ratio assesses how efficiently a firm uses its fixed assets?

Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities?

You have located the following information on Rock Company: debt ratio = 40 percent,capital intensity ratio = 2.25 times,profit margin = 8 percent,and dividend payout ratio = 25 percent.What is the sustainable growth rate for Rock?

A firm that is efficient in inventory management will have

Which of the following statements is correct?

You have the following information on Universe It Ts,Inc.: sales to working capital = 10 times,profit margin = 25 percent,net income available to common stockholders = $3 million,and current liabilities = $1 million.What is the firm's balance of current assets?

You are considering investing in Lenny's Lube,Inc.You have been able to locate the following information on the firm: total assets = $20 million,accounts receivable = $6 million,ACP = 20 days,net income = $5 million,and debt-to-equity ratio = 2.5 times.What is the ROE for the firm?

PJ's Ice Cream Parlour has asked you to help piece together financial information on the firm for the most current year.Managers give you the following information: sales = $50 million,total debt = $20 million,debt ratio = 50 percent,and ROE = 12 percent.Using this information,what is PJ's ROA?

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?

Trina'sTrikes,Inc.reported a debt-to-equity ratio of 2 times at the end of 2018.If the firm's total debt at year-end was $10 million,how much equity does Trina's Trikes have?

Which of these statements is true?

A firm reported a profit margin of 8.5 percent,total asset turnover of 0.85 times,debt-to-equity ratio of 0.90 times,net income of $550,000,and dividends paid to common stockholders of $100,000.The firm has no preferred stock outstanding.What is the firm's internal growth rate?

You are thinking of investing in Tikki's Torches,Inc.You have only the following information on the firm at year-end 2018: net income = $500,000,total debt = $12 million,and debt ratio = 40 percent.What is Tikki's ROE for 2018?

An investor wanting large returns will be interested in companies that have

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 fixed-charge coverage ratio?

A firm has a profit margin of 12 percent; total asset turnover of 0.55 and an equity multiplier of 2.2.What is the firm's ROA and ROE?

All of the following are users of financial ratios EXCEPT

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 cash coverage ratio?

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