Question 1

Which of the following is unlikely to have a high capital intensity ratio?

Accepted Answer

A)  railroad 
B)  automobile manufacturer 
C)  law firm 
D)  shipbuilder 
A)  railroad 
B)  automobile manufacturer 
C)  law firm 
D)  shipbuilder

Question 2

Saddle and Bridle reported a profit margin of 12 percent,total asset turnover ratio of 2 times,debt-to­-equity ratio of 1.9 times,net income of $1 million,and dividends paid to common stockholders of $250,000.The firm has no preferred stock outstanding.What is Saddle and Bridle's internal growth rate?

Accepted Answer

A)  13.64 percent 
B)  18.00 percent 
C)  24.00 percent 
D)  21.95 percent 
A)  13.64 percent 
B)  18.00 percent 
C)  24.00 percent 
D)  21.95 percent

Question 3

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 debt-to-equity ratio for the two firms.

Accepted Answer

A)  Firm A: 9 times; Firm B: 1.11 times 
B)  Firm A: 19 times; Firm B: 0.11 times 
C)  Firm A: 9 times; Firm B: 0.11 times 
D)  Firm A: 19 times; Firm B: 1.11 times 
A)  Firm A: 9 times; Firm B: 1.11 times 
B)  Firm A: 19 times; Firm B: 0.11 times 
C)  Firm A: 9 times; Firm B: 0.11 times 
D)  Firm A: 19 times; Firm B: 1.11 times

Question 4

Which of the following ratios measure how efficiently a firm uses its assets,as well as how efficiently the firm manages its accounts payable?

Accepted Answer

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

Question 5

Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent.What is the internal growth rate?

Accepted Answer

A)  4.75 percent 
B)  0.50 percent 
C)  50.00 percent 
D)  52.63 percent 
A)  4.75 percent 
B)  0.50 percent 
C)  50.00 percent 
D)  52.63 percent

Question 6

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 7

The term "spreading the financial statements" refers to

Accepted Answer

A)  creating common-size financial statements. 
B)  comparing the statements to the industry average. 
C)  calculating the internal and sustainable growth rate. 
D)  evaluating the debt levels. 
A)  creating common-size financial statements. 
B)  comparing the statements to the industry average. 
C)  calculating the internal and sustainable growth rate. 
D)  evaluating the debt levels.

Question 8

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent.What is the internal growth rate?

Accepted Answer

A)  1.00 percent 
B)  2.25 percent 
C)  5.26 percent 
D)  100.00 percent 
A)  1.00 percent 
B)  2.25 percent 
C)  5.26 percent 
D)  100.00 percent

Question 9

A strong liquidity position means that

Accepted Answer

A)  the firm is able to meet its short-term obligations. 
B)  the firm uses little debt in its capital structure. 
C)  the firm pays out a large portion of its net income in the form of dividends. 
D)  the firm pays its creditors on time. 
A)  the firm is able to meet its short-term obligations. 
B)  the firm uses little debt in its capital structure. 
C)  the firm pays out a large portion of its net income in the form of dividends. 
D)  the firm pays its creditors on time.

Question 10

Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent.What is the sustainable growth rate?

Accepted Answer

A)  1.11 percent 
B)  2.04 percent 
C)  44.44 percent 
D)  50.00 percent 
A)  1.11 percent 
B)  2.04 percent 
C)  44.44 percent 
D)  50.00 percent

Question 11

A firm reported an ROE of 19 percent.The firm's debt ratio was 45 percent,sales were $12 million,and the capital intensity ratio was 1.1 times.Calculate the net income for the firm.

Accepted Answer

A)  0.34 million 
B)  1.38 million 
C)  1.93 million 
D)  2.06 million 
A)  0.34 million 
B)  1.38 million 
C)  1.93 million 
D)  2.06 million

Question 12

Which of the following statements is false regarding inventory management?

Accepted Answer

A)  In general, a firm wants to produce a low level of sales per dollar of inventory. 
B)  In general, a firm wants to produce a high level of sales per dollar of inventory. 
C)  A high inventory turnover ratio or a low days' sales in inventory is generally a sign of good management. 
D)  Extremely high levels for inventory turnover ratio and low levels for days' sales in inventory ratio may actually be a sign of bad firm or production management. 
A)  In general, a firm wants to produce a low level of sales per dollar of inventory. 
B)  In general, a firm wants to produce a high level of sales per dollar of inventory. 
C)  A high inventory turnover ratio or a low days' sales in inventory is generally a sign of good management. 
D)  Extremely high levels for inventory turnover ratio and low levels for days' sales in inventory ratio may actually be a sign of bad firm or production management.

Question 13

A firm has an ROA of 12 percent and an ROE of 52 percent.What is the firm's equity multiplier?

Accepted Answer

A)  0.23 
B)  4.33 
C)  1.63 
D)  2.90 
A)  0.23 
B)  4.33 
C)  1.63 
D)  2.90

Question 14

If Apex,Inc.has an ROE = 10 percent,equity multiplier = 3,and profit margin of 5 percent,what is the total asset turnover ratio?

Accepted Answer

A)  0.0600 
B)  0.0667 
C)  0.1667 
D)  0.6667 
A)  0.0600 
B)  0.0667 
C)  0.1667 
D)  0.6667

Which of the following is unlikely to have a high capital intensity ratio?

Which of the following ratios measure how efficiently a firm uses its assets,as well as how efficiently the firm manages its accounts payable?

Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent.What is the 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?

The term "spreading the financial statements" refers to

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent.What is the internal growth rate?

A strong liquidity position means that

Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent.What is the sustainable growth rate?

A firm reported an ROE of 19 percent.The firm's debt ratio was 45 percent,sales were $12 million,and the capital intensity ratio was 1.1 times.Calculate the net income for the firm.

Which of the following statements is false regarding inventory management?

A firm has an ROA of 12 percent and an ROE of 52 percent.What is the firm's equity multiplier?

If Apex,Inc.has an ROE = 10 percent,equity multiplier = 3,and profit margin of 5 percent,what is the total asset turnover 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 of the following is unlikely to have a high capital intensity ratio?

Which of the following ratios measure how efficiently a firm uses its assets,as well as how efficiently the firm manages its accounts payable?

Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent.What is the 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?

The term "spreading the financial statements" refers to

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent.What is the internal growth rate?

A strong liquidity position means that

Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent.What is the sustainable growth rate?

A firm reported an ROE of 19 percent.The firm's debt ratio was 45 percent,sales were $12 million,and the capital intensity ratio was 1.1 times.Calculate the net income for the firm.

Which of the following statements is false regarding inventory management?

A firm has an ROA of 12 percent and an ROE of 52 percent.What is the firm's equity multiplier?

If Apex,Inc.has an ROE = 10 percent,equity multiplier = 3,and profit margin of 5 percent,what is the total asset turnover 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