Question 1

According to the text,did Enron follow Generally Accepted Accounting Principles (GAAP)in its financial reporting process?

Accepted Answer

Many of Enron's problems were kept hidde

Question 2

Use the table for the question(s)below.
    
-Refer to the statement of financial position above.If in 2015 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then Luther's stock would be considered to be:

Accepted Answer

A) undervalued. 
B) overvalued. 
C) a growth stock. 
D) a value stock. 
E) worthless. 
A) undervalued. 
B) overvalued. 
C) a growth stock. 
D) a value stock. 
E) worthless.

Question 3

Which of the following firms would be expected to have a high ROE based on that firm's high operating efficiency?

Accepted Answer

A) a medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals 
B) a high-end fashion retailer that has a very high mark-up on all items it sells 
C) a brokerage firm that has high levels of leverage 
D) a grocery store chain that has very high turnover,selling many multiples of its assets per year 
E) a mining firm that is mostly engaged in exploration for new deposits 
A) a medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals 
B) a high-end fashion retailer that has a very high mark-up on all items it sells 
C) a brokerage firm that has high levels of leverage 
D) a grocery store chain that has very high turnover,selling many multiples of its assets per year 
E) a mining firm that is mostly engaged in exploration for new deposits

Question 4

A firm has EBIT of $24 million and has a corporate tax rate of 25%.The firm has total debt of $40 million,and excess cash of $8 million.If the firm's book value of equity is $72 million,what is the firm's return on invested capital (ROIC)?

Accepted Answer

A) 6% 
B) 17% 
C) 16% 
D) 15% 
E) 23% 
A) 6% 
B) 17% 
C) 16% 
D) 15% 
E) 23%

Question 5

What role does Generally Accepted Accounting Principles (GAAP)play in the accounting process?

Accepted Answer

All firms quoted on a Canadian exchange

Question 6

A firm has EBIT of $29 million,interest expense of $4.5 million,and pays taxes of $8 million.If the firm has 15 million shares outstanding,what is the firm's EPS?

Accepted Answer

A) $1.93 
B) $1.10 
C) $1.40 
D) $1.63 
E) $0.91 
A) $1.93 
B) $1.10 
C) $1.40 
D) $1.63 
E) $0.91

Question 7

What is the need for the notes to the financial statements when the firm's operations are already documented in the financial statements?

Accepted Answer

Not all actions of the firm can be direc

Question 8

Use the table for the question(s)below.
Statement of Financial Position
  
-If the above statement of financial position is for a retail company,what indications about this company would best be drawn from the changes in quick ratio between 2014 and 2015?

Accepted Answer

A) The company has eliminated the risk that it will experience a cash shortfall in the near future. 
B) The company has reduced the risk that it will experience a cash shortfall in the near future. 
C) The risk that the company will experience a cash shortfall in the near future is unchanged. 
D) The company has increased the risk that it will experience a cash shortfall in the near future. 
E) The company has greatly reduced the risk that it will experience a cash shortfall in the near future. 
A) The company has eliminated the risk that it will experience a cash shortfall in the near future. 
B) The company has reduced the risk that it will experience a cash shortfall in the near future. 
C) The risk that the company will experience a cash shortfall in the near future is unchanged. 
D) The company has increased the risk that it will experience a cash shortfall in the near future. 
E) The company has greatly reduced the risk that it will experience a cash shortfall in the near future.

Question 9

What is the main problem in using a statement of financial position to provide an accurate assessment of the value of a company's equity?

Accepted Answer

A) Valuable assets such as the company's reputation,the quality of its work force,and the strength of its management are not captured on the statement of financial position. 
B) The statement of financial position does not accurately represent the book value of assets held by the company. 
C) The equity shown on the statement of financial position does not reflect the market capitalization of the company. 
D) Knowing at a single point in time what assets a firm possesses and the liabilities a firm owes does not give any indication of what those assets can produce in the future. 
E) The statement of financial position does not provide enough detail about the company's equity. 
A) Valuable assets such as the company's reputation,the quality of its work force,and the strength of its management are not captured on the statement of financial position. 
B) The statement of financial position does not accurately represent the book value of assets held by the company. 
C) The equity shown on the statement of financial position does not reflect the market capitalization of the company. 
D) Knowing at a single point in time what assets a firm possesses and the liabilities a firm owes does not give any indication of what those assets can produce in the future. 
E) The statement of financial position does not provide enough detail about the company's equity.

Question 10

The third party who checks annual financial statements to ensure that they are prepared according to Generally Accepted Accounting Principles (GAAP)and verifies that the information reported is reliable is the:

Accepted Answer

A) TSX Enforcement Board. 
B) Accounting Standards Board. 
C) provincial securities commission. 
D) auditor. 
E) GAAP commission. 
A) TSX Enforcement Board. 
B) Accounting Standards Board. 
C) provincial securities commission. 
D) auditor. 
E) GAAP commission.

Question 11

Price-earnings ratios tend to be high for fast-growing firms.

Accepted Answer

A) True 
 B)False

Question 12

Secure Energy Services has 20 million shares outstanding,with a current share price of $12.15 per share.If the firm's market-to-book ratio is 4.5,what is the firm's book value of equity?

Accepted Answer

A) $7.4 million 
B) $54 million 
C) $20 million 
D) $90 million 
E) $243 million 
A) $7.4 million 
B) $54 million 
C) $20 million 
D) $90 million 
E) $243 million

Question 13

Which type of transactions must be disclosed in the management discussion and analysis?

Accepted Answer

A) transactions that significantly affect the firm's leverage 
B) off balance sheet transactions 
C) off income statement transactions 
D) very large transactions 
E) transactions that reduce the firm's net income 
A) transactions that significantly affect the firm's leverage 
B) off balance sheet transactions 
C) off income statement transactions 
D) very large transactions 
E) transactions that reduce the firm's net income

Question 14

Use the table for the question(s)below.
Income Statement for Xenon Manufacturing:
  
-Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.Calculate the operating margin for 2014 and 2015.What does the change in the operating margin between these two years imply about the company?

Accepted Answer

A) The efficiency of Xenon Manufacturing has significantly risen between 2014 and 2015. 
B) The ability of Xenon Manufacturing to sell its goods and services for more than the costs of producing them rose between 2014 and 2015. 
C) The efficiency of Xenon Manufacturing has significantly fallen between 2014 and 2015. 
D) The leverage of Xenon Manufacturing fell slightly between 2014 and 2015. 
E) The revenues available to equity holders fell slightly between 2014 and 2015. 
A) The efficiency of Xenon Manufacturing has significantly risen between 2014 and 2015. 
B) The ability of Xenon Manufacturing to sell its goods and services for more than the costs of producing them rose between 2014 and 2015. 
C) The efficiency of Xenon Manufacturing has significantly fallen between 2014 and 2015. 
D) The leverage of Xenon Manufacturing fell slightly between 2014 and 2015. 
E) The revenues available to equity holders fell slightly between 2014 and 2015.

Question 15

Use the table for the question(s)below.
Statement of Financial Position
  
-The above diagram shows a statement of financial position for a certain company.All quantities shown are in millions of dollars.If the company has 4 million shares outstanding,and these shares are trading at a price of $8.24 per share,what does this tell you about how investors view this firm's book value?

Accepted Answer

A) Investors consider that the firm's market value is worth very much less than its book value. 
B) Investors consider that the firm's market value is worth less than its book value. 
C) Investors consider that the firm's market value and its book value are roughly equivalent. 
D) Investors consider that the firm's market value is worth more than its book value. 
E) Investors consider that the firm's market value is worth much more than its book value. 
A) Investors consider that the firm's market value is worth very much less than its book value. 
B) Investors consider that the firm's market value is worth less than its book value. 
C) Investors consider that the firm's market value and its book value are roughly equivalent. 
D) Investors consider that the firm's market value is worth more than its book value. 
E) Investors consider that the firm's market value is worth much more than its book value.

Question 16

Which of the following best describes why the left and right sides of a statement of financial position are equal?

Accepted Answer

A) In a properly run business,the value of liabilities will not exceed the assets held by the company. 
B) By definition,the assets plus the liabilities will be the same as the stockholders' equity. 
C) The assets must equal liabilities plus stockholders' equity,because stockholders' equity is the difference between the assets and the liabilities. 
D) By accounting convention,the assets of a company must be equal to the liabilities of that company. 
E) Assets must always exceed liabilities or the company will be bankrupt. 
A) In a properly run business,the value of liabilities will not exceed the assets held by the company. 
B) By definition,the assets plus the liabilities will be the same as the stockholders' equity. 
C) The assets must equal liabilities plus stockholders' equity,because stockholders' equity is the difference between the assets and the liabilities. 
D) By accounting convention,the assets of a company must be equal to the liabilities of that company. 
E) Assets must always exceed liabilities or the company will be bankrupt.

Question 17

A firm's net profit margin increased from 8.1% to 8.3% from 2014 to 2015.If net income increased from $4.5 million to $5.6 million,what was the change in the firm's sales?

Accepted Answer

A) $55 million 
B) $21 million 
C) $0.1 million 
D) $11.9 million 
E) $1.1 million 
A) $55 million 
B) $21 million 
C) $0.1 million 
D) $11.9 million 
E) $1.1 million

Question 18

A company has a share price of $24.50 and 118 million shares outstanding.Its market-to-book ratio is 4.2,its book debt-equity ratio is 3.2,and it has cash of $800 million.How much would it cost to take over this business assuming you pay its enterprise value?

Accepted Answer

A) $1.5 billion 
B) $2.8 billion 
C) $3.6 billion 
D) $4.3 billion 
E) $2.9 billion 
A) $1.5 billion 
B) $2.8 billion 
C) $3.6 billion 
D) $4.3 billion 
E) $2.9 billion

Question 19

What will be the effect on the statement of financial position if a firm buys a new processing plant through a new loan?

Accepted Answer

The Assets side will increase under Net

Question 20

Use the table for the question(s)below.
AOS Industries Statement of Cash Flows for 2015
  
-Consider the above statement of cash flows.What were AOS Industries' major means of raising money in 2015?

Accepted Answer

A) from investment activities 
B) by sale of stock 
C) from its operations 
D) by issuing debt 
E) from short-term bank loans 
A) from investment activities 
B) by sale of stock 
C) from its operations 
D) by issuing debt 
E) from short-term bank loans

Exam 2: Introduction to Financial Statement Analysis

According to the text,did Enron follow Generally Accepted Accounting Principles (GAAP)in its financial reporting process?

Use the table for the question(s)below. -Refer to the statement of financial position above.If in 2015 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then Luther's stock would be considered to be:

Which of the following firms would be expected to have a high ROE based on that firm's high operating efficiency?

A firm has EBIT of $24 million and has a corporate tax rate of 25%.The firm has total debt of $40 million,and excess cash of $8 million.If the firm's book value of equity is $72 million,what is the firm's return on invested capital (ROIC)?

What role does Generally Accepted Accounting Principles (GAAP)play in the accounting process?

A firm has EBIT of $29 million,interest expense of $4.5 million,and pays taxes of $8 million.If the firm has 15 million shares outstanding,what is the firm's EPS?

What is the need for the notes to the financial statements when the firm's operations are already documented in the financial statements?

Use the table for the question(s)below. Statement of Financial Position -If the above statement of financial position is for a retail company,what indications about this company would best be drawn from the changes in quick ratio between 2014 and 2015?

What is the main problem in using a statement of financial position to provide an accurate assessment of the value of a company's equity?

The third party who checks annual financial statements to ensure that they are prepared according to Generally Accepted Accounting Principles (GAAP)and verifies that the information reported is reliable is the:

Price-earnings ratios tend to be high for fast-growing firms.

Secure Energy Services has 20 million shares outstanding,with a current share price of $12.15 per share.If the firm's market-to-book ratio is 4.5,what is the firm's book value of equity?

Which type of transactions must be disclosed in the management discussion and analysis?

Which of the following best describes why the left and right sides of a statement of financial position are equal?

A firm's net profit margin increased from 8.1% to 8.3% from 2014 to 2015.If net income increased from $4.5 million to $5.6 million,what was the change in the firm's sales?

A company has a share price of $24.50 and 118 million shares outstanding.Its market-to-book ratio is 4.2,its book debt-equity ratio is 3.2,and it has cash of $800 million.How much would it cost to take over this business assuming you pay its enterprise value?

What will be the effect on the statement of financial position if a firm buys a new processing plant through a new loan?

Use the table for the question(s)below. AOS Industries Statement of Cash Flows for 2015 -Consider the above statement of cash flows.What were AOS Industries' major means of raising money in 2015?

Corporate Finance and the Financial Manager

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

Filters