Question 1

The income statement reports the firm's revenues and expenses,and it computes the firm's bottom line of net income,or earnings.

Accepted Answer

A) True 
 B)False

Question 2

Use the table for the question(s)below.
    
-Refer to the statement of financial position above.Luther's quick ratio for 2014 is closest to:

Accepted Answer

A) 0.77 
B) 1.31 
C) 1.09 
D) 0.92 
E) 0.87 
A) 0.77 
B) 1.31 
C) 1.09 
D) 0.92 
E) 0.87

Question 3

CIBC has 110 million shares outstanding,with a current share price of $94.50 per share.If the firm's market-to-book ratio is 7.85,what is the firm's book value of equity?

Accepted Answer

A) $5.6 billion 
B) $0.9 billion 
C) $10.4 billion 
D) $1.3 billion 
E) $2.75 billion 
A) $5.6 billion 
B) $0.9 billion 
C) $10.4 billion 
D) $1.3 billion 
E) $2.75 billion

Question 4

Company A has current assets of $42 billion and current liabilities of $31 billion.Company B has current assets of $2.7 billion and current liabilities of $1.8 billion.Which of the following statements is correct,based on this information?

Accepted Answer

A) Company A is less likely than Company B to have sufficient working capital to meet its short-term needs. 
B) Company A has greater leverage than Company B. 
C) Company A has less leverage than Company B. 
D) Company A and Company B have roughly equivalent enterprise values. 
E) Company A is more likely than Company B to have sufficient working capital to meet its short-term needs. 
A) Company A is less likely than Company B to have sufficient working capital to meet its short-term needs. 
B) Company A has greater leverage than Company B. 
C) Company A has less leverage than Company B. 
D) Company A and Company B have roughly equivalent enterprise values. 
E) Company A is more likely than Company B to have sufficient working capital to meet its short-term needs.

Question 5

Allen Company bought a new copy machine to be depreciated straight line for three years for use by sales personnel.Where would this purchase be reflected on the Statement of Cash Flows?

Accepted Answer

A) It would be an expense on the income statement,so it would be reflected in operating cash flows. 
B) It would be an addition to property,plant and equipment,so it would be an investing activity. 
C) It would be an addition to cash,so would be reflected in the change in cash. 
D) It would be an increase in borrowing,so would be reflected in financing activities. 
E) It would be a change in inventory,so would be reflected in operating activities. 
A) It would be an expense on the income statement,so it would be reflected in operating cash flows. 
B) It would be an addition to property,plant and equipment,so it would be an investing activity. 
C) It would be an addition to cash,so would be reflected in the change in cash. 
D) It would be an increase in borrowing,so would be reflected in financing activities. 
E) It would be a change in inventory,so would be reflected in operating activities.

Question 6

In general,a successful firm will have a market-to-book ratio that is substantially greater than 1.

Accepted Answer

A) True 
 B)False

Question 7

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.What is the company's net working capital?

Accepted Answer

A) $7 million 
B) $32 million 
C) $33 million 
D) $40 million 
E) $20 million 
A) $7 million 
B) $32 million 
C) $33 million 
D) $40 million 
E) $20 million

Question 8

A printing company prints a brochure for a client,and then bills them for this service.At the time the printing company's financial disclosure statements are prepared,the client has not yet paid the bill for this service.How will this transaction be recorded?

Accepted Answer

A) The sale will be added to Net Income on the income statement and retained in Net Income on the statement of cash flows. 
B) The sale will be added to Net Income on the income statement but deducted from Net Income on the statement of cash flows. 
C) The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows. 
D) The sale will neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows. 
E) The sale will be deducted from Net Income on the income statement but added to Net Income on the statement of cash flows. 
A) The sale will be added to Net Income on the income statement and retained in Net Income on the statement of cash flows. 
B) The sale will be added to Net Income on the income statement but deducted from Net Income on the statement of cash flows. 
C) The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows. 
D) The sale will neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows. 
E) The sale will be deducted from Net Income on the income statement but added to Net Income on the statement of cash flows.

Question 9

A firm has gross profit of $142 million,EBIT of $94 million,and net income of $55 million.If the firm has 28 million shares outstanding,what is the firm's EPS?

Accepted Answer

A) $1.39 
B) $3.36 
C) $1.71 
D) $2.30 
E) $1.96 
A) $1.39 
B) $3.36 
C) $1.71 
D) $2.30 
E) $1.96

Question 10

Use the table for the question(s)below.
  
-Refer to the income statement above.Luther's return on equity (ROE)for the year ending December 31,2015 is closest to:

Accepted Answer

A) 2.0% 
B) 6.5% 
C) 8.4% 
D) 12.7% 
E) 32.5% 
A) 2.0% 
B) 6.5% 
C) 8.4% 
D) 12.7% 
E) 32.5%

Question 11

In Canada,publicly traded companies can choose whether or not they wish to release periodic financial statements.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is one of the ways that the Sarbanes-Oxley Act sought to improve the accuracy of information given to both boards and shareholders?

Accepted Answer

A) by reducing the penalties to firms for providing false information 
B) by increasing the independence of auditors and clients 
C) by increasing the non-audit fees that an auditor can receive from a client 
D) by forcing CEOs and CFOs to certify the accuracy of their firm's financial statements 
E) by removing the requirement that firms include outside directors on audit committees 
A) by reducing the penalties to firms for providing false information 
B) by increasing the independence of auditors and clients 
C) by increasing the non-audit fees that an auditor can receive from a client 
D) by forcing CEOs and CFOs to certify the accuracy of their firm's financial statements 
E) by removing the requirement that firms include outside directors on audit committees

Question 13

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.How would the balance sheet change if the company's long-term assets were judged to depreciate at an extra $5 million per year?

Accepted Answer

A) Net property,plant,and equipment would rise to $126 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
B) Net property,plant,and equipment would fall to $116 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
C) Long-Term Liabilities would rise to $182 million,and Total Liabilities and Stockholders' Equity would would be adjusted accordingly. 
D) Long-Term Liabilities would fall to $172 million,and Total Liabilities and Stockholders' Equity would be adjusted accordingly. 
E) Net property,plant,and equipment would be unchanged,and Total Assets and Stockholders' Equity would also remain the same. 
A) Net property,plant,and equipment would rise to $126 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
B) Net property,plant,and equipment would fall to $116 million,and Total Assets and Stockholders' Equity would be adjusted accordingly. 
C) Long-Term Liabilities would rise to $182 million,and Total Liabilities and Stockholders' Equity would would be adjusted accordingly. 
D) Long-Term Liabilities would fall to $172 million,and Total Liabilities and Stockholders' Equity would be adjusted accordingly. 
E) Net property,plant,and equipment would be unchanged,and Total Assets and Stockholders' Equity would also remain the same.

Question 14

Use the table for the question(s)below.
  
-Refer to the income statement above.Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2015 Luther's diluted earnings per share are closest to:

Accepted Answer

A) $1.01 
B) $1.04 
C) $1.53 
D) $3.92 
E) $4.04 
A) $1.01 
B) $1.04 
C) $1.53 
D) $3.92 
E) $4.04

Question 15

Use the table for the question(s)below.
  
-Refer to the income statement above.Luther's operating margin for the year ending December 31,2014 is closest to:

Accepted Answer

A) 1.8% 
B) 2.7% 
C) 5.4% 
D) 6.8% 
E) 16.7% 
A) 1.8% 
B) 2.7% 
C) 5.4% 
D) 6.8% 
E) 16.7%

Question 16

What are the four financial statements that all public companies must produce?

Accepted Answer

1.statement of financial posit

Question 17

Gross profit is calculated as:

Accepted Answer

A) Total sales - Cost of sales - Selling,general,and administrative expenses - Depreciation and amortization. 
B) Total sales - Cost of sales - Selling,general,and administrative expenses. 
C) Total sales - Cost of sales. 
D) Total sales - Cost of sales - Interest expense. 
E) Total sales - Cost of sales - Interest expense -Taxes. 
A) Total sales - Cost of sales - Selling,general,and administrative expenses - Depreciation and amortization. 
B) Total sales - Cost of sales - Selling,general,and administrative expenses. 
C) Total sales - Cost of sales. 
D) Total sales - Cost of sales - Interest expense. 
E) Total sales - Cost of sales - Interest expense -Taxes.

Question 18

International Financial Reporting Standards are taking root throughout the world.However,it is unlikely that the Canada will report according to IFRS before the second half of the twenty-first century.

Accepted Answer

A) True 
 B)False

Question 19

Ivanhoe Energy Inc has 36 million shares outstanding,with a current share price of $21.45 per share.If the firm's book value of equity is $80 million,what is its market-to-book ratio?

Accepted Answer

A) 0.45 
B) 2.22 
C) 9.65 
D) 0.10 
E) 3.73 
A) 0.45 
B) 2.22 
C) 9.65 
D) 0.10 
E) 3.73

Question 20

Use the table for the question(s)below.
    
-Refer to the statement of financial position above.What is Luther's net working capital in 2014?

Accepted Answer

A) $12 million 
B) $27 million 
C) $39 million 
D) $45 million 
E) $63.6 million 
A) $12 million 
B) $27 million 
C) $39 million 
D) $45 million 
E) $63.6 million

Exam 2: Introduction to Financial Statement Analysis

The income statement reports the firm's revenues and expenses,and it computes the firm's bottom line of net income,or earnings.

Use the table for the question(s)below. -Refer to the statement of financial position above.Luther's quick ratio for 2014 is closest to:

CIBC has 110 million shares outstanding,with a current share price of $94.50 per share.If the firm's market-to-book ratio is 7.85,what is the firm's book value of equity?

Company A has current assets of $42 billion and current liabilities of $31 billion.Company B has current assets of $2.7 billion and current liabilities of $1.8 billion.Which of the following statements is correct,based on this information?

Allen Company bought a new copy machine to be depreciated straight line for three years for use by sales personnel.Where would this purchase be reflected on the Statement of Cash Flows?

In general,a successful firm will have a market-to-book ratio that is substantially greater than 1.

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.What is the company's net working capital?

A printing company prints a brochure for a client,and then bills them for this service.At the time the printing company's financial disclosure statements are prepared,the client has not yet paid the bill for this service.How will this transaction be recorded?

A firm has gross profit of $142 million,EBIT of $94 million,and net income of $55 million.If the firm has 28 million shares outstanding,what is the firm's EPS?

Use the table for the question(s)below. -Refer to the income statement above.Luther's return on equity (ROE)for the year ending December 31,2015 is closest to:

In Canada,publicly traded companies can choose whether or not they wish to release periodic financial statements.

Which of the following is one of the ways that the Sarbanes-Oxley Act sought to improve the accuracy of information given to both boards and shareholders?

Use the table for the question(s)below. -Refer to the income statement above.Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2015 Luther's diluted earnings per share are closest to:

Use the table for the question(s)below. -Refer to the income statement above.Luther's operating margin for the year ending December 31,2014 is closest to:

What are the four financial statements that all public companies must produce?

Gross profit is calculated as:

International Financial Reporting Standards are taking root throughout the world.However,it is unlikely that the Canada will report according to IFRS before the second half of the twenty-first century.

Ivanhoe Energy Inc has 36 million shares outstanding,with a current share price of $21.45 per share.If the firm's book value of equity is $80 million,what is its market-to-book ratio?

Use the table for the question(s)below. -Refer to the statement of financial position above.What is Luther's net working capital in 2014?

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

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