Question 1

Operating income is negative in an amount equal to _________________________ when revenues are zero.

Accepted Answer

The answer of Operating income is negative in an amount...

Question 2

Sustainable earnings represent:

Accepted Answer

A)  the level of earnings expected to persist in the future. 
B)  the level of earnings and the growth in the levels of earnings expected to persist in the future. 
C)  the growth rate of future earnings. 
D)  retained earnings. 
A)  the level of earnings expected to persist in the future. 
B)  the level of earnings and the growth in the levels of earnings expected to persist in the future. 
C)  the growth rate of future earnings. 
D)  retained earnings.

Question 3

Hall and Porter argue that firms have two generic alternative strategies for any particular product.These strategies are:

Accepted Answer

A)  low risk focus,low risk focus 
B)  retail customer focus,wholesale customer focus 
C)  product differentiation,low-cost leadership 
D)  low operating leverage,high operating leverage 
A)  low risk focus,low risk focus 
B)  retail customer focus,wholesale customer focus 
C)  product differentiation,low-cost leadership 
D)  low operating leverage,high operating leverage

Question 4

Examine the four following conditions involving inventory turnover.Discuss what economic factors might be leading to the condition and whether it suggests positive or negative future economic conditions.

Accepted Answer

Condition A: Increasing cost of goods so

Question 5

One important difference between return on assets (ROA)and return on common shareholder's equity (ROCE)is that:

Accepted Answer

A)  ROA does not differentiate based on how a company finances its assets;ROCE does. 
B)  ROA does not distinguish between the different types of income items,such as income from continuing operations,discontinued operations,extraordinary items and changes in accounting principles;ROCE does. 
C)  ROCE does not distinguish between the different types of income items,such as income from continuing operations,discontinued operations,extraordinary items and changes in accounting principles;ROA does. 
D)  ROCE does not differentiate based on how a company finances its assets;ROA does. 
A)  ROA does not differentiate based on how a company finances its assets;ROCE does. 
B)  ROA does not distinguish between the different types of income items,such as income from continuing operations,discontinued operations,extraordinary items and changes in accounting principles;ROCE does. 
C)  ROCE does not distinguish between the different types of income items,such as income from continuing operations,discontinued operations,extraordinary items and changes in accounting principles;ROA does. 
D)  ROCE does not differentiate based on how a company finances its assets;ROA does.

Question 6

Orca Industries
Below are the two most recent balance sheets and most recent income statement for Orca Industries.The company has an effective tax rate of 35%.   Income Statement
For the year ended December 31,2011  
-Refer to the information for Orca Industries.The profit margin for computing ROA for Orca Industries is:

Accepted Answer

A)  9.4% 
B)  13.5% 
C)  4.8% 
D)  12.3% 
A)  9.4% 
B)  13.5% 
C)  4.8% 
D)  12.3%

Question 7

In order to measure how profitable a firm is in generating a return for its common shareholders,a financial analyst would examine the return on _____________________________________________.

Accepted Answer

common sha

Question 8

Net Devices Inc.
The following balance sheets and income statements are for Net Devices Inc. ,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%.
BALANCE SHEETS      
-Refer to the information for Net Devices Inc.What is the accounts receivable turnover ratio for Net Devices for 2011?

Accepted Answer

A)  24.65 
B)  14.85 
C)  14.81 
D)  10.50 
A)  24.65 
B)  14.85 
C)  14.81 
D)  10.50

Question 9

Orca Industries
Below are the two most recent balance sheets and most recent income statement for Orca Industries.The company has an effective tax rate of 35%.   Income Statement
For the year ended December 31,2011  
-Refer to the information for Orca Industries.The return on common shareholders' equity for Orca Industries is:

Accepted Answer

A)  15.2% 
B)  13.5% 
C)  10% 
D)  11.9% 
A)  15.2% 
B)  13.5% 
C)  10% 
D)  11.9%

Question 10

Which of the following might an analyst not want to eliminate from past earnings when using past earnings to forecast future earnings?

Accepted Answer

A)  Nonrecurring gains from the sale of assets 
B)  Unusual asset impairment charges 
C)  Nonrecurring restructuring charges 
D)  Revenue from the sale of inventory 
A)  Nonrecurring gains from the sale of assets 
B)  Unusual asset impairment charges 
C)  Nonrecurring restructuring charges 
D)  Revenue from the sale of inventory

Question 11

Firms with high operating leverage have a higher proportion of _________________________ in their cost structure.

Accepted Answer

The answer of Firms with high operating leverage have a...

Question 12

Orca Industries
Below are the two most recent balance sheets and most recent income statement for Orca Industries.The company has an effective tax rate of 35%.   Income Statement
For the year ended December 31,2011  
-Refer to the information for Orca Industries.Orca's accounts receivable turnover is (assume that Orca makes all sales on account):

Accepted Answer

A)  7.0 
B)  .53 
C)  11.2 
D)  10 
A)  7.0 
B)  .53 
C)  11.2 
D)  10

Question 13

The statutory tax rate differs from a firm's average tax rate due to which of the following reasons?

Accepted Answer

A)  The statutory tax rate is a marginal tax rate. 
B)  Some expenses are included in book income but do not enter into taxable income. 
C)  The average tax rate is for a period of three years. 
D)  The statutory tax rate does not affect GAAP measures of revenues and expenses. 
A)  The statutory tax rate is a marginal tax rate. 
B)  Some expenses are included in book income but do not enter into taxable income. 
C)  The average tax rate is for a period of three years. 
D)  The statutory tax rate does not affect GAAP measures of revenues and expenses.

Question 14

Net Devices Inc.
The following balance sheets and income statements are for Net Devices Inc. ,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%.
BALANCE SHEETS      
-Refer to the information for Net Devices Inc.What is the inventory turnover for Net Devices for 2011?

Accepted Answer

A)  10.32 
B)  8.90 
C)  2.51 
D)  6.23 
A)  10.32 
B)  8.90 
C)  2.51 
D)  6.23

Question 15

Net Devices Inc.
The following balance sheets and income statements are for Net Devices Inc. ,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%.
BALANCE SHEETS      
-Refer to the information for Net Devices Inc.What is the profit margin for ROA for Net Devices for 2010?

Accepted Answer

A)  7.26% 
B)  4.22% 
C)  5.00% 
D)  3.97% 
A)  7.26% 
B)  4.22% 
C)  5.00% 
D)  3.97%

Question 16

Return on assets can be disaggregated into three components.Which of the following is not one of the components?

Accepted Answer

A)  Assets Turnover ratio 
B)  Profit Margin ratio 
C)  Debt to Equity ratio 
D)  Capital Structure Leverage ratio 
A)  Assets Turnover ratio 
B)  Profit Margin ratio 
C)  Debt to Equity ratio 
D)  Capital Structure Leverage ratio

Question 17

Ramos Company
Ramos Company included the following information in its annual report:
  
-Refer to the information for Ramos Company.In a common size income statement for 2009,the cost of goods sold is expressed as:

Accepted Answer

A)  64.3% 
B)  40.0% 
C)  87 % 
D)  103% 
A)  64.3% 
B)  40.0% 
C)  87 % 
D)  103%

Question 18

All else being equal,firms with high levels of ________________________________________ incur more risk in their operations and should earn higher rates of return.

Accepted Answer

The answer of All else being equal,firms with high levels...

Question 19

Return on common equity can be disaggregated into profit margin for ROCE,capital structure leverage and _________________________________________________.

Accepted Answer

The answer of Return on common equity can be disaggregated...

Question 20

The profit margin for ROA indicates the ability of a firm to generate earnings for a particular level of:

Accepted Answer

A)  sales 
B)  assets 
C)  working capital 
D)  shareholders' equity 
A)  sales 
B)  assets 
C)  working capital 
D)  shareholders' equity

Operating income is negative in an amount equal to _________________________ when revenues are zero.

Sustainable earnings represent:

Hall and Porter argue that firms have two generic alternative strategies for any particular product.These strategies are:

Examine the four following conditions involving inventory turnover.Discuss what economic factors might be leading to the condition and whether it suggests positive or negative future economic conditions.

One important difference between return on assets (ROA)and return on common shareholder's equity (ROCE)is that:

In order to measure how profitable a firm is in generating a return for its common shareholders,a financial analyst would examine the return on _____________________________________________.

Which of the following might an analyst not want to eliminate from past earnings when using past earnings to forecast future earnings?

Firms with high operating leverage have a higher proportion of _________________________ in their cost structure.

The statutory tax rate differs from a firm's average tax rate due to which of the following reasons?

Return on assets can be disaggregated into three components.Which of the following is not one of the components?

Ramos Company Ramos Company included the following information in its annual report: -Refer to the information for Ramos Company.In a common size income statement for 2009,the cost of goods sold is expressed as:

All else being equal,firms with high levels of ________________________________________ incur more risk in their operations and should earn higher rates of return.

Return on common equity can be disaggregated into profit margin for ROCE,capital structure leverage and _________________________________________________.

The profit margin for ROA indicates the ability of a firm to generate earnings for a particular level of:

Overview of Financial Reporting,financial Statement Analysis,and Valuation

Asset and Liability Valuation and Income Recognition

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Risk Analysis

Accounting Quality

Financing Activities

Investing Activities

Operating Activities

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

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Exam 4: Profitability Analysis

Operating income is negative in an amount equal to _________________________ when revenues are zero.

Sustainable earnings represent:

Hall and Porter argue that firms have two generic alternative strategies for any particular product.These strategies are:

Examine the four following conditions involving inventory turnover.Discuss what economic factors might be leading to the condition and whether it suggests positive or negative future economic conditions.

One important difference between return on assets (ROA)and return on common shareholder's equity (ROCE)is that:

In order to measure how profitable a firm is in generating a return for its common shareholders,a financial analyst would examine the return on _____________________________________________.

Which of the following might an analyst not want to eliminate from past earnings when using past earnings to forecast future earnings?

Firms with high operating leverage have a higher proportion of _________________________ in their cost structure.

The statutory tax rate differs from a firm's average tax rate due to which of the following reasons?

Return on assets can be disaggregated into three components.Which of the following is not one of the components?

Ramos Company Ramos Company included the following information in its annual report: -Refer to the information for Ramos Company.In a common size income statement for 2009,the cost of goods sold is expressed as:

All else being equal,firms with high levels of ________________________________________ incur more risk in their operations and should earn higher rates of return.

Return on common equity can be disaggregated into profit margin for ROCE,capital structure leverage and _________________________________________________.

The profit margin for ROA indicates the ability of a firm to generate earnings for a particular level of:

Overview of Financial Reporting,financial Statement Analysis,and Valuation

Asset and Liability Valuation and Income Recognition

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Risk Analysis

Accounting Quality

Financing Activities

Investing Activities

Operating Activities

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters