Question 1

A firm with total asset turnover lower than the industry average may have

Accepted Answer

A) excessive debt. 
B) excessive cost of goods sold. 
C) excessive sales. 
D) insufficient fixed assets. 
E) none of the above

Question 2

Which of the following is not a variable cost?

Accepted Answer

A) direct materials 
B) direct labor 
C) delivery costs 
D) commissions 
E) all of the above are variable costs

Question 3

If a firm's sale price per unit decreases,the firm's operating breakeven point will

Accepted Answer

A) decrease 
B) increase 
C) remain unchanged 
D) change in an undetermined direction

Question 4

The ________ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold,operating expenses,and interest expense that are expressed as a ratio of projected sales.

Accepted Answer

A) percent of assets 
B) accrual 
C) judgmental 
D) cash 
E) none of the above

Question 5

Which of the following statements about liquidity ratios is true?

Accepted Answer

A) the lower the quick ratio relative to the current ratio,the safer a firm is in terms of liquidity. 
B) the higher the current ratio,the more likely a firm is able to pay its short-term obligations. 
C) the quick ratio is always between 0 and 1. 
D) all the above statements are true.

Question 6

Which one of the following types of ratios indicates the ability to meet short-term obligations to creditors as they come due?

Accepted Answer

A) liquidity ratios 
B) asset management ratios 
C) capital structure ratios 
D) profitability ratios 
E) market value ratios

Question 7

Which one of the following types of financial ratios does not get all of its information from a firm's income statements and balance sheets?

Accepted Answer

A) liquidity ratios 
B) asset management ratios 
C) capital structure ratios 
D) profitability ratios 
E) market value ratios

Question 8

A firm's sales forecast is usually based on

Accepted Answer

A) forecasts of external economic activity 
B) the firm's sales force estimates of demand 
C) both internal and external factor estimates 
D) accounts receivable experience

Question 9

As part of the measurement of financial leverage,the total debt ratio is calculated as:

Accepted Answer

A) total liabilities divided by total assets 
B) total liabilities times total assets 
C) current liabilities divided by total assets 
D) total assets minus current liabilities divided by total liabilities divided by total liabilities

Question 10

The current ratio of a firm with current assets of $300,000,current liabilities of $100,000,and inventory of $100,000 is:

Accepted Answer

A) 1:1 
B) 2:1 
C) 3:1 
D) 4:1

Question 11

The price/earnings ratio (P/E)is calculated as:

Accepted Answer

A) stock price divided by earnings per share 
B) stock price times earnings per share 
C) earnings per share divided by stock price 
D) stock price divided by the difference between earnings per share and cash dividends per share

Question 12

A firm's Price/Earnings ratio is always greater than its Price/Book ratio.

Accepted Answer

A) True 
 B)False

Question 13

Assume a firm is developing,manufacturing,and selling a basic software package at $300 per copy.Raw material and direct labor total $100 per unit.Fixed costs are $150,000.If unit sales are 3,000 per year,what will be the break-even point in units?

Accepted Answer

A) 375 units 
B) 500 units 
C) 750 units 
D) 800 units

Question 14

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

Accepted Answer

A) excessive fixed assets. 
B) excessive inventory. 
C) excessive accounts receivable. 
D) excessive debt. 
E) none of the above

Question 15

Find the average payment period if accounts payable is $20,000,cost of goods sold is $200,000,and sales are $500,000.

Accepted Answer

A) 10 
B) 36.5 
C) 25 
D) 14.6

Question 16

The fixed charge coverage ratio is a stricter measure of a firm's ability to meet its fixed payment obligations than the interest coverage ratio.

Accepted Answer

A) True 
 B)False

Question 17

The current ratio is computed by dividing the sum of cash,marketable securities,and accounts receivable by the current liabilities.

Accepted Answer

A) True 
 B)False

Question 18

_____________ costs are a function of time (not sales)and are generally contractual.

Accepted Answer

A) fixed 
B) semi-variable 
C) operating 
D) variable 
E) none of the above

Question 19

Financial analysis using ratios is not useful in the firm's financial planning process.

Accepted Answer

A) True 
 B)False

Question 20

If a firm has an after-tax profit margin of 5%,an asset turnover of 2.5 times,and no debt,the return on equity is:

Accepted Answer

A) 2% 
B) 8.5% 
C) 12.5% 
D) not enough information available

Exam 14: Financial Analysis and Long-Term Financial Planning

A firm with total asset turnover lower than the industry average may have

Which of the following is not a variable cost?

If a firm's sale price per unit decreases,the firm's operating breakeven point will

The ________ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold,operating expenses,and interest expense that are expressed as a ratio of projected sales.

Which of the following statements about liquidity ratios is true?

Which one of the following types of ratios indicates the ability to meet short-term obligations to creditors as they come due?

Which one of the following types of financial ratios does not get all of its information from a firm's income statements and balance sheets?

A firm's sales forecast is usually based on

As part of the measurement of financial leverage,the total debt ratio is calculated as:

The current ratio of a firm with current assets of $300,000,current liabilities of $100,000,and inventory of $100,000 is:

The price/earnings ratio (P/E) is calculated as:

A firm's Price/Earnings ratio is always greater than its Price/Book ratio.

Assume a firm is developing,manufacturing,and selling a basic software package at $300 per copy.Raw material and direct labor total $100 per unit.Fixed costs are $150,000.If unit sales are 3,000 per year,what will be the break-even point in units?

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

Find the average payment period if accounts payable is $20,000,cost of goods sold is $200,000,and sales are $500,000.

The fixed charge coverage ratio is a stricter measure of a firm's ability to meet its fixed payment obligations than the interest coverage ratio.

The current ratio is computed by dividing the sum of cash,marketable securities,and accounts receivable by the current liabilities.

_____________ costs are a function of time (not sales) and are generally contractual.

Financial analysis using ratios is not useful in the firm's financial planning process.

If a firm has an after-tax profit margin of 5%,an asset turnover of 2.5 times,and no debt,the return on equity is: