Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A firm has fixed operating costs of $25,000,a per unit sales price of $5,and a variable cost per unit of $3.What is its operating breakeven point if it desires net operating income of $10,000,not $0 (zero)?

Accepted Answer

A) 12,500 units 
B) 15,000 units 
C) 17,500 units 
D) 25,000 units

Question 3

Net working capital is current assets plus current liabilities.

Accepted Answer

A) True 
 B)False

Question 4

_____________ costs are a function of quantity sold,not time.

Accepted Answer

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

Question 5

In general,a firm's return on assets will be less than its return on equity.

Accepted Answer

A) True 
 B)False

Question 6

All other things being equal,a decrease in the selling price of a product for a firm would:

Accepted Answer

A) increase the break-even point 
B) decrease the break-even point 
C) have no impact on the break-even point 
D) not enough information given

Question 7

The five basic groups of ratios are liquidity ratios,asset management ratios,capital budgeting ratios,profitability ratios,and market value ratios.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

It is possible that the results of financial statement analysis could reflect the non-financial operations of a firm.

Accepted Answer

A) True 
 B)False

Question 10

Higher levels of fixed costs result in lower levels of operating leverage.

Accepted Answer

A) True 
 B)False

Question 11

The degree of operating leverage (DOL)can be measured by the percent change in operating income (EBIT)divided by percent change in:

Accepted Answer

A) fixed costs 
B) total costs 
C) variable costs 
D) unit sales

Question 12

Ratios standardize balance sheet and income statement numbers,thus minimizing the effect of firm size.

Accepted Answer

A) True 
 B)False

Question 13

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

Accepted Answer

A) dollar sales 
B) unit sales 
C) dollar fixed costs 
D) unit variable costs

Question 14

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0.Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0.Based on this limited information firm ________ appears to be in ________ debt management position than firm ________.

Accepted Answer

A) A,better,B 
B) B,better,A 
C) A,a comparable,B 
D) none of the above

Question 15

External financing needs can be calculated by subtracting the addition to retained earnings and an increase in spontaneous financing from a firms change in assets.

Accepted Answer

A) True 
 B)False

Question 16

If a firm's variable cost per unit increases,the firm's operating breakeven point will

Accepted Answer

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

Question 17

The profitability ratio that measures the return that shareholders earned on the equity they invested in the firm is the:

Accepted Answer

A) operating profit margin 
B) return on equity 
C) net profit margin 
D) return on assets

Question 18

If a firm's fixed financial costs decrease,the firm's operating breakeven point will

Accepted Answer

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

Question 19

Ratio analysis is a financial technique that involves dividing various financial statements numbers into one another.

Accepted Answer

A) True 
 B)False

Question 20

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 plant and equipment. 
E) both a and d are correct

Exam 14: Financial Analysis and Long-Term Financial Planning

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

A firm has fixed operating costs of $25,000,a per unit sales price of $5,and a variable cost per unit of $3.What is its operating breakeven point if it desires net operating income of $10,000,not $0 (zero) ?

Net working capital is current assets plus current liabilities.

_____________ costs are a function of quantity sold,not time.

In general,a firm's return on assets will be less than its return on equity.

All other things being equal,a decrease in the selling price of a product for a firm would:

The five basic groups of ratios are liquidity ratios,asset management ratios,capital budgeting ratios,profitability ratios,and market value ratios.

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

It is possible that the results of financial statement analysis could reflect the non-financial operations of a firm.

Higher levels of fixed costs result in lower levels of operating leverage.

The degree of operating leverage (DOL) can be measured by the percent change in operating income (EBIT) divided by percent change in:

Ratios standardize balance sheet and income statement numbers,thus minimizing the effect of firm size.

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0.Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0.Based on this limited information firm appears to be in debt management position than firm .

External financing needs can be calculated by subtracting the addition to retained earnings and an increase in spontaneous financing from a firms change in assets.

If a firm's variable cost per unit increases,the firm's operating breakeven point will

The profitability ratio that measures the return that shareholders earned on the equity they invested in the firm is the:

If a firm's fixed financial costs decrease,the firm's operating breakeven point will

Ratio analysis is a financial technique that involves dividing various financial statements numbers into one another.

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