Question 1

Which one of the following is not a basic component of the DuPont method of ratio analysis?

Accepted Answer

A) profit margin 
B) total asset turnover 
C) equity multiplier 
D) liquidity margin

Question 2

The primary purpose of the liquidity ratios is to determine:

Accepted Answer

A) the extent to which borrowed funds are used to finance assets 
B) the ability of the firm to meet short-term obligations to creditors 
C) the extent to which assets are used to support sales 
D) none of the above

Question 3

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 4

The contribution margin represents contribution of each unit sold that first goes toward paying fixed costs.

Accepted Answer

A) True 
 B)False

Question 5

Financial leverage ratios indicate the extent to which borrowed funds are used to finance assets.

Accepted Answer

A) True 
 B)False

Question 6

Profitability ratios indicate the extent to which assets are used to support sales.

Accepted Answer

A) True 
 B)False

Question 7

Budgets are written financial plans utilized in sales forecasts.

Accepted Answer

A) True 
 B)False

Question 8

A financial technique that involves dividing various financial statement numbers into one another is called:

Accepted Answer

A) trend analysis 
B) cross sectional analysis 
C) ratio analysis 
D) percent of sales analysis

Question 9

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. None of the above clone of prior item.

Accepted Answer

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

Question 10

_____________ costs are a function of time (not sales) and are generally contractual. None of the above clone of prior item.

Accepted Answer

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

Question 11

A firm's Price/Earnings ratio is always greater than its Price/Book ratio.
Not addressed in the chapter

Accepted Answer

A) True 
 B)False

Question 12

All other things being equal, an increase in the amount of fixed operating costs 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 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

The method of evaluating the firm's performance over time is known as:

Accepted Answer

A) trend analysis 
B) cross-sectional analysis 
C) industry comparative analysis 
D) Due Pont analysis

Question 15

Earnings before interest and taxes (EBIT) is another way of describing:

Accepted Answer

A) operating profits 
B) net profits before taxes 
C) gross profits 
D) earnings per share

Question 16

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 sales 
B) accrual 
C) judgmental 
D) cash

Question 17

In employing DuPont analysis, the user would break the return on total assets into the profit margin, total asset turnover, and an equity multiplier.

Accepted Answer

A) True 
 B)False

Question 18

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.

Accepted Answer

A) Inconclusive 
B) General 
C) Incomplete 
D) Initial 
E) all of the above

Question 19

If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a stock that is selling at $50 per share and has 10 shares of stock outstanding, then the firm has a P/E ratio of:

Accepted Answer

A) 2.00 
B) 1.00 
C) 10.0 
D) 0.20

Question 20

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

Exam 14: Financial Analysis and Long-Term Financial Planning

Which one of the following is not a basic component of the DuPont method of ratio analysis?

The primary purpose of the liquidity ratios is to determine:

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

The contribution margin represents contribution of each unit sold that first goes toward paying fixed costs.

Financial leverage ratios indicate the extent to which borrowed funds are used to finance assets.

Profitability ratios indicate the extent to which assets are used to support sales.

Budgets are written financial plans utilized in sales forecasts.

A financial technique that involves dividing various financial statement numbers into one another is called:

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. None of the above clone of prior item.

_____________ costs are a function of time (not sales) and are generally contractual. None of the above clone of prior item.

A firm's Price/Earnings ratio is always greater than its Price/Book ratio. Not addressed in the chapter

All other things being equal, an increase in the amount of fixed operating costs for a firm would:

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?

The method of evaluating the firm's performance over time is known as:

Earnings before interest and taxes (EBIT) is another way of describing:

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.

In employing DuPont analysis, the user would break the return on total assets into the profit margin, total asset turnover, and an equity multiplier.

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.

If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a stock that is selling at $50 per share and has 10 shares of stock outstanding, then the firm has a P/E ratio of:

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) ?