Question 1

A firm has a debt-equity ratio of 0.42. What is the total debt ratio?

Accepted Answer

A)  0.30
B)  0.36
C)  0.44
D)  1.58
E)  2.38F) A) and B)
G) D) and E)

Question 2

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

Accepted Answer

A)  increase in the cash ratio
B)  increase in the net working capital to total assets ratio
C)  decrease in the quick ratio
D)  decrease in the cash coverage ratio
E)  increase in the current ratioF) A) and D)
G) B) and E)

Question 3

Relationships determined from a firm's financial information and used for comparison purposes are known as:

Accepted Answer

A)  financial ratios.
B)  identities.
C)  dimensional analysis.
D)  scenario analysis.
E)  solvency analysis.F) None of the above
G) D) and E)

Question 4

Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income?

Accepted Answer

A)  $105,616
B)  $148,309
C)  $157,136
D)  $161,008
E)  $164,909F) B) and C)
G) C) and D)

Question 5

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

Accepted Answer

A)  accounts payable
B)  cash
C)  inventory
D)  accounts receivable
E)  fixed assetsF) A) and B)
G) A) and E)

Question 6

How does accounts receivable affect the statement of cash flows for 2012?

Accepted Answer

A)  a use of $4,218 of cash as an investment activity
B)  a source of $807 of cash as an operating activity
C)  a use of $4,218 of cash as a financing activity
D)  a source of $807 of cash as an investment activity
E)  a use of $807 of cash as an operating activityF) D) and E)
G) A) and B)

Question 7

Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?

Accepted Answer

A)  0.89
B)  1.13
C)  1.47
D)  1.89
E)  2.13F) A) and D)
G) A) and C)

Question 8

A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

Accepted Answer

A)  equity multiplier
B)  total asset turnover
C)  profit margin
D)  return on assets
E)  return on equityF) C) and E)
G) A) and C)

Question 9

On the Statement of Cash Flows, which of the following are considered financing activities?
I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid

Accepted Answer

A)  I and IV only
B)  III and IV only
C)  II and III only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and B)
G) B) and C)

Question 10

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

Accepted Answer

A)  volatile market prices
B)  negative earnings
C)  positive PEG ratios
D)  a negative Tobin's Q
E)  increasing salesF) A) and E)
G) A) and D)

Question 11

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Accepted Answer

A)  return on equity
B)  return on assets
C)  profit margin
D)  equity multiplier
E)  price-earnings ratioF) D) and E)
G) B) and D)

Question 12

How many dollars of sales are being generated from every dollar of net fixed assets? (Use 2012 values.)

Accepted Answer

A)  $0.88
B)  $1.87
C)  $2.33
D)  $2.59
E)  $3.09F) B) and E)
G) A) and D)

Question 13

Wise's Corner Grocer had the following current account values. What effect did the change in net working capital have on the firm's cash flows for 2012?

Accepted Answer

A)  net use of cash of $37
B)  net use of cash of $83
C)  net source of cash of $83
D)  net source of cash of $111
E)  net source of cash of $135F) B) and E)
G) C) and D)

Question 14

What is the equity multiplier for 2012?

Accepted Answer

A)  1.67
B)  1.72
C)  1.88
D)  1.93
E)  2.03F) B) and E)
G) All of the above

Question 15

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio?

Accepted Answer

A)  0.97
B)  1.01
C)  1.08
D)  1.15
E)  1.22F) B) and D)
G) A) and E)

Question 16

A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio?

Accepted Answer

A)  12.14
B)  15.24
C)  17.27
D)  23.41
E)  24.56F) C) and E)
G) B) and E)

Question 17

Activities of a firm which require the spending of cash are known as:

Accepted Answer

A)  sources of cash.
B)  uses of cash.
C)  cash collections.
D)  cash receipts.
E)  cash on hand.F) A) and E)
G) C) and E)

Question 18

Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?

Accepted Answer

A)  0.31
B)  0.53
C)  0.71
D)  1.04
E)  1.07F) A) and D)
G) A) and E)

Question 19

What is debt-equity ratio? (Use 2012 values)

Accepted Answer

A)  0.52
B)  0.87
C)  0.94
D)  1.01
E)  1.06F) A) and B)
G) None of the above

Question 20

On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?

Accepted Answer

A)  current year sales
B)  current year total assets
C)  base-year sales
D)  base-year total assets
E)  base-year accounts receivablesF) None of the above
G) All of the above

Exam 3: Working With Financial Statements

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

Correct AnswerverifiedShow Answer

A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

Correct AnswerverifiedShow Answer

On the Statement of Cash Flows, which of the following are considered financing activities? I. increase in long-term debt II. decrease in accounts payable III. interest paid IV. dividends paid

Correct AnswerverifiedShow Answer

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

Correct AnswerverifiedShow Answer

What is the equity multiplier for 2012?

Correct AnswerverifiedShow Answer

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Correct AnswerverifiedShow Answer

Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?

Correct AnswerverifiedShow Answer

Activities of a firm which require the spending of cash are known as:

Correct AnswerverifiedShow Answer

Relationships determined from a firm's financial information and used for comparison purposes are known as:

Correct AnswerverifiedShow Answer

A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio?

Correct AnswerverifiedShow Answer

On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?

Correct AnswerverifiedShow Answer

Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income?

Correct AnswerverifiedShow Answer

A firm has a debt-equity ratio of 0.42. What is the total debt ratio?

Correct AnswerverifiedShow Answer

How many dollars of sales are being generated from every dollar of net fixed assets? (Use 2012 values.)

Correct AnswerverifiedShow Answer

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

Correct AnswerverifiedShow Answer

What is debt-equity ratio? (Use 2012 values)

Correct AnswerverifiedShow Answer

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio?

Correct AnswerverifiedShow Answer

How does accounts receivable affect the statement of cash flows for 2012?

Correct AnswerverifiedShow Answer

Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?

Correct AnswerverifiedShow Answer

Wise's Corner Grocer had the following current account values. What effect did the change in net working capital have on the firm's cash flows for 2012?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified