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Exam 14: Financial Statement Analysis

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Question 31

Multiple Choice

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The level of real income of a firm can be distorted by the reporting of depreciation and interest expense.During periods of low inflation,the level of reported depreciation tends to __________ income,and the level of interest expense reported tends to __________ income.

A) understate; overstate
B) understate; understate
C) overstate; understate
D) overstate; overstate

E) B) and C)
F) B) and D)

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Question 32

Multiple Choice

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A firm has a tax burden of 0.7,a leverage ratio of 1.3,an interest burden of 0.8,and a return on sales ratio of 10%.The firm generates $2.28 in sales per dollar of assets.What is the firm's ROE?

A) 12.4%
B) 14.5%
C) 16.6%
D) 17.8%

E) None of the above
F) A) and B)

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Question 33

Multiple Choice

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By 2008,over 100 countries have adopted financial reporting standards which are in conformance with ________.

A firm has a ROE of 20% and a market-to-book ratio of 2.38.Its P/E ratio is _________.

The financial statements of Flathead Lake Manufacturing Company are given below: Note: The common shares are trading in the stock market for $15 per share -Refer to the financial statements of Flathead Lake Manufacturing Company.The firm's ATO for 2007 is _________.Please keep in mind that when a ratio involves both income statement and balance sheet numbers,the balance sheet numbers for the beginning and end of the year must be averaged.

Another term for EVA is ______.

A firm purchases goods on credit worth $100.The same firm pays off $80 in old credit purchases.An investment is made via the purchase of a new facility and equity is issued in the amount of $200 to pay for the purchase.What is the change in net cash provided by financing?

A firm has an ROA of 8%,a debt/equity ratio of 0.5,its ROE is _________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the stock market for $27 each. -Refer to the financial statements of Burnaby Mountain Trading Company.The firm's P/E ratio for 2008 is _________.

Look at the following table of data for Key Biscuit Company: What must have caused the firm's ROE to drop?

If the interest rate on debt is higher than the ROA,then a firm's ROE will _________.

Which of the following transactions will result in a decrease in cash flow from operations?

The tax burden of the firm is 0.5,the interest burden is 0.55,the profit margin is 0.25,the asset turnover is 1.5,and the leverage ratio is 1.65.What is the ROE of the firm?

What ratio will definitely increase when a firm increases its annual sales with no corresponding increase in assets?

The term quality of earnings refers to ________.

The major difference between IFRS and GAAP is that U.S.standards are ___________ and IFRS standards are _________.

The firms leverage ratio is 1.2,interest burden ratio is .81,profit margin is .25,and its asset turnover is 1.10.What is the firm's compound leverage factor?

Economic Value Added (EVA) is:

Quick ratio is a measure of firm's __________.

In 2006 Hewlett Packard repurchased shares of common stock worth $5,241 million and made dividend payments of $894 million.Other financing activities raised $196 million and Hewlett-Packard's total cash flow from financing was -$6,077 million.How much did the long term debt accounts of Hewlett Packard change?