2023年公司理财英文版题库

CHAPTER3

FinancialStatementAnalysis,Planning,andGrowth

MultipleChoiceQuestions:

I. DEFINITIONS

LONG-TERMPLANNING

c 1. Onekeyreasonalong-termfinancialplanisdevelopedisbecause:

a. theplandeterminesyourfinancialpolicy.

b. theplandeterminesyourinvestmentpolicy.

c. therearedirectconnectionsbetweenachievablecorporategrowthandthefinancialpolicy.

d. thereisunlimitedgrowthpossibleinawell-developedfinancialplan.

e. Noneoftheabove.

PROFORMASTATEMENTS

b 2. Projectedfuturefinancialstatementsarecalled:

a. plugstatements.

b. proformastatements.

c. reconciledstatements.

d. aggregatedstatements.

e. noneoftheabove.

PERCENTAGEOFSALES

e 3. Thepercentageofsalesmethod:

a. requiresthatallaccountsgrowatthesamerate.

b. separatesaccountsthatvarywithsalesandthosethatdonotvarywithsales.

c. allowstheanalysttocalculatehowmuchfinancingthefirmwillneedtosupportthepredictedsaleslevel.

d. BothAandB.

e. BothBandC.

COMMON-SIZESTATEMENTS

e 4. A_____standardizesitemsontheincomestatementandbalancesheetasapercentageoftotalsalesandtotalassets,respectively.

a. taxreconciliationstatement

b. statementofstandardization

c. statementofcashflows

d. common-baseyearstatement

e. common-sizestatement

FINANCIALRATIOS

a 5. Relationshipsdeterminedfromafirm’sfinancialinformationandusedforcomparisonpurposesareknownas:

a. financialratios.

b. comparisonstatements.

c. dimensionalanalysis.

d. scenarioanalysis.

e. solvencyanalysis.

SHORT-TERMSOLVENCYRATIOS

c 6. Financialratiosthatmeasureafirm’sabilitytopayitsbillsovertheshortrunwithoutunduestressareknownas_____ratios.

a. assetmanagement

b. long-termsolvency

c. short-termsolvency

d. profitability

e. marketvalue

CURRENTRATIO

b 7. Thecurrentratioismeasuredas:

a. currentassetsminuscurrentliabilities.

b. currentassetsdividedbycurrentliabilities.

c. currentliabilitiesminusinventory,dividedbycurrentassets.

d. cashonhanddividedbycurrentliabilities.

e. currentliabilitiesdividedbycurrentassets.

QUICKRATIO

d 8. Thequickratioismeasuredas:

a. currentassetsdividedbycurrentliabilities.

b. cashonhandpluscurrentliabilities,dividedbycurrentassets.

c. currentliabilitiesdividedbycurrentassets,plusinventory.

d. currentassetsminusinventory,dividedbycurrentliabilities.

e. currentassetsminusinventoryminuscurrentliabilities.

CASHRATIO

e 9. Thecashratioismeasuredas:

a. currentassetsdividedbycurrentliabilities.

b. currentassetsminuscashonhand,dividedbycurrentliabilities.

c. currentliabilitiespluscurrentassets,dividedbycashonhand.

d. cashonhandplusinventory,dividedbycurrentliabilities.

e. cashonhanddividedbycurrentliabilities.

LONG-TERMSOLVENCYRATIOS

b 10. Ratiosthatmeasureafirm’sfinancialleverageareknownas_____ratios.

a. assetmanagement

b. long-termsolvency

c. short-termsolvency

d. profitability

e. marketvalue

TOTALDEBTRATIO

a 11. Thefinancialratiomeasuredastotalassetsminustotalequity,dividedbytotalassets,isthe:

a. totaldebtratio.

b. equitymultiplier.

c. debt-equityratio.

d. currentratio.

e. timesinterestearnedratio.

DEBT-EQUITYRATIO

c 12. Thedebt-equityratioismeasuredastotal:

a. equityminustotaldebt.

b. equitydividedbytotaldebt.

c. debtdividedbytotalequity.

d. debtplustotalequity.

e. debtminustotalassets,dividedbytotalequity.

EQUITYMULTIPLIER

e 13. Theequitymultiplierratioismeasuredastotal:

a. equitydividedbytotalassets.

b. equityplustotaldebt.

c. assetsminustotalequity,dividedbytotalassets.

d. assetsplustotalequity,dividedbytotaldebt.

e. assetsdividedbytotalequity.

TIMESINTERESTEARNEDRATIO

c 14. Thefinancialratiomeasuredasearningsbeforeinterestandtaxes,dividedbyinterestexpenseisthe:

a. cashcoverageratio.

b. debt-equityratio.

c. timesinterestearnedratio.

d. grossmargin.

e. totaldebtratio.

CASHCOVERAGERATIO

a 15. Thefinancialratiomeasuredasearningsbeforeinterestandtaxes,plusdepreciation,dividedbyinterestexpense,isthe:

a. cashcoverageratio.

b. debt-equityratio.

c. timesinterestearnedratio.

d. grossmargin.

e. totaldebtratio.

ASSETMANAGEMENTRATIOS

a 16. Ratiosthatmeasurehowefficientlyafirmusesitsassetstogeneratesalesareknownas_____ratios.

a. assetmanagement

b. long-termsolvency

c. short-termsolvency

d. profitability

e. marketvalue

INVENTORYTURNOVER

c 17. Theinventoryturnoverratioismeasuredas:

a. totalsalesminusinventory.

b. inventorytimestotalsales.

c. costofgoodssolddividedbyinventory.

d. inventorytimescostofgoodssold.

e. inventorypluscostofgoodssold.

DAYS’SALESININVENTORY

e 18. Thefinancialratiodays’salesininventoryismeasuredas:

a. inventoryturnoverplus365days.

b. inventorytimes365days.

c. inventorypluscostofgoodssold,dividedby365days.

d. 365daysdividedbytheinventory.

e. 365daysdividedbytheinventoryturnover.

RECEIVABLESTURNOVER

b 19. Thereceivablesturnoverratioismeasuredas:

a. salesplusaccountsreceivable.

b. salesdividedbyaccountsreceivable.

c. salesminusaccountsreceivable,dividedbysales.

d. accountsreceivabletimessales.

e. accountsreceivabledividedbysales.

DAYS’SALESINRECEIVABLES

d 20. Thefinancialratiodays’salesinreceivablesismeasuredas:

a. receivablesturnoverplus365days.

b. accountsreceivabletimes365days.

c. accountsreceivableplussales,dividedby365days.

d. 365daysdividedbythereceivablesturnover.

e. 365daysdividedbytheaccountsreceivable.

TOTALASSETTURNOVER

b 21. Thetotalassetturnoverratioismeasuredas:

a. salesminustotalassets.

b. salesdividedbytotalassets.

c. salestimestotalassets.

d. totalassetsdividedbysales.

e. totalassetsplussales.

PROFITABILITYRATIOS

d 22. Ratiosthatmeasurehowefficientlyafirm’smanagementusesitsassetsandequitytogeneratebottomlinenetincomeareknownas_____ratios.

a. assetmanagement

b. long-termsolvency

c. short-termsolvency

d. profitability

e. marketvalue

PROFITMARGIN

a 23. Thefinancialratiomeasuredasnetincomedividedbysalesisknownasthefirm’s:

a. profitmargin.

b. returnonassets.

c. returnonequity.

d. assetturnover.

e. earningsbeforeinterestandtaxes.

RETURNONASSETS

b 24. Thefinancialratiomeasuredasnetincomedividedbytotalassetsisknownasthefirm’s:

a. profitmargin.

b. returnonassets.

c. returnonequity.

d. assetturnover.

e. earningsbeforeinterestandtaxes.

RETURNONEQUITY

c 25. Thefinancialratiomeasuredasnetincomedividedbytotalequityisknownasthefirm’s:

a. profitmargin.

b. returnonassets.

c. returnonequity.

d. assetturnover.

e. earningsbeforeinterestandtaxes.

PRICE-EARNINGSRATIO

d 26. Thefinancialratiomeasuredasthepricepershareofstockdividedbyearningspershareisknownasthe:

a. returnonassets.

b. returnonequity.

c. debt-equityratio.

d. price-earningsratio.

e. DuPontidentity.

MARKET-TO-BOOKRATIO

e 27. Themarket-to-bookratioismeasuredas:

a. totalequitydividedbytotalassets.

b. netincometimesmarketpricepershareofstock.

c. netincomedividedbymarketpricepershareofstock.

d. marketpricepershareofstockdividedbyearningspershare.

e. marketvalueofequitypersharedividedbybookvalueofequitypershare.

DUPONTIDENTITY

a 28. The_____breaksdownreturnonequityintothreecomponentparts.

a. DuPontidentity

b. returnonassets

c. statementofcashflows

d. assetturnoverratio

e. equitymultiplier

EXTERNALFUNDSNEEDED

c 29. TheExternalFundsNeeded(EFN)equationdoesnotmeasuresthe:

a. additionalassetrequirementsgivenachangeinsales.

b. additionaltotalliabilitiesfinancingraisedgiventhechangeinsales.

c. rateofreturntoshareholdersgiventhechangeinsales.

d. netincomeexpectedtobeearnedgiventhechangeinsales.

e. Noneoftheabove.

SUSTAINABLEGROWTHRATE

e 30. Tocalculatesustainablegrowthrate,theanalystneedsthe:

a. profitmargin.

b. payoutratio.

c. debt-to-equityratio.

d. assetrequirementratio.

e. Alloftheabove.

GROWTH

b 31. Growthcanbereconciledwiththegoalofmaximizingfirmvalue:

a. becausegreatergrowthalwaysaddstovalue.

b. becausegrowthmustbeanoutcomeofdecisionsthatmaximizeNPV.

c. becausegrowthandwealthmaximizationarethesame.

d. becausegrowthofanytypecannotdecreasevalue.

e. noneoftheabove.

SUSTAINABLEGROWTH

b 32. Sustainablegrowthcanbedeterminedbythe:

a. profitmargin,totalassetturnoverandthepricetoearningsratio.

b. profitmargin,thepayoutratio,thedebt-to-equityratio,andtheassetrequirementratio.

c. Totalgrowthlesscapitalgainsgrowth.

d. EitherAorB.

e. Noneoftheabove.

SUSTAINABLEGROWTH

c 33. Whichofthefollowingwillincreasesustainablegrowth?

a. Buybackexistingstock.

b. Decreasedebt.

c. Increaseprofitmargin.

d. Increaseassetrequirementratio.

e. Increasedividendpayoutratio.

LONGTERMPLANNING

d 34. Themainobjectiveoflong-termfinancialplanningmodelsisto:

a. determinetheassetrequirementsgiventheinvestmentactivitiesofthefirm.

b. planforcontingenciesoruncertainevents.

c. determinetheexternalfinancingneeds.

d. alloftheabovearecorrect.

e. noneoftheabovearecorrect.

COMMON-SIZEBALANCESHEET

d 35. Onacommon-sizebalancesheet,all_____accountsareshownasapercentageof:

a. income;totalassets.

liability;netincome.

asset;sales.

liability;totalassets.

equity;sales.

RATIOANALYSIS

a 36. Whichoneofthefollowingstatementsiscorrectconcerningratioanalysis?

a. Asingleratioisoftencomputeddifferentlybydifferentindividuals.

Ratiosdonotaddresstheproblemofsizedifferencesamongfirms.

Thereisonlyaverylimitednumberofratioswhichcanbeusedforanalyticalpurposes.

Eachratiohasaspecificformulathatisusedconsistentlybyallanalysts.

Ratioscannotbeusedforcomparisonpurposesoverperiodsoftime.

LIQUIDITYRATIOS

a 37. Whichofthefollowingareliquidityratios?

cashcoverageratio

currentratio

quickratio

inventoryturnover

a. IIandIIIonly

b. IandIIonly

c. II,III,andIVonly

I,III,andIVonly

I,II,III,andIV

LIQUIDITYRATIOS

c 38. Anincreaseinwhichoneofthefollowingaccountsincreasesafirm’scurrentratiowithoutaffectingitsquickratio?

a. accountspayable

b. cash

c. inventory

d. accountsreceivable

e. fixedassets

LIQUIDITYRATIOS

b 39. Asupplier,whorequirespaymentwithintendays,ismostconcernedwithwhich

oneofthefollowingratioswhengrantingcredit?

a. current

cash

debt-equity

quick

totaldebt

LONG-TERMSOLVENCYRATIOS

d 40. Afirmhasatotaldebtratioof.47.Thismeansthatthatfirmhas47centsindebtforevery:

a. $1inequity.

b. $1intotalsales.

c. $1incurrentassets.

$.53inequity.

$.53intotalassets.

LONG-TERMSOLVENCYRATIOS

d 41. Thelong-termdebtratioisprobablyofmostinteresttoafirm’s:

a. creditcustomers.

employees.

suppliers.

mortgageholder.

shareholders.

LONG-TERMSOLVENCYRATIOS

e 42. Abankerconsideringloaningafirmmoneyfortenyearswouldmostlikelypreferthe firmhaveadebtratioof_____andatimesinterestearnedratioof_____.

a. .75;.75.

.50;1.00.

.45;1.75.

.40;2.50.

.35;3.00.

LONG-TERMSOLVENCYRATIOS

b 43. Fromacashflowposition,whichoneofthefollowingratiosbestmeasuresafirm’s

abilitytopaytheinterestonitsdebts?

a. timesinterestearnedratio

cashcoverageratio

cashratio

quickratio

intervalmeasure

ASSETMANAGEMENTRATIOS

a 44. Thehighertheinventoryturnovermeasure,the:

a. fasterafirmsellsitsinventory.

fasterafirmcollectspaymentonitssales.

longerittakesafirmtosellitsinventory.

greatertheamountofinventoryheldbyafirm.

lessertheamountofinventoryheldbyafirm.

ASSETMANAGEMENTRATIOS

d 45. Whichoneofthefollowingstatementsiscorrectifafirmhasareceivablesturnovermeasureof10?

a. Ittakesafirm10daystocollectpaymentfromitscustomers.

Ittakesafirm36.5daystosellitsinventoryandcollectthepaymentfromthesale.

Ittakesafirm36.5daystopayitscreditors.

Thefirmhasanaveragecollectionperiodof36.5days.

Thefirmhastentimesmoreinaccountsreceivablethanitdoesincash.

ASSETMANAGEMENTRATIOS

d 46. Atotalassetturnovermeasureof1.03meansthatafirmhas$1.03in:

a. totalassetsforevery$1incash.

totalassetsforevery$1intotaldebt.

totalassetsforevery$1inequity.

salesforevery$1intotalassets.

long-termassetsforevery$1inshort-termassets.

PROFITABILITYRATIOS

c 47. Puffy’sPastriesgeneratesfivecentsofnetincomeforevery$1insales.Thus,

Puffy’shasa_____of5percent.

a. returnonassets

returnonequity

profitmargin

DuPontmeasure

totalassetturnover

PROFITABILITYRATIOS

a 48. Ifafirmproducesa10percentreturnonassetsandalsoa10percentreturnon

equity,thenthefirm:

a. hasnodebtofanykind.

isusingitsassetsasefficientlyaspossible.

hasnonetworkingcapital.

alsohasacurrentratioof10.

hasanequitymultiplierof2.

PROFITABILITYRATIOS

c 49. Ifshareholderswanttoknowhowmuchprofitafirmismakingontheirentire

investmentinthefirm,theshareholdersshouldlookatthe:

a. profitmargin.

returnonassets.

returnonequity.

equitymultiplier.

earningspershare.

PROFITABILITYRATIOS

a 50. BGLEnterprisesincreasesitsoperatingefficiencysuchthatcostsdecreasewhilesalesremainconstant.Asaresult,givenallelseconstant,the:

a. returnonequitywillincrease.

b. returnonassetswilldecrease.

c. profitmarginwilldecline.

d. equitymultiplierwilldecrease.

e. price-earningsratiowillincrease.

PROFITABILITYRATIOS

d 51. TheonlydifferencebetweenJoe’sandMoe’sisthatJoe’shasold,fullydepreciatedequipment.Moe’sjustpurchasedallnewequipmentwhichwillbedepreciatedovereightyears.Assumingallelseequal:

a. Joe’swillhavealowerprofitmargin.

b. Joe’swillhavealowerreturnonequity.

c. Moe’swillhaveahighernetincome.

d. Moe’swillhavealowerprofitmargin.

e. Moe’swillhaveahigherreturnonassets.

MARKETVALUERATIOS

e 52. Lastyear,Alfred’sAutomotivehadaprice-earningsratioof15.Thisyear,theprice

earningsratiois18.Basedonthisinformation,itcanbestatedwithcertaintythat:

a. thepricepershareincreased.

b. theearningspersharedecreased.

c. investorsarepayingahigherpriceforeachshareofstockpurchased.

d. investorsarereceivingahigherrateofreturnthisyear.

e. eitherthepricepershare,theearningspershare,orbothchanged.

MARKETVALUERATIO

b 53. Turner’sInc.hasaprice-earningsratioof16.Alfred’sCo.hasaprice-earningsratioof19.Thus,youcanstatewithcertaintythatoneshareofstockinAlfred’s:

a. hasahighermarketpricethanoneshareofstockinTurner’s.

b. hasahighermarketpriceperdollarofearningsthandoesoneshareofTurner’s.

c. sellsatalowerpricepersharethanoneshareofTurner’s.

d. representsalargerpercentageoffirmownershipthandoesoneshareofTurner’sstock.

e. earnsagreaterprofitpersharethandoesoneshareofTurner’sstock.

MARKETVALUERATIOS

b 54. Whichtwoofthefollowingaremostapttocauseafirmtohaveahigherprice-earningsratio?

I. slowindustryoutlook

II. highprospectoffirmgrowth

III. verylowcurrentearnings

IV. investorswithalowopinionofthefirm

a. IandIIonly

b. IIandIIIonly

c. IIandIVonly

d. IandIIIonly

e. IIIandIVonly

MARKETVALUERATIOS

d 55. Vinnie’sMotorshasamarket-to-bookratioof3.Thebookvaluepershareis$4.00.

Thismeansthata$1increaseinthebookvaluepersharewill:

a. causetheaccountantstoincreasetheequityofthefirmbyanadditional$2.

b. increasethemarketpricepershareby$1.

c. increasethemarketpricepershareby$12.

d. tendtocausethemarketpricepersharetorise.

e. onlyaffectbookvaluesbutnotmarketvalues.

MARKETVALUERATIOS

d 56. Whichoneofthefollowingsetsofratiosappliesmostdirectlytoshareholders?

a. returnonassetsandprofitmargin

quickratioandtimesinterestearned

price-earningsratioanddebt-equityratio

market-to-bookratioandprice-earningsratio

cashcoverageratioandtimesequitymultiplier

DUPONTIDENTITY

b 57. ThethreepartsoftheDuPontidentitycanbegenerallydescribedas:

I. operatingefficiency,assetuseefficiencyandfirmprofitability.

II. financialleverage,operatingefficiencyandassetuseefficiency.

III. theequitymultiplier,theprofitmarginandthetotalassetturnover.

IV. thedebt-equityratio,thecapitalintensityratioandtheprofitmargin.

a. IandIIonly

b. IIandIIIonly

c. IandIVonly

d. IandIIIonly

e. IIIandIVonly

DUPONTIDENTITY

e 58. Ifafirmdecreasestheiroperatingcosts,allelseconstant,then:

a. theprofitmarginincreaseswhiletheequitymultiplierdecreases.

b. thereturnonassetsincreaseswhilethereturnonequitydecreases.

c. thetotalassetturnoverratedecreaseswhiletheprofitmarginincreases.

d. boththeprofitmarginandtheequitymultiplierincrease.

e. boththereturnonassetsandthereturnonequityincrease.

EVALUATINGFINANCIALSTATEMENTS

b 59. Whichoneofthefollowingstatementsiscorrect?

a. Bookvaluesshouldalwaysbegivenprecedenceovermarketvalues.

b. Financialstatementsarefrequentlythebasisusedforperformanceevaluations.

c. Historicalinformationhasnovaluewhenpredictingthefuture.

d. Potentiallendersplacelittlevalueonfinancialstatementinformation.

e. Reviewingfinancialinformationovertimehasverylimitedvalue.

EVALUATINGFINANCIALSTATEMENTS

c 60. Itiseasiertoevaluateafirmusingtheirfinancialstatementswhenthefirm:

a. isaconglomerate.

b. isglobalinnature.

c. usesthesameaccountingproceduresasotherfirmsintheirindustry.

d. hasadifferentfiscalyearthanotherfirmsintheirindustry.

e. tendstohaveone-timeeventssuchasassetsalesandpropertyacquisitions.

EVALUATINGFINANCIALSTATEMENTS

a 61. Whichtwoofthefollowingrepresentthemosteffectivemethodsof

directlyevaluatingthefinancialperformanceofafirm?

I. comparingthecurrentfinancialratiostothoseofthesamefirmfrompriortime

periods

II. comparingafirm’sfinancialratiostothoseofotherfirmsinthefirm’speer groupwhohavesimilaroperations

III. comparingthefinancialstatementsofthefirmtothefinancialstatementsofsimilarfirmsoperatinginothercountries

IV. comparingthefinancialratiosofthefirmtotheaverageratiosofallfirmslocatedinthesamegeographicarea

a. IandIIonly

b. IIandIIIonly

c. IIIandIVonly

d. IandIVonly

e. IandIIIonly

EVALUATINGFINANCIALSTATEMENTS

e 62. Whichofthefollowingrepresentproblemsencounteredwhencomparingthefinancial

statementsofonefirmwiththoseofanotherfirm?

I. Eitherone,orboth,ofthefirmsmaybeconglomeratesandthushaveunrelatedlinesofbusiness.

II. Theoperationsofthetwofirmsmayvarygeographically.

III. Thefirmsmayusedifferingaccountingmethodsforinventorypurposes.

IV. Thetwofirmsmaybeseasonalinnatureandhavedifferentfiscalyearends.

a. IandIIonly

b. IIandIIIonly

c. I,III,andIVonly

d. I,II,andIIIonly

e. I,II,III,andIV

EXTERNALFUNDSNEEDED

b 63. Inthefinancialplanningmodel,externalfundsneeded(EFN)isequaltochangesin

a. assets-(liabilities–equity).

b. assets-(liabilities+equity).

c. (assets+liabilities.–equity).

d. (assets+equity.–liabilities).

e. assets-equity.

SUSTAINABLEGROWTHRATE

e 64. Afirm'ssustainablegrowthrateinsalesdoesnotdirectlydependonits

a. debttoequityratio.

b. profitmargin.

c. dividendpolicy.

d. assetefficiency.

e. alloftheabove.

SUSTAINABLEGROWTHRATE

a 65. Thesustainablegrowthratewillbeequivalenttotheinternalgrowthratewhen:

a. afirmhasnodebt.

b. thegrowthrateispositive.

c. theplowbackratioispositivebutlessthan1.

d. afirmhasadebt-equityratioexactlyequalto1.

e. netincomeisgreaterthanzero.

SUSTAINABLEGROWTHRATE

b 66. Thesustainablegrowthrate:

a. assumesthereisnoexternalfinancingofanykind.

b. isnormallyhigherthantheinternalgrowthrate.

c. assumesthedebt-equityratioisvariable.

d. isbasedonreceivingadditionalexternaldebtandequityfinancing.

e. assumesthat100percentofallincomeisretainedbythefirm.

SUSTAINABLEGROWTHRATE

d 67. Ifafirmbasesitsgrowthprojectionontherateofsustainablegrowth,andshows

positivenetincome,thenthe:

a. fixedassetswillhavetoincreaseatthesamerate,regardlessofthecurrentcapacity

level.

b. numberofcommonsharesoutstandingwillincreaseatthesamerateofgrowth.

c. debt-equityratiowillhavetoincrease.

d. debt-equityratiowillremainconstantwhileretainedearningsincrease.

e. fixedassets,debt-equityratio,andnumberofcommonsharesoutstandingwillall increase.

SUSTAINABLEGROWTHRATE

d 68. Marcie’sMercantilewantstomaintaintheircurrentdividendpolicy,whichisapayout ratioof40percent.Thefirmdoesnotwanttoincreasetheirequityfinancingbutare willingtomaintaintheircurrentdebt-equityratio.Giventheserequirements,the

maximumrateatwhichMarcie’scangrowisequalto:

a. 40percentoftheinternalrateofgrowth.

b. 60percentoftheinternalrateofgrowth.

c. theinternalrateofgrowth.

d. thesustainablerateofgrowth.

e. 60percentofthesustainablerateofgrowth.

FINANCIALPLANNINGMODELS

e 69. Oneoftheprimaryweaknessesofmanyfinancialplanningmodelsisthatthey:

a. relytoomuchonfinancialrelationshipsandtoolittleonaccountingrelationships.

b. areiterativeinnature.

c. ignorethegoalsandobjectivesofseniormanagement.

d. arebasedsolelyonbestcaseassumptions.

e. ignorethesize,risk,andtimingofcashflows.

FINANCIALPLANNING

d 70. Financialplanning,whenproperlyexecuted,

a. ignoresthenormalrestraintsencounteredbyafirm.

b. ensuresthattheprimarygoalsofseniormanagementarefullyachieved.

c. reducesthenecessityofdailymanagementoversightofthebusinessoperations.

d. helpsensurethatproperfinancingisinplacetosupportthedesiredlevelofgrowth.

e. eliminatestheneedtoplanmorethanoneyearinadvance.

III. PROBLEMS

COMMON-SIZESTATEMENTS

b 71. Afirmhassalesof$1,200,netincomeof$200,netfixedassetsof$500,andcurrent

assetsof$300.Thefirmhas$100ininventory.Whatisthecommon-sizestatement

valueofinventory?

a. 8.3percent

b. 12.5percent

c. 20.0percent

d. 33.3percent

e. 50.0percent

COMMON-SIZESTATEMENTS

a 72. Afirmhassalesof$1,500,netincomeof$100,totalassetsof$1,000,andtotalequity

of$700.Interestexpenseis$50.Whatisthecommon-sizestatementvalueofthe

interestexpense?

a. 3.3percent

b. 5.0percent

c. 7.1percent

d. 16.7percent

e. 50.0percent

LIQUIDITYRATIOS

b 73. Jessica’sBoutiquehascashof$50,accountsreceivableof$60,accountspayableof

$200,andinventoryof$150.Whatisthevalueofthequickratio?

a. .30

b. .55

c. .77

d. 1.30

e. 1.82

LONG-TERMSOLVENCYRATIOS

a 74. Afirmhasadebt-equityratioof.40.Whatisthetotaldebtratio?

a. .29

b. .33

c. .67

d. 1.40

e. 1.50

LONG-TERMSOLVENCYRATIOS

e 75. Afirmhastotaldebtof$1,200andadebt-equityratioof.30.Whatisthevalueofthe

totalassets?

a. $1,560

b. $3,000

c. $3,600

d. $4,000

e. $5,200

LONG-TERMSOLVENCYRATIOS

d 76. Afirmhassalesof$3,600,costsof$2,800,interestpaidof$100,anddepreciationof

$400.Thetaxrateis34percent.Whatisthevalueofthecashcoverageratio?

a. 2

b. 4

c. 6

d. 8

e. 10

LONG-TERMSOLVENCYRATIOS

d 77. Rosita’sResourcespaid$250ininterestand$130individendslastyear.Thetimes

interestearnedratiois3.8andthedepreciationexpenseis$60.Whatisthevalueofthe

cashcoverageratio?

a. 2.40

b. 3.52

c. 3.80

d. 4.04

e. 4.28

ASSETMANAGEMENTRATIOS

c 78. Mario’sHomeSystemshassalesof$2,800,costsofgoodssoldof$2,100,inventoryof

$500,andaccountsreceivableof$400.Howmanydays,onaverage,doesittake

Mario’stoselltheirinventory?

a. 65.2days

b. 85.2days

c. 86.9days

d. 96.9days

e. 117.3days

ASSETMANAGEMENTRATIOS

d 79. Syed’sIndustrieshasaccountsreceivableof$700,inventoryof$1,200,salesof

$4,200,andcostofgoodssoldof$3,400.HowlongdoesittakeSyed’stobothsell

theirinventoryandthencollectthepaymentonthesale?

a. 128days

b. 146days

c. 163days

d. 190days

e. 211days

ASSETMANAGEMENTRATIOS

b 80. Afirmhasnetworkingcapitalof$400,netfixedassetsof$2,400,salesof$6,000,and

currentliabilitiesof$800.Howmanydollarsworthofsalesaregeneratedfromevery

$1intotalassets?

a. $1.33

b. $1.67

c. $1.88

d. $2.33

e. $2.50

PROFITABILITYRATIOS

b 81 Rosita’sRestaurantehassalesof$4,500,totaldebtof$1,300,totalequityof$2,400,

andaprofitmarginof5percent.Whatisthereturnonassets?

a. 5.00percent

b. 6.08percent

c. 7.39percent

d. 9.38percent

e. 17.31percent

PROFITABILITYRATIOS

c 82. LeeSun’shassalesof$3,000,totalassetsof$2,500,andaprofitmarginof5percent.

Thefirmhasatotaldebtratioof40percent.Whatisthereturnonequity?

a. 6percent

b. 8percent

c. 10percent

d. 12percent

e. 15percent

MARKETVALUERATIOS

d 83. JupiterExplorershas$6,400insales.Theprofitmarginis4percent.Thereare6,400

sharesofstockoutstanding.Themarketpricepershareis$1.20.Whatistheprice- earningsratio?

a. 13

b. 14

c. 21

d. 30

e. 48

MARKETVALUERATIOS

c 84. Patti’shasnetincomeof$1,800,aprice-earningsratioof12,andearningspershareof

$1.20.Howmanysharesofstockareoutstanding?

a. 1,200

b. 1,400

c. 1,500

d. 1,600

e. 1,800

MARKETVALUERATIOS

d 85. Afirmhas5,000sharesofstockoutstanding,salesof$6,000,netincomeof$800,a

price-earningsratioof10,andabookvaluepershareof$.50.Whatisthemarket-to-

bookratio?

a. 1.6

b. 2.4

c. 3.0

d. 3.2

e. 3.6

DUPON