Question 1

Hoagland Corp's stock price at the end of last year was $48.50,and its book value per share was $25.00.What was its market/book ratio?

Accepted Answer

A)   2.17
B)   1.94
C)   1.63
D)   1.55
E)   1.80F) A) and B)
G) A) and D)

Question 2

Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year.Trend analysis is one method of examining changes in a firm's performance over time.

Accepted Answer

A) True 
 B)False

Question 3

Beranek Corp has $695,000 of assets (which equal total invested capital) ,and it uses no debt - it is financed only with common equity.The new CFO wants to employ enough debt to raise the total debt to total capital ratio to 40%,using the proceeds from borrowing to buy back common stock at its book value.How much must the firm borrow to achieve the target debt ratio?

Accepted Answer

A)   $219,620
B)   $278,000
C)   $344,720
D)   $294,680
E)   $247,420F) C) and E)
G) A) and E)

Question 4

Other things held constant,a decline in sales accompanied by an increase in financial leverage must result in a lower profit margin.

Accepted Answer

A) True 
 B)False

Question 5

Garcia Industries has sales of $167,500 and accounts receivable of $18,500,and it gives its customers 25 days to pay.The industry average DSO is 27 days,based on a 365-day year.If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average,and if it earns 8.0% on any cash freed-up by this change,how would that affect its net income,assuming other things are held constant? Assume all sales to be on credit.Do not round your intermediate calculations.

Accepted Answer

A)   $386.13
B)   $601.18
C)   $488.77
D)   $562.08
E)   $537.64F) B) and D)
G) D) and E)

Question 6

The profit margin measures net income per dollar of sales.

Accepted Answer

A) True 
 B)False

Question 7

River Corp's total assets at the end of last year were $480,000 and its net income was $32,750.What was its return on total assets?

Accepted Answer

A)   6.28%
B)   5.73%
C)   6.82%
D)   6.48%
E)   7.71%F) A) and C)
G) None of the above

Question 8

Companies HD and LD are both profitable,and they have the same total assets (TA) ,total invested capital,sales (S) ,return on assets (ROA) ,and profit margin (PM) .Both firms finance using only debt and common equity.However,Company HD has the higher total debt to total capital ratio.Which of the following statements is CORRECT?

Accepted Answer

A)   Company HD has a lower total assets turnover than Company LD.
B)   Company HD has a lower equity multiplier than Company LD.
C)   Company HD has a higher fixed assets turnover than Company LD.
D)   Company HD has a higher ROE than Company LD.
E)   Company HD has a lower operating income (EBIT) than Company LD.F) A) and B)
G) D) and E)

Question 9

If a bank loan officer were considering a company's loan request,which of the following statements would you consider to be CORRECT?

Accepted Answer

A)   The lower the company's inventory turnover ratio,other things held constant,the lower the interest rate the bank would charge the firm.
B)   Other things held constant,the higher the days sales outstanding ratio,the lower the interest rate the bank would charge.
C)   Other things held constant,the lower the total debt to total capital ratio,the lower the interest rate the bank would charge.
D)   The lower the company's TIE ratio,other things held constant,the lower the interest rate the bank would charge.
E)   Other things held constant,the lower the current ratio,the lower the interest rate the bank would charge the firm.F) A) and D)
G) A) and B)

Question 10

If a firm's ROE is equal to 9% and its ROA is equal to 6%,its equity multiplier must be 1.5.

Accepted Answer

A) True 
 B)False

Question 11

Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable.This action had no effect on the company's total assets or operating income.Which of the following effects would occur as a result of this action?

Accepted Answer

A)   The company's current ratio increased.
B)   The company's times interest earned ratio decreased.
C)   The company's basic earning power ratio increased.
D)   The company's equity multiplier increased.
E)   The company's total debt to total capital ratio increased.F) C) and D)
G) A) and E)

Question 12

Which of the following statements is CORRECT?

Accepted Answer

A)   A reduction in inventories would have no effect on the current ratio.
B)   An increase in inventories would have no effect on the current ratio.
C)   If a firm increases its sales while holding its inventories constant,then,other things held constant,its inventory turnover ratio will increase.
D)   A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
E)   If a firm increases its sales while holding its inventories constant,then,other things held constant,its fixed assets turnover ratio will decline.F) None of the above
G) B) and E)

Question 13

Ryngard Corp's sales last year were $42,000,and its total assets were $16,000.What was its total assets turnover ratio (TATO) ?

Accepted Answer

A)   2.68
B)   2.36
C)   2.31
D)   3.15
E)   2.63F) C) and E)
G) B) and D)

Question 14

Companies HD and LD have the same total assets,sales,operating costs,and tax rates,and they pay the same interest rate on their debt.Both firms finance using only debt and common equity and total assets equal total invested capital.However,company HD has a higher total debt to total capital ratio.Which of the following statements is CORRECT?

Accepted Answer

A)   Given this information,LD must have the higher ROE.
B)   Company LD has a higher basic earning power ratio (BEP) .
C)   Company HD has a higher basic earning power ratio (BEP) .
D)   If the interest rate the companies pay on their debt is more than their basic earning power (BEP) ,then Company HD will have the higher ROE.
E)   If the interest rate the companies pay on their debt is less than their basic earning power (BEP) ,then Company HD will have the higher ROE.F) All of the above
G) B) and E)

Question 15

Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. 
-​Refer to Exhibit 4.1.What is the firm's return on invested capital?

Accepted Answer

A)   4.63%
B)   ​4.17%
C)   4.35%
D)   5.05%
E)   ​4.12%F) A) and D)
G) B) and E)

Question 16

Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. 
-Refer to Exhibit 4.1.What is the firm's days sales outstanding? Assume a 365-day year for this calculation.Do not round your intermediate calculations.

Accepted Answer

A)   47.57
B)   68.84
C)   69.96
D)   50.93
E)   55.97F) C) and E)
G) A) and E)

Question 17

Market value ratios provide management with an indication of how investors view the firm's past performance and especially its future prospects.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. 
-Refer to Exhibit 4.1.What is the firm's operating margin? Do not round your intermediate calculations.

Accepted Answer

A)   4.23%
B)   4.32%
C)   5.80%
D)   3.80%
E)   4.75%F) A) and D)
G) B) and D)

Question 19

Meyer Inc's total invested capital is $660,000,and its total debt outstanding is $185,000.The new CFO wants to establish a total debt to total capital ratio of 55%.The size of the firm will not change.How much debt must the company add or subtract to achieve the target debt to capital ratio?

Accepted Answer

A)   $217,160
B)   $178,000
C)   $176,220
D)   $172,660
E)   $138,840F) All of the above
G) B) and C)

Question 20

Which of the following statements is CORRECT?

Accepted Answer

A)   A decline in a firm's inventory turnover ratio suggests that it is improving both its inventory management and its liquidity position,i.e. ,that it is becoming more liquid.
B)   In general,it's better to have a low inventory turnover ratio than a high one,as a low one indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock.
C)   If a firm's fixed assets turnover ratio is significantly lower than its industry average,this could indicate that it uses its fixed assets very efficiently or is operating at over capacity and should probably add fixed assets.
D)   The more conservative a firm's management is,the higher its total debt to total capital ratio is likely to be.
E)   The days sales outstanding ratio tells us how long it takes,on average,to collect after a sale is made.The DSO can be compared with the firm's credit terms to get an idea of whether customers are paying on time.F) A) and E)
G) All of the above

Exam 4: Analysis of Financial Statements

Correct Answer
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Other things held constant,a decline in sales accompanied by an increase in financial leverage must result in a lower profit margin.

Correct Answer
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The profit margin measures net income per dollar of sales.

Correct Answer
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River Corp's total assets at the end of last year were $480,000 and its net income was $32,750.What was its return on total assets?

Correct Answer
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Ryngard Corp's sales last year were $42,000,and its total assets were $16,000.What was its total assets turnover ratio (TATO) ?

Correct Answer
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If a firm's ROE is equal to 9% and its ROA is equal to 6%,its equity multiplier must be 1.5.

Correct Answer
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Correct Answer
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Correct Answer
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Meyer Inc's total invested capital is $660,000,and its total debt outstanding is $185,000.The new CFO wants to establish a total debt to total capital ratio of 55%.The size of the firm will not change.How much debt must the company add or subtract to achieve the target debt to capital ratio?

Correct Answer
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If a bank loan officer were considering a company's loan request,which of the following statements would you consider to be CORRECT?

Correct Answer
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Correct Answer
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Correct Answer
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Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year.Trend analysis is one method of examining changes in a firm's performance over time.

Correct Answer
verified

Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable.This action had no effect on the company's total assets or operating income.Which of the following effects would occur as a result of this action?

Correct Answer
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Hoagland Corp's stock price at the end of last year was $48.50,and its book value per share was $25.00.What was its market/book ratio?

Correct Answer
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Which of the following statements is CORRECT?

Correct Answer
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Correct Answer
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Market value ratios provide management with an indication of how investors view the firm's past performance and especially its future prospects.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
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Correct Answer
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Exam 4: Analysis of Financial Statements

Correct AnswerverifiedShow Answer

Other things held constant,a decline in sales accompanied by an increase in financial leverage must result in a lower profit margin.

Correct AnswerverifiedShow Answer

The profit margin measures net income per dollar of sales.

Correct AnswerverifiedShow Answer

River Corp's total assets at the end of last year were $480,000 and its net income was $32,750.What was its return on total assets?

Correct AnswerverifiedShow Answer

Ryngard Corp's sales last year were $42,000,and its total assets were $16,000.What was its total assets turnover ratio (TATO) ?

Correct AnswerverifiedShow Answer

If a firm's ROE is equal to 9% and its ROA is equal to 6%,its equity multiplier must be 1.5.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Meyer Inc's total invested capital is $660,000,and its total debt outstanding is $185,000.The new CFO wants to establish a total debt to total capital ratio of 55%.The size of the firm will not change.How much debt must the company add or subtract to achieve the target debt to capital ratio?

Correct AnswerverifiedShow Answer

If a bank loan officer were considering a company's loan request,which of the following statements would you consider to be CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year.Trend analysis is one method of examining changes in a firm's performance over time.

Correct AnswerverifiedShow Answer

Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable.This action had no effect on the company's total assets or operating income.Which of the following effects would occur as a result of this action?

Correct AnswerverifiedShow Answer

Hoagland Corp's stock price at the end of last year was $48.50,and its book value per share was $25.00.What was its market/book ratio?

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Market value ratios provide management with an indication of how investors view the firm's past performance and especially its future prospects.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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