Question 1

The quick ratio is measured as:

Accepted Answer

A)   current assets divided by current liabilities.
B)   cash on hand plus current liabilities, divided by current assets.
C)   current liabilities divided by current assets, plus inventory.
D)   current assets minus inventory, divided by current liabilities.
E)   current assets minus inventory minus current liabilities.F) A) and E)
G) B) and C)

Question 2

The long-term debt ratio is probably of most interest to a firm's:

Accepted Answer

A)   credit customers.
B)   employees.
C)   suppliers.
D)   mortgage holder.
E)   shareholders.F) A) and B)
G) All of the above

Question 3

The financial ratio measured as the price per share of stock divided by earnings per share is known as the:

Accepted Answer

A)   return on assets.
B)   return on equity.
C)   debt-equity ratio.
D)   price-earnings ratio.
E)   Du Pont identity.F) A) and E)
G) B) and D)

Question 4

The sustainable growth rate will be equivalent to the internal growth rate when:

Accepted Answer

A)   a firm has no debt.
B)   the growth rate is positive.
C)   the plowback ratio is positive but less than 1.
D)   a firm has a debt-equity ratio exactly equal to 1.
E)   net income is greater than zero.F) A) and C)
G) A) and D)

Question 5

Which of the following are liquidity ratios?
I. cash coverage ratio
II. current ratio
III. quick ratio
IV. inventory turnover

Accepted Answer

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

Question 6

Rosita's Resources paid $250 in interest and $130 in dividends last year. The times interest earned ratio is 3.8 and the depreciation expense is $80. What is the value of the cash coverage ratio?

Accepted Answer

A)   2.71
B)   3.64
C)   4.12
D)   5.78
E)   6.10F) A) and B)
G) A) and C)

Question 7

Why is it important for managers to understand the importance of both the internal and the sustainable rates of growth?

Accepted Answer

One reason that causes firms to go out o...

Question 8

Catherine's Consulting has a net income of $1,400 and a total equity of $12,000. The debt-equity ratio is 1.0 and the plowback is 30%. What is the return on assets?

Accepted Answer

A)   4.24%
B)   4.64%
C)   5.23%
D)   5.83%
E)   None of these.F) C) and D)
G) A) and E)

Question 9

What is the equity multiplier for 2011?

Accepted Answer

A)   1.21
B)   1.36
C)   1.44
D)   1.82
E)   1.91F) None of the above
G) A) and B)

Question 10

Turner's Inc. has a price-earnings ratio of 16. Alfred's Co. has a price-earnings ratio of 19. Thus,you can state with certainty that one share of stock in Alfred's:

Accepted Answer

A)   has a higher market price than one share of stock in Turner's.
B)   has a higher market price per dollar of earnings than does one share of Turner's.
C)   sells at a lower price per share than one share of Turner's.
D)   represents a larger percentage of firm ownership than does one share of Turner's stock.
E)   earns a greater profit per share than does one share of Turner's stock.F) C) and D)
G) D) and E)

Question 11

On a common-size balance sheet,all _______ accounts are shown as a percentage of _______.

Accepted Answer

A)   income; total assets
B)   liability; net income
C)   asset; sales
D)   liability; total assets
E)   equity; salesF) A) and C)
G) A) and E)

Question 12

A firm has a total debt ratio of .47. This means that that firm has 47 cents in debt for every:

Accepted Answer

A)   $1 in equity.
B)   $1 in total sales.
C)   $1 in current assets.
D)   $.53 in equity.
E)   $.53 in total assets.F) C) and D)
G) A) and D)

Question 13

Patti's has net income of $1,800,a price-earnings ratio of 12,and earnings per share of $1.20. How many shares of stock are outstanding?

Accepted Answer

A)   1,200
B)   1,400
C)   1,500
D)   1,600
E)   1,800F) A) and C)
G) C) and D)

Question 14

What is the quick ratio for 2011?

Accepted Answer

A)   .82
B)   .95
C)   1.36
D)   2.18
E)   2.28F) C) and D)
G) A) and E)

Question 15

Samuelson's has a debt-equity ratio of 40%,sales of $8,000,net income of $600,and total debt of $2,400. What is the return on equity?

Accepted Answer

A)   6.25%
B)   7.50%
C)   9.75%
D)   10.00%
E)   11.25%F) A) and E)
G) A) and D)

Question 16

Ratios that measure how efficiently a firm's management uses its assets and equity to generate bottom line net income are known as _______ ratios.

Accepted Answer

A)   asset management
B)   long-term solvency
C)   short-term solvency
D)   profitability
E)   market valueF) A) and B)
G) B) and D)

Question 17

Ratios that measure a firm's financial leverage are known as ________ ratios.

Accepted Answer

A)   asset management
B)   long-term solvency
C)   short-term solvency
D)   profitability
E)   market valueF) B) and C)
G) C) and E)

Question 18

Jupiter Explorers has $6,400 in sales. The profit margin is 4%. There are 6,400 shares of stock outstanding. The market price per share is $1.20. What is the price-earnings ratio?

Accepted Answer

A)   13
B)   14
C)   21
D)   30
E)   48F) A) and E)
G) B) and E)

Question 19

The financial ratio measured as net income divided by total assets is known as the firm's:

Accepted Answer

A)   profit margin.
B)   return on assets.
C)   return on equity.
D)   asset turnover.
E)   earnings before interest and taxes.F) A) and D)
G) A) and C)

Question 20

Catherine's Consulting has a net income of $1,400 and a total equity of $12,000. The debt-equity ratio is 1.0 and the plowback is 30%. What is the internal growth rate for Catherine's consulting?

Accepted Answer

A)   1.6%
B)   1.78%
C)   1.98%
D)   2.21%
E)   None of these.F) B) and E)
G) C) and D)

Exam 3: Financial Statements Analysis and Financial Models

A firm has a total debt ratio of .47. This means that that firm has 47 cents in debt for every:

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On a common-size balance sheet,all _______ accounts are shown as a percentage of _______.

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The financial ratio measured as net income divided by total assets is known as the firm's:

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Patti's has net income of $1,800,a price-earnings ratio of 12,and earnings per share of $1.20. How many shares of stock are outstanding?

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Jupiter Explorers has $6,400 in sales. The profit margin is 4%. There are 6,400 shares of stock outstanding. The market price per share is $1.20. What is the price-earnings ratio?

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Why is it important for managers to understand the importance of both the internal and the sustainable rates of growth?

Correct AnswerverifiedOne reason that causes firms to go out o...View AnswerShow Answer

Which of the following are liquidity ratios? I. cash coverage ratio II. current ratio III. quick ratio IV. inventory turnover

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Catherine's Consulting has a net income of $1,400 and a total equity of $12,000. The debt-equity ratio is 1.0 and the plowback is 30%. What is the return on assets?

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Turner's Inc. has a price-earnings ratio of 16. Alfred's Co. has a price-earnings ratio of 19. Thus,you can state with certainty that one share of stock in Alfred's:

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What is the quick ratio for 2011?

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The quick ratio is measured as:

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What is the equity multiplier for 2011?

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Samuelson's has a debt-equity ratio of 40%,sales of $8,000,net income of $600,and total debt of $2,400. What is the return on equity?

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The financial ratio measured as the price per share of stock divided by earnings per share is known as the:

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Catherine's Consulting has a net income of $1,400 and a total equity of $12,000. The debt-equity ratio is 1.0 and the plowback is 30%. What is the internal growth rate for Catherine's consulting?

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The long-term debt ratio is probably of most interest to a firm's:

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The sustainable growth rate will be equivalent to the internal growth rate when:

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Ratios that measure how efficiently a firm's management uses its assets and equity to generate bottom line net income are known as _______ ratios.

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Ratios that measure a firm's financial leverage are known as ________ ratios.

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Rosita's Resources paid $250 in interest and $130 in dividends last year. The times interest earned ratio is 3.8 and the depreciation expense is $80. What is the value of the cash coverage ratio?

Correct AnswerverifiedShow Answer

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On a common-size balance sheet,all _ accounts are shown as a percentage of _.

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One reason that causes firms to go out o...
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