Question 1

Patti's has net income of $2400,a price-earnings ratio of 16,and earnings per share of $1.60.How many shares of stock are outstanding?

Accepted Answer

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

Question 2

Which is a more meaningful measure of profitability for a firm,return on assets or return on equity?
 Why?

Accepted Answer

Most would argue ROE since it measures r...

Question 3

Marcie's Mercantile wants to maintain its current dividend policy,which is a payout ratio of 40%.The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio.Given these requirements,the maximum rate at which Marcie's can grow is equal to:

Accepted Answer

A)  60% of the internal rate of growth.
B)  40% of the internal rate of growth.
C)  the sustainable rate of growth.
D)  the internal rate of growth.
E)  60% of the sustainable rate of growth.F) All of the above
G) A) and E)

Question 4

A firm's sustainable growth rate in sales directly depends on its:

Accepted Answer

A)  debt to equity ratio.
B)  profit margin.
C)  dividend policy.
D)  asset efficiency.
E)  all of the above.F) A) and B)
G) A) and C)

Question 5

To calculate sustainable growth rate without using return on equity,the analyst needs the:

Accepted Answer

A)  profit margin.
B)  payout ratio.
C)  debt-to-equity ratio.
D)  total asset turnover.
E)  All of the above.F) A) and B)
G) D) and E)

Question 6

What is the equity multiplier for 2010?

Accepted Answer

A)  1.6
B)  1.8
C)  2.0
D)  2.3
E)  2.5F) B) and E)
G) C) and D)

Question 7

Sustainable growth can be determined by the:

Accepted Answer

A)  profit margin,total asset turnover and the price to earnings ratio.
B)  profit margin,the payout ratio,the debt-to-equity ratio,and the asset requirement or asset turnover ratio.
C)  Total growth less capital gains growth.
D)  Either A or B.
E)  None of the above.F) All of the above
G) C) and D)

Question 8

When examining the EBITDA ratio,lower numbers are:

Accepted Answer

A)  considered good.
B)  considered mediocre.
C)  considered poor.
D)  indifferent to higher numbers.
E)  it is impossible to garner information from this ratio.F) A) and B)
G) D) and E)

Question 9

It is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them.What kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm?

Accepted Answer

This question is totally open-ended and ...

Question 10

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 E)
G) A) and C)

Question 11

Financial planning,when properly executed:

Accepted Answer

A)  ignores the normal restraints encountered by a firm.
B)  ensures that the primary goals of senior management are fully achieved.
C)  reduces the necessity of daily management oversight of the business operations.
D)  helps ensure that proper financing is in place to support the desired level of growth.
E)  eliminates the need to plan more than one year in advance.F) B) and E)
G) D) and E)

Question 12

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) D) and E)
G) A) and C)

Question 13

The inventory turnover ratio is measured as:

Accepted Answer

A)  total sales minus inventory.
B)  cost of goods sold divided by inventory.
C)  inventory times total sales.
D)  inventory plus cost of goods sold.
E)  inventory times cost of goods sold.F) B) and D)
G) A) and B)

Question 14

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 $60.What is the value of the cash coverage ratio?

Accepted Answer

A)  2.40
B)  3.52
C)  3.80
D)  4.04
E)  4.28F) A) and B)
G) B) and D)

Question 15

What is the days' sales in receivables in 2010?

Accepted Answer

A)  31.8 days
B)  32.5 days
C)  33.7 days
D)  41.9 days
E)  47.4 daysF) C) and E)
G) A) and C)

Question 16

The higher the inventory turnover measure,the:

Accepted Answer

A)  longer it takes a firm to sell its inventory.
B)  faster a firm collects payment on its sales.
C)  faster a firm sells its inventory.
D)  lesser the amount of inventory held by a firm.
E)  greater the amount of inventory held by a firm.F) A) and C)
G) B) and E)

Question 17

The Green Giant has a 5% profit margin and a 40% dividend payout ratio.The total asset turnover is 1.40 and the equity multiplier is 1.50.What is the sustainable rate of growth?

Accepted Answer

A)  6.30%
B)  6.72%
C)  6.83%
D)  6.90%
E)  6.93%F) B) and D)
G) B) and C)

Question 18

The financial ratio measured as earnings before interest and taxes,divided by interest expense is the:

Accepted Answer

A)  cash coverage ratio.
B)  total debt ratio.
C)  gross margin.
D)  times interest earned ratio.
E)  debt-equity ratio.F) A) and D)
G) A) and C)

Question 19

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) C) and D)
G) A) and E)

Question 20

What is the times interest earned ratio for 2010?

Accepted Answer

A)  30
B)  36
C)  38
D)  40
E)  44F) B) and C)
G) A) and E)

Exam 3: Financial Statements Analysis and Long-Term Planning

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

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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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It is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them.What kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm?

Correct AnswerverifiedThis question is totally open-ended and ...View AnswerShow Answer

The inventory turnover ratio is measured as:

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The higher the inventory turnover measure,the:

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What is the equity multiplier for 2010?

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Financial planning,when properly executed:

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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 $60.What is the value of the cash coverage ratio?

Correct AnswerverifiedShow Answer

What is the days' sales in receivables in 2010?

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Which is a more meaningful measure of profitability for a firm,return on assets or return on equity? Why?

Correct AnswerverifiedMost would argue ROE since it measures r...View AnswerShow Answer

Sustainable growth can be determined by the:

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To calculate sustainable growth rate without using return on equity,the analyst needs the:

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Patti's has net income of $2400,a price-earnings ratio of 16,and earnings per share of $1.60.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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The financial ratio measured as earnings before interest and taxes,divided by interest expense is the:

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A firm's sustainable growth rate in sales directly depends on its:

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What is the times interest earned ratio for 2010?

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The Green Giant has a 5% profit margin and a 40% dividend payout ratio.The total asset turnover is 1.40 and the equity multiplier is 1.50.What is the sustainable rate of growth?

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Marcie's Mercantile wants to maintain its current dividend policy,which is a payout ratio of 40%.The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio.Given these requirements,the maximum rate at which Marcie's can grow is equal to:

Correct AnswerverifiedShow Answer

When examining the EBITDA ratio,lower numbers are:

Correct AnswerverifiedShow Answer

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This question is totally open-ended and ...
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Most would argue ROE since it measures r...
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