Question 1

On the Statement of Cash Flows, which of the following are considered financing activities?
I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid

Accepted Answer

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

Question 2

Relationships determined from a firm's financial information and used for comparison purposes are known as:

Accepted Answer

A)  financial ratios.
B)  identities.
C)  dimensional analysis.
D)  scenario analysis.
E)  solvency analysis.F) A) and D)
G) None of the above

Question 3

Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income?

Accepted Answer

A)  $105,616
B)  $148,309
C)  $157,136
D)  $161,008
E)  $164,909F) All of the above
G) C) and D)

Question 4

Activities of a firm which require the spending of cash are known as:

Accepted Answer

A)  sources of cash.
B)  uses of cash.
C)  cash collections.
D)  cash receipts.
E)  cash on hand.F) A) and D)
G) None of the above

Question 5

A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio?

Accepted Answer

A)  12.14
B)  15.24
C)  17.27
D)  23.41
E)  24.56F) A) and D)
G) C) and D)

Question 6

Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?

Accepted Answer

A)  0.89
B)  1.13
C)  1.47
D)  1.89
E)  2.13F) A) and B)
G) B) and E)

Question 7

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

Accepted Answer

A)  accounts payable
B)  cash
C)  inventory
D)  accounts receivable
E)  fixed assetsF) C) and E)
G) A) and E)

Question 8

On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?

Accepted Answer

A)  current year sales
B)  current year total assets
C)  base-year sales
D)  base-year total assets
E)  base-year accounts receivablesF) A) and B)
G) A) and C)

Question 9

Wise's Corner Grocer had the following current account values. What effect did the change in net working capital have on the firm's cash flows for 2012?

Accepted Answer

A)  net use of cash of $37
B)  net use of cash of $83
C)  net source of cash of $83
D)  net source of cash of $111
E)  net source of cash of $135F) A) and C)
G) A) and D)

Question 10

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

Accepted Answer

A)  volatile market prices
B)  negative earnings
C)  positive PEG ratios
D)  a negative Tobin's Q
E)  increasing salesF) A) and B)
G) A) and C)

Question 11

What is debt-equity ratio? (Use 2012 values)

Accepted Answer

A)  0.52
B)  0.87
C)  0.94
D)  1.01
E)  1.06F) A) and B)
G) A) and C)

Question 12

A firm has a debt-equity ratio of 0.42. What is the total debt ratio?

Accepted Answer

A)  0.30
B)  0.36
C)  0.44
D)  1.58
E)  2.38F) D) and E)
G) A) and E)

Question 13

Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?

Accepted Answer

A)  0.31
B)  0.53
C)  0.71
D)  1.04
E)  1.07F) None of the above
G) D) and E)

Question 14

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

Accepted Answer

A)  increase in the cash ratio
B)  increase in the net working capital to total assets ratio
C)  decrease in the quick ratio
D)  decrease in the cash coverage ratio
E)  increase in the current ratioF) A) and E)
G) C) and D)

Question 15

How many dollars of sales are being generated from every dollar of net fixed assets? (Use 2012 values.)

Accepted Answer

A)  $0.88
B)  $1.87
C)  $2.33
D)  $2.59
E)  $3.09F) A) and C)
G) A) and D)

Question 16

A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

Accepted Answer

A)  equity multiplier
B)  total asset turnover
C)  profit margin
D)  return on assets
E)  return on equityF) All of the above
G) C) and D)

Question 17

How does accounts receivable affect the statement of cash flows for 2012?

Accepted Answer

A)  a use of $4,218 of cash as an investment activity
B)  a source of $807 of cash as an operating activity
C)  a use of $4,218 of cash as a financing activity
D)  a source of $807 of cash as an investment activity
E)  a use of $807 of cash as an operating activityF) B) and D)
G) D) and E)

Question 18

What is the equity multiplier for 2012?

Accepted Answer

A)  1.67
B)  1.72
C)  1.88
D)  1.93
E)  2.03F) C) and D)
G) B) and C)

Question 19

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio?

Accepted Answer

A)  0.97
B)  1.01
C)  1.08
D)  1.15
E)  1.22F) A) and E)
G) A) and C)

Question 20

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Accepted Answer

A)  return on equity
B)  return on assets
C)  profit margin
D)  equity multiplier
E)  price-earnings ratioF) All of the above
G) B) and E)

Exam 3: Working With Financial Statements

A firm has annual sales of $320,000, a price-earnings ratio of 24, and a profit margin of 4.2 percent. There are 14,000 shares of stock outstanding. What is the price-sales ratio?

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An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

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Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

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A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action?

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The price-sales ratio is especially useful when analyzing firms that have which one of the following?

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Activities of a firm which require the spending of cash are known as:

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On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?

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Wise's Corner Grocer had the following current account values. What effect did the change in net working capital have on the firm's cash flows for 2012?

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A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34 percent. What is the value of the cash coverage ratio?

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How many dollars of sales are being generated from every dollar of net fixed assets? (Use 2012 values.)

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Relationships determined from a firm's financial information and used for comparison purposes are known as:

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Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?

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What is the equity multiplier for 2012?

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An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

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What is debt-equity ratio? (Use 2012 values)

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On the Statement of Cash Flows, which of the following are considered financing activities? I. increase in long-term debt II. decrease in accounts payable III. interest paid IV. dividends paid

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Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?

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A firm has a debt-equity ratio of 0.42. What is the total debt ratio?

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How does accounts receivable affect the statement of cash flows for 2012?

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Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is $560,000. What is the net income?

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