Question 1

BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant.As a result,given all else constant,the:

Accepted Answer

A)  return on equity will increase.
B)  return on assets will decrease.
C)  profit margin will decline.
D)  equity multiplier will decrease.
E)  price-earnings ratio will increase.F) A) and B)
G) C) and D)

Question 2

Growth can be reconciled with the goal of maximizing firm value:

Accepted Answer

A)  because greater growth always adds to value.
B)  because growth must be an outcome of decisions that maximize NPV.
C)  because growth and wealth maximization are the same.
D)  because growth of any type cannot decrease value.
E)  None of the above.F) None of the above
G) D) and E) B

Question 3

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 E)
G) A) and D)

Question 4

One key reason a long-term financial plan is developed is because:

Accepted Answer

A)  the plan determines your financial policy.
B)  the plan determines your investment policy.
C)  there are direct connections between achievable corporate growth and the financial policy.
D)  there is unlimited growth possible in a well-developed financial plan.
E)  None of the above.F) B) and C)
G) C) and D)

Question 5

List and interpret two liquidity ratios.

Accepted Answer

Choose any two of the following:
1.Curre...

Question 6

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 7

The _____ breaks down return on equity into three component parts.

Accepted Answer

A)  Du Pont identity
B)  return on assets
C)  statement of cash flows
D)  asset turnover ratio
E)  equity multiplierF) A) and B)
G) A) and E) A

Question 8

What is the times interest earned ratio for 2011?

Accepted Answer

A)  30
B)  36
C)  40
D)  50
E)  54F) None of the above
G) A) and E)

Question 9

The sustainable growth rate:

Accepted Answer

A)  assumes there is no external financing of any kind.
B)  is normally higher than the internal growth rate.
C)  assumes the debt-equity ratio is variable.
D)  is based on receiving additional external debt and equity financing.
E)  assumes that 100% of all income is retained by the firm.F) A) and E)
G) All of the above

Question 10

If shareholders want to know how much profit a firm is making on their entire investment in the firm,the shareholders should look at the:

Accepted Answer

A)  profit margin.
B)  return on assets.
C)  return on equity.
D)  equity multiplier.
E)  earnings per share.F) A) and B)
G) All of the above

Question 11

A supplier,who requires payment within ten days,is most concerned with which one of the following ratios when granting credit?

Accepted Answer

A)  current
B)  cash
C)  debt-equity
D)  quick
E)  total debtF) A) and D)
G) D) and E)

Question 12

One of the primary weaknesses of many financial planning models is that they:

Accepted Answer

A)  rely too much on financial relationships and too little on accounting relationships.
B)  are iterative in nature.
C)  ignore the goals and objectives of senior management.
D)  are based solely on best case assumptions.
E)  ignore the size,risk,and timing of cash flows.F) D) and E)
G) C) and D)

Question 13

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) B) and D)
G) D) and E) D

Question 14

Vinnie's Motors has a market-to-book ratio of 3.The book value per share is $4.00.Holding market-to-book constant,a $1 increase in the book value per share will:

Accepted Answer

A)  cause the accountants to increase the equity of the firm by an additional $2.
B)  increase the market price per share by $1.
C)  increase the market price per share by $12.
D)  tend to cause the market price per share to rise.
E)  only affect book values but not market values.F) C) and D)
G) C) and E)

Question 15

Which of the following represent problems encountered when comparing the financial statements of one firm with those of another firm?
I.Either one,or both,of the firms may be conglomerates and thus have unrelated lines of business.
II.The operations of the two firms may vary geographically.
III.The firms may use differing accounting methods for inventory purposes.
IV.The two firms may be seasonal in nature and have different fiscal year ends.

Accepted Answer

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

Question 16

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600.How many days,on average,does it take Mario's to sell its inventory?

Accepted Answer

A)  42.10 days
B)  66.37 days
C)  78.21 days
D)  104.29 days
E)  273.75 daysF) A) and E)
G) None of the above

Question 17

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 the aboveF) B) and C)
G) B) and E)

Question 18

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)  6.53%
C)  6.72%
D)  6.80%
E)  6.83%F) A) and D)
G) A) and E)

Question 19

What is the return on equity for 2011?

Accepted Answer

A)  5.7%
B)  6.8%
C)  13.0%
D)  15.3%
E)  16.0%F) B) and C)
G) A) and C)

Question 20

The inventory turnover ratio is measured as:

Accepted Answer

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

Exam 3: Financial Statements Analysis and Long-Term Planning

BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant.As a result,given all else constant,the:

Correct Answer
verified

Growth can be reconciled with the goal of maximizing firm value:

Correct Answer
verified
B

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

Correct Answer
verified

One key reason a long-term financial plan is developed is because:

Correct Answer
verified

List and interpret two liquidity ratios.

Correct Answer
verified
Choose any two of the following:
1.Curre...
View Answer

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

Correct Answer
verified
Most would argue ROE since it measures r...
View Answer

The _____ breaks down return on equity into three component parts.

Correct Answer
verified
A

What is the times interest earned ratio for 2011?

Correct Answer
verified

The sustainable growth rate:

Correct Answer
verified

If shareholders want to know how much profit a firm is making on their entire investment in the firm,the shareholders should look at the:

Correct Answer
verified

A supplier,who requires payment within ten days,is most concerned with which one of the following ratios when granting credit?

Correct Answer
verified

One of the primary weaknesses of many financial planning models is that they:

Correct Answer
verified

The quick ratio is measured as:

Correct Answer
verified
D

Vinnie's Motors has a market-to-book ratio of 3.The book value per share is $4.00.Holding market-to-book constant,a $1 increase in the book value per share will:

Correct Answer
verified

Correct Answer
verified

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600.How many days,on average,does it take Mario's to sell its inventory?

Correct Answer
verified

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?

Correct Answer
verified

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?

Correct Answer
verified

What is the return on equity for 2011?

Correct Answer
verified

The inventory turnover ratio is measured as:

Correct Answer
verified

Exam 3: Financial Statements Analysis and Long-Term Planning

BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant.As a result,given all else constant,the:

Correct AnswerverifiedShow Answer

Growth can be reconciled with the goal of maximizing firm value:

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

One key reason a long-term financial plan is developed is because:

Correct AnswerverifiedShow Answer

List and interpret two liquidity ratios.

Correct AnswerverifiedChoose any two of the following:1.Curre...View AnswerShow Answer

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

The _____ breaks down return on equity into three component parts.

Correct AnswerverifiedA

What is the times interest earned ratio for 2011?

Correct AnswerverifiedShow Answer

The sustainable growth rate:

Correct AnswerverifiedShow Answer

If shareholders want to know how much profit a firm is making on their entire investment in the firm,the shareholders should look at the:

Correct AnswerverifiedShow Answer

A supplier,who requires payment within ten days,is most concerned with which one of the following ratios when granting credit?

Correct AnswerverifiedShow Answer

One of the primary weaknesses of many financial planning models is that they:

Correct AnswerverifiedShow Answer

The quick ratio is measured as:

Correct AnswerverifiedD

Vinnie's Motors has a market-to-book ratio of 3.The book value per share is $4.00.Holding market-to-book constant,a $1 increase in the book value per share will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Mario's Home Systems has sales of $2,800,cost of goods sold of $2,100,inventory of $600,and accounts receivable of $600.How many days,on average,does it take Mario's to sell its inventory?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

What is the return on equity for 2011?

Correct AnswerverifiedShow Answer

The inventory turnover ratio is measured as:

Correct AnswerverifiedShow Answer

Correct Answer
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B

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Choose any two of the following:
1.Curre...
View Answer

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Most would argue ROE since it measures r...
View Answer

Correct Answer
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A

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Correct Answer
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Correct Answer
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D

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