Question 1

A total asset turnover measure of 1.03 means that a firm has $1.03 in:

Accepted Answer

A)  total assets for every $1 in cash.
B)  total assets for every $1 in total debt.
C)  total assets for every $1 in equity.
D)  sales for every $1 in total assets.
E)  long-term assets for every $1 in short-term assets.F) B) and D)
G) C) and D)

Question 2

A firm has a debt-equity ratio of .40.What is the total debt ratio?

Accepted Answer

A)  .29
B)  .33
C)  .67
D)  1.40
E)  1.50F) B) and E)
G) A) and C)

Question 3

What is the equity multiplier for 2011?

Accepted Answer

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

Question 4

A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable.Taken together,what do these three figures imply about the firm's operations and its cash flows?

Accepted Answer

It takes,on average,105 days to sell inv...

Question 5

The market-to-book ratio is measured as:

Accepted Answer

A)  total equity divided by total assets.
B)  net income times market price per share of stock.
C)  net income divided by market price per share of stock.
D)  market price per share of stock divided by earnings per share.
E)  market value of equity per share divided by book value of equity per share.F) A) and D)
G) C) and E)

Question 6

From a cash flow position,which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Accepted Answer

A)  times interest earned ratio
B)  cash coverage ratio
C)  cash ratio
D)  quick ratio
E)  Interval measureF) C) and D)
G) B) and E)

Question 7

Puffy's Pastries generates five cents of net income for every $1 in sales.Thus,Puffy's has a _____ of 5%.

Accepted Answer

A)  return on assets
B)  return on equity
C)  profit margin
D)  Du Pont measure
E)  total asset turnoverF) A) and C)
G) A) and E)

Question 8

Rosita's Restaurant has sales of $5,000,total debt of $1,300,total equity of $2,400,and a profit margin of 6%.What is the return on assets?

Accepted Answer

A)  8.11%
B)  12.50%
C)  23.08%
D)  27.13%
E)  135.13%F) C) and E)
G) A) and B)

Question 9

What is the days' sales in receivables in 2011?

Accepted Answer

A)  31.8 days
B)  33.7 days
C)  38.4 days
D)  41.9 days
E)  47.4 daysF) B) and D)
G) C) and D)

Question 10

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 B)

Question 11

Suppose a firm calculates its external funding needs and finds that it is negative.What are the firm's options in this case?

Accepted Answer

With a negative external financing need,...

Question 12

A firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800.How many dollars worth of sales are generated from every $1 in total assets?

Accepted Answer

A)  $2.11
B)  $2.32
C)  $3.73
D)  $4.52
E)  $6.70F) C) and E)
G) B) and C)

Question 13

Robert Morris Associates publishes peer group financial information for a host of industries,yet the numbers typically only appear in common-size form.Why not report average dollar amounts instead?

Accepted Answer

The common-size numbers are inherently m...

Question 14

The debt-equity ratio is measured as total:

Accepted Answer

A)  equity minus total debt.
B)  equity divided by total debt.
C)  debt divided by total equity.
D)  debt plus total equity.
E)  debt minus total assets,divided by total equity.F) None of the above
G) B) and D)

Question 15

A firm has total debt of $1,200 and a debt-equity ratio of .40.What is the value of the total assets?

Accepted Answer

A)  $1,680
B)  $3,000
C)  $3,520
D)  $4,200
E)  $5,300F) C) and D)
G) All of the above

Question 16

The financial ratio measured as net income divided by total equity 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) D) and E)
G) A) and E)

Question 17

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 D)
G) A) and C)

Question 18

It is easier to evaluate a firm using its financial statements when the firm:

Accepted Answer

A)  is a conglomerate.
B)  is global in nature.
C)  uses the same accounting procedures as other firms in its industry.
D)  has a different fiscal year than other firms in its industry.
E)  tends to have one-time events such as asset sales and property acquisitions.F) None of the above
G) A) and B)

Question 19

The financial ratio days' sales in receivables is measured as:

Accepted Answer

A)  receivables turnover plus 365 days.
B)  accounts receivable times 365 days.
C)  accounts receivable plus sales,divided by 365 days.
D)  365 days divided by the receivables turnover.
E)  365 days divided by the accounts receivable.F) None of the above
G) B) and E)

Question 20

Suppose you calculated the following ratio for a firm: The sum of the compensation paid to the owners,directors,and managers,divided by total sales.Which class of financial ratios should this be included in and why? Who might be interested in such a ratio?

Accepted Answer

This doesn't fit well into any of the fi...

Exam 3: Financial Statements Analysis and Long-Term Planning

The debt-equity ratio is measured as total:

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A total asset turnover measure of 1.03 means that a firm has $1.03 in:

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A firm has a debt-equity ratio of .40.What is the total debt ratio?

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Suppose you calculated the following ratio for a firm: The sum of the compensation paid to the owners,directors,and managers,divided by total sales.Which class of financial ratios should this be included in and why? Who might be interested in such a ratio?

Correct AnswerverifiedThis doesn't fit well into any of the fi...View AnswerShow Answer

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

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Puffy's Pastries generates five cents of net income for every $1 in sales.Thus,Puffy's has a _____ of 5%.

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A firm has total debt of $1,200 and a debt-equity ratio of .40.What is the value of the total assets?

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What is the equity multiplier for 2011?

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Suppose a firm calculates its external funding needs and finds that it is negative.What are the firm's options in this case?

Correct AnswerverifiedWith a negative external financing need,...View AnswerShow Answer

A firm has net working capital of $600,net fixed assets of $2,400,sales of $8,000,and current liabilities of $800.How many dollars worth of sales are generated from every $1 in total assets?

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What is the days' sales in receivables in 2011?

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A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable.Taken together,what do these three figures imply about the firm's operations and its cash flows?

Correct AnswerverifiedIt takes,on average,105 days to sell inv...View AnswerShow Answer

Robert Morris Associates publishes peer group financial information for a host of industries,yet the numbers typically only appear in common-size form.Why not report average dollar amounts instead?

Correct AnswerverifiedThe common-size numbers are inherently m...View AnswerShow Answer

From a cash flow position,which one of the following ratios best measures a firm's ability to pay the interest on its debts?

Correct AnswerverifiedShow Answer

The financial ratio days' sales in receivables is measured as:

Correct AnswerverifiedShow Answer

What is the quick ratio for 2011?

Correct AnswerverifiedShow Answer

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

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The market-to-book ratio is measured as:

Correct AnswerverifiedShow Answer

It is easier to evaluate a firm using its financial statements when the firm:

Correct AnswerverifiedShow Answer

Rosita's Restaurant has sales of $5,000,total debt of $1,300,total equity of $2,400,and a profit margin of 6%.What is the return on assets?

Correct AnswerverifiedShow Answer

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This doesn't fit well into any of the fi...
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With a negative external financing need,...
View Answer

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It takes,on average,105 days to sell inv...
View Answer

Correct Answer
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The common-size numbers are inherently m...
View Answer

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

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