Analysis - Fundamental Analysis

What accounting method is used for bookkeeping purposes by publicly traded companies? A - Accrual B - Amortization C - Accretion D - Actuarial

A - Accrual

If net income before tax falls at a faster rate than operating income, then which statement is TRUE? A - Bond interest expense is increasing at a faster rate than operating expenses B - Bond interest expense is decreasing at a faster rate than operating expenses C - Dividends are increasing at a faster rate than operating income D - Dividends are decreasing at a faster rate than operating income

A - Bond interest expense is increasing at a faster rate than operating expenses

A corporation buys furniture and fixtures, paying cash. What is affected? A - Current Assets B - Current Liabilities C - Net Worth D - Stockholders' Equity

A - Current Assets

A corporation declares a cash dividend to shareholders. All of the following choices are affected EXCEPT: A - Current Assets B - Current Liabilities C - Net Worth D - Net Working Capital

A - Current Assets

All of the following are methods of depreciation EXCEPT: A - First In; First Out B - Double Declining Balance C - Sum of Years Digits D - Straight Line

A - First In; First Out

Which item would be found on a corporation's income statement? A - Taxes B - Quick Assets C - Liabilities D - Stockholders' Equity

A - Taxes

A corporate issuer declares a reverse 2 for 3 stock split. After the split is effected, which statement is TRUE? A - The market price of the corporation's shares will increase B - The reported earnings per common share will decrease C - The number of common shares outstanding will increase D - Each common shareholder's proportionate ownership interest will increase

A - The market price of the corporation's shares will increase

A corporation has an operating margin of profit of 9.50%. This means that for every $9.50 of profit, the company had $100 of: A - expenses B - revenues C - assets D - liabilities

B - revenues

If total liabilities of a company are subtracted from total assets of a company, the result is the company's: A - market value B - net worth C - capitalization D - net working capital

B - net worth

A company has reported operating income of $25,000,000. The bond interest expense for the year is $4,000,000 and principal repayments on bonds totaled $1,000,000. The company's debt service coverage ratio is: A - 1:5 B - 5:1 C - 16:1 D - 25:1

B - 5:1

A corporation's annual report shows that the reported net income before tax is falling at a faster rate than operating income. Which of the following expenses must have grown at a faster rate? A - Depreciation B - Bond Interest C - Preferred Dividend D - Cost of Goods Sold

B - Bond Interest

If a corporation declares a stock dividend, which statement is FALSE? A - Retained Earnings decreases B - Capital in Excess of Par decreases C - The number of common shares outstanding increases D - Par value per share is unchanged

B - Capital in Excess of Par decreases

A corporation has previously declared a cash dividend. When the dividend is actually paid, which of the following are reduced? A - Current Assets only B - Current Assets and Current Liabilities C - Net Worth D - Net Working Capital

B - Current Assets and Current Liabilities

A corporation receives, but has not paid for, a shipment of goods that go into inventory. Which of the following choices is TRUE? A - Current Assets decreases B - Current Liabilities increases C - Cash decreases D - Net Working Capital increases

B - Current Liabilities increases

Which item would be found on a company's income statement? A - Retained earnings B - Taxes paid C - Reinvested dividends D - Accumulated depreciation

B - Taxes paid

If a convertible bond is converted, what is the effect on the issuing company's balance sheet? A - Both Current Assets and Stockholders' Equity increase B - Total Liabilities decreases and Stockholders' Equity increases C - Net Working Capital decreases and Stockholders' Equity increases D - Net Working Capital increases and Total Liabilities decreases

B - Total Liabilities decreases and Stockholders' Equity increases

All of the following will affect the reported net income per share of a corporation EXCEPT: A - discontinuance of operations of an operating division B - declaration of a common dividend C - decrease in the number of common shares outstanding D - change in accounting method for valuing inventories

B - declaration of a common dividend

A corporation would repurchase its debt for all of the following reasons EXCEPT to: A - refinance at lower interest rates B - increase its capitalization C - increase the market value of its equity issues D - reduce its sensitivity to earnings fluctuations due to cyclical conditions

B - increase its capitalization

XYZ common stock is currently trading at $96 per share. Last year, XYZ common stock earned $8.00 per share, giving the company a Price / Earnings Ratio of 12:1. If XYZ splits 3 for 1, the new Price / Earnings ratio will be: A - 4:1 B - 6:1 C - 12:1 D - 24:1

C - 12:1

A company has reported operating income of $5,000,000. The bond interest expense for the year is $500,000 and principal repayments on bonds totaled $1,500,000. The company's debt service coverage ratio is: A - 10:1 B - 3.33:1 C - 2.5:1 D - 1:1

C - 2.5:1

A corporation's capitalization is: 1st Mortgage Bonds 9% M '32$10,000,000 Preferred Stock 8%5,000,000 Common Stock ($.10 par)200,000 Capital in Excess of Par800,000 Retained Earnings6,000,000 The company's preferred stock ratio is: A - 3% B - 14% C - 23% D - 32%

C - 23%

Corporate earnings that are not paid to shareholders as a dividend are credited to: A - Common at Par B - Capital in Excess of Par C - Retained Earnings D - Current Assets

C - Retained Earnings

A corporation issues a stock dividend. Which statement is TRUE? A - Par value per common share will decrease B - Par value per common share will increase C - Retained earnings will decrease D - Retained earnings will remain the same

C - Retained earnings will decrease

XYZ Company has 100,000,000 authorized common shares. 25,000,000 shares have been issued and another 10,000,000 shares are currently in registration. The sale of the 10,000,000 shares will result in all of the following EXCEPT a(n) A - decrease in earnings per share B - increase in net worth C - decrease in net working capital D - increase in the number of shares outstanding

C - decrease in net working capital

Bond interest expense of a corporation is : A - deductible before operating expenses B - deducted before computing operating income C - deductible before taxes D - not deductible since these are not tax free issues

C - deductible before taxes

Accelerated depreciation deductions: A - increase reported income in early years B - do not impact the income statement since these are balance sheet items C - increase reported income in later years D - increase each quarter

C - increase reported income in later years

A corporation would repurchase its debt for each of the following reasons EXCEPT: A - to increase the market value of its equity issues B - to reduce its sensitivity to earnings fluctuations due to cyclical conditions C - to refinance at higher interest rates D - to decrease its leverage

C - to refinance at higher interest rates

A corporation's capitalization is: 1st Mortgage Bonds 9% M '45$10,000,000 Preferred Stock 8%5,000,000 Common Stock ($.10 par)200,000 Capital in Excess of Par800,000 Retained Earnings6,000,000 The company's common stock ratio is: A - 3% B - 14% C - 27% D - 32%

D - 32%

A corporation's capitalization is: 1st Mortgage Bonds 9% M '32$10,000,000 Preferred Stock 8%5,000,000 Common Stock ($.10 par)200,000 Capital in Excess of Par800,000 Retained Earnings6,000,000 The company's debt or bond ratio is: A - 14% B- 27% C - 32% D - 45%

D - 45%

The formula for Net Working Capital is: A - (Total Assets - Inventory) / Total Liabilities B - Total Assets - Total Liabilities C - (Current Assets - Inventory) / Current Liabilities D - Current Assets - Current Liabilities

D - Current Assets - Current Liabilities

All of the following are components of total long term capital of a corporation EXCEPT: A - Common Stockholders' Equity B - Preferred Stockholders' Equity C - Long Term Bonded Debt D - Current Liabilities

D - Current Liabilities

Which ratio is the least stringent test of liquidity? A - Cash assets ratio B - Quick ratio C - Acid test ratio D - Current ratio

D - Current ratio

A corporation has an operating margin of profit of 9.50%. What does this mean? A - For every $9.50 of expenses, the company had $1 of revenue B - For every $9.50 of expenses, the company had $100 of revenue C - For every $90.50 of expenses, the company had $1 of revenue D - For every $90.50 of expenses, the company had $100 of revenue

D - For every $90.50 of expenses, the company had $100 of revenue

All of the following are components of common stockholders' equity EXCEPT: A - Common at Par B - Capital in Excess of Par C - Retained Earnings D - Intangibles

D - Intangibles

A corporation has previously declared a cash dividend. When the dividend is actually paid, all of the following choices are affected EXCEPT: A - Cash B - Current Assets C - Current Liabilities D - Net Working Capital

D - Net Working Capital

A corporation issues convertible debentures at par. Which of the following is affected? A - Shares outstanding B - Current Liabilities C - Net Worth D - Net Working Capital

D - Net Working Capital

A corporation issues a 20% stock dividend. What is affected? A - Current Assets B - Total Liabilities C - Net Worth D - Retained Earnings

D - Retained Earnings

A corporation issues $100,000,000 of 10% convertible debentures, convertible at $50. Upon issuance, all of the following are affected EXCEPT: A - Total Assets B - Total Liabilities C - Net Working Capital D - Stockholders' Equity

D - Stockholders' Equity