FIN 315 CHAPTER 3

WHICH OF THE FOLLOWING ARE SOURCES OF CASH

1) A DECREASE IN ACCOUNTS RECEIVABLE 2) AN INCREASE IN NOTES PAYABLE

THE CASH RATIO IS FOUND BY DIVIDED CASH BY

CURRENT LIABILITIES

A TIMES INTEREST EARNED TIE RATIO OF 3.5 TIMES MEANS A FIRMS HAS___ THAT ARE 3.5 TIMES GREATER THAN THE FIRMS INTEREST EXPENSE

EARNINGS BEFORE INTEREST AND TAXES

IF A COMPANY HAS INVENTORY, THE QUICK RATIO WILL ALWAYS BE___ THE CURRENT RATIO

LESS THAN

WHENEVER___ INFORMATION IS AVAILABLE, IT SHOULD BE USED INSTEAD OF ACCOUNTING DATA

MARKET

RETURN ON ASSETS IS A MEASURE OF

PROFITABILITY

IF A COMPANY COMMON SIZE INCOME STATEMENT SHOWS A LOWER PERCENTAGE FOR COSTS OF GOODS SOLD THIS PERIOD COMPARED TO LAST PERIOD THE COMPANY MAY BE CONTROLLING ITS COSTS WELL OR IT HAS___

RAISED ITS PRICE RELATIVE TO COSTS

FINANCIAL MANAGERS USE COMMON SIZE INCOME STATEMENTS TO DETERMINE

WHICH COSTS ARE RISING OR FALLING AS A PERCENTAGE OF SALES

WHICH OF THESE COMPUTES DAYS SALES IN RECEIVABLES

365/RECEIVABLES TURNOVER

AN IMPORTANT ACCOUNTING GOAL IS TO REPORT FINANCIAL INFORMATION TO USERS IN A WAY THAT IS USEFUL FOR___

DECISION MAKING

A COMMON BASE YEAR FINANCIAL STATEMENTS PRESENTS ITEMS RELATIVE TO A CERTAIN BASE WHICH IS THE

DOLLAR AMOUNT OF EACH ITEM DURING A COMMON BASE YEAR

WHENEVER___ INFORMATION IS AVAILABLE IT SHOULD BE USED INSTEAD OF ACCOUNTING DATA

MARKET

THE PRICE EARNINGS PE RATIO IS A___ RATIO

MARKET VALUE

WHICH OF THE FOLLOWING ITEMS ARE AMONG THE ITEMS USED TO COMPUTE THE CURRENT RATIO

1) CASH 2) ACCOUNTS PAYABLE

THE INVENTORY RATIOS FOR PROCTOR AND GAMBLE OVER THE PAST THREE YEARS ARE 5.09, 5.72 AND 5.92 TIMES RESPECTIVELY. EXPLAINING THE UPWARD TREND IN THE INVENTORY TURNOVER RATIO REQURIRES

1) EXAMINING WHETHER THE TREND IS BECAUSE OF INCREASED SALES OR DECREASED INVENTORY 2) FURTHER INVESTIGATION

WHICH OF THE FOLLOWING ARE USES OF CASH

1) INCREASE IN PROPERTY, PLANT AND EQUIPMENT 2)INCREASE IN INVENTORY 3)DECREASE IN ACCOUNTS PAYABLE

WHICH OF THE FOLLOWING ARE TRADITIONAL FINANCIAL RATIO CATAGORIES

1) PROFITABILITY RATIOS 2) ASSET MANAGEMENT RATIOS 3)MARKET VALUE RATIOS

WHICH TWO OF THE FOLLOWING ARE MOST LIKELY TO CREATE PROBLEMS WHEN COMPARING FINANCIAL STATEMENTS FOR MULTIPLE FIRMS

1)DIFFERING FISCAL YEARS 2)DIFFERING ACCOUNTING METHODS

WHICH TWO OF THE FOLLOWING GROUPS ARE MOST INTERESTED IN LIQUIDITY RATIOS

1)SUPPLIERS 2)BANKERS

VERA HAS EARNINGS PER SHARE OF $3 AND DIVIDENDS PER SHARE OF 1.20 THE STOCK SELLS FOR $30 A SHARE. WHAT IS THE PE RATIO

10 TIMES

OMEGA CO. HAS ANNUAL SALES OF 250000 COST OF GOODS SOLD 168000 AND ASSETS OF 322000 ACCOUNTS RECEIVABLE ARE 86200 WHAT IS THE RECEIVABLES TURNOVER

2.90

ALPHA CO HAS COST OF GOODS SOLD 77 MILLION NET INCOME OF 9.6 MILLION AND SALES OF 120 MILLION AND TOTAL ASSETS OF 150 MILLION. A COMMON SIZE INCOME STATEMENT WILL SHOW COST OF GOODS SOLD OF ___PERCENT AND A NET PROFIT OF ___ PERCENT

64.2;8.0

BC CORPORATION HAS NET INCOME OF $176,000 SALES OF $1982000 AND TOTAL ASSETS 2.24 MILLION. WHAT IS THE RETURN ON ASSETS

7.86

HOW ARE FIRMS CLASSIFIED INTO PEER GROUPS FOR RATIO ANALYSIS

ACCORDING TO STANDARD INDUSTRIAL CLASSIFICATIONS CODES

PROFITABILITY MEASURE SUCH AS ROA AND ROE ARE ___RATES OF RETURN

ACCOUNTING

ALTHOUGH___ ___ ARE OFTEN POOR REFLECTION OF REALITY, THEY ARE OFTEN BEST INFORMATION AVAILABLE

ACCOUNTING NUMBERS

FINANCIAL STATEMENTS REPORT

BOOK VALUE

WHEN A COMBINING COMMON SIZE AND COMMON BASE YEAR ANALYSIS THE EFFECT OF OVERALL GROWTH IN ASSETS CAN BE ELIMINATED BY FIRST FORMING THE;

COMMON-SIZE STATEMENTS

THE CURRENT RATIO SHOWS THE RELATIONSHIP BETWEEN

CURRENT ASSETS AND CURRENT LIABILITIES

WHICH OF THE FOLLOWING IS THE CORRECT REPRESENTATION OF THE CASH COVERAGE RATIO

EBIT+ NON-CASH EXPENSE/ INTREST EXPENSE

TRUE OR FALSE: THERE IS ONLY ONE METHOD FOR PREPARING THE STATEMENT OF CASH FLOWS

FALSE

LONG TERM SOLVENCY RATIOS ARE KNOWN AS

FINANCIAL LEVERAGE RATIOS

___ ___ ARE THE PRIME SOURCE OF INFORMATION ABOUT A FIRMS FINANCIAL HEALTH

FINANCIAL STATEMENT

AS LONG AS ALL SALES REQUESTS ARE BEING MET A___ INVENTORY IS BETTER

HIGHER

WHEN THE TYPICAL STOCK IN THE S&P 500 INDEX HAS A PE RATIO 12 A COMPANY WITH A PE RATIO OF 15 MAY HAVE___ THAN AVERAGE GROWTH PROSPECTS GIVEN SIMILAR EARNINGS PER SHARE

HIGHER

THE INFORMATION NEEDED TO COMPUTE THE PROFIT MARGIN CAN BE FOUND ON THE ___

INCOME STATMENT

AN___ IN NET PROFIT MARGIN WILL INCREASE ROE

INCREASE

WHICH ONE OF THE FOLLOWING DOES NOT AFFECT ROE ACCORDING TO THE DUPONT IDENTIFY

INVESTOR SENTIMENT

WHAT WILL HAPPEN TO THE CURRENT RATIO IF CURRENT ASSETS INCREASE WHILE EVERYTHING ELSE REMAINS UNCHANGED

IT WILL INCREASE

IF MANAGEMENT HAS BEEN UNSUCCESSFUL AT CREATING VALUE FOR THE COMPANY STOCKHOLDERS THE MARKET TO BOOK RATIO WILL BE

LESS THAN 1

SOME FINANCIAL RATIOS MEASURE A FIRMS___ WHICH SHOWS ABILITY MEET SHORT TERM OBLIGATIONS WITHOUT UNDUE STRESS WHILE OTHERS MEASURE FIRMS FINANCIAL___ WHICH DEMONSTRATES THE PROPORTION OF ASSETS FINANCED BY LONG TERM OBLIGATIONS

LIQUIDITY; LEVERAGE

THE QUICK RATIO PROVIDES A MORE REL LIABLE MEASURE OF LIQUIDITY THAN THE CURRENT ESPECIALLY WHEN THE COMPANY INVENTORY TAKES A ___ TIME TO SELL

LONG

TOTAL CAPITALIZATION EQUALS TOTAL EQUITY PLUS TOTAL

LONG TERM DEBT

HOW IS MARKET TO BOOK RATIO MEASURED

MARKET VALUE PER SHARE/ BOOK VALUE PER SHARE

WHICH RATIOS USE SOME INFORMATION THAT IS NOT CONTAINED IN FINANCIAL STATEMENTS

MARKET VALUE RATIOS

WHAT IS THE MAIN DIFFERENCE BETWEEN THE CASH COVERAGE RATIO AND THE TIMES INTEREST EARNED RATIO

NON CASH EXPENSES

ONE OF THE MOST IMPORTANT USES OF FINANCIAL INFORMATION WITHIN THE FIRM IS

PERFORMANCE EVALUATION

WHEN A COMPANY HAS A NEGATIVE EARNINGS FOR AN EXTENDED PERIOD OF TIME ANALYSTS WILL OFTEN RESORT TO THE

PRICE SALES RATIO

WHICH OF THE FOLLOWING REPRESENTS THE RECEIVABLES TURNOVER RATIO

SALES/ ACCOUNTS RECEIVABLE

WHICH ONE OF THE FOLLOWING EQUATIONS DEFINE THE TOTAL ASSET TURNOVER RATIO

SALES/ TOTAL ASSETS

AT THE MOST FUNDAMENTAL LEVEL, FIRMS GENERATE CASH AND

SPEND IT

___ FINANCIAL STATEMENTS PROVIDE FOR COMPARISON OF FIRMS THAT DIFFER IN SIZE

STANDARDIDZED

WHAT DOES AN INVENTORY TURNOVER RATIO OF 5 MEAN

THE ENTIRE INVENTORY WAS SOLD AND REPLACED 5 TIMES DURING THE YEAR

WHAT DOES IT MEAN WHEN A FIRM HAS A DAYS SALES IN RECEIVABLES OF 45

THE FIRM COLLECTS ITS CREDIT SALES IN 45 DAYS ON AVERAGE

WHAT DOES A CURRENT RATIO OF 1.2MEAN

THE FIRM HAS 1.20 IN CURRENT ASSETS FOR EVERY 1 DOLLAR IN CURRENT LIABILITIES

THE EBITDA RATIO IS SIMILAR IN SPIRIT TO

THE PE RATIO

WHICH ONE OF THE FOLLOWING IS ONE WAY IN WHICH MANAGERS USE A COMMON-SIZE BALANCE SHEET

TO TRACK CHANGES IN A FIRMS CAPITAL STRUCTURE

WHICH OF THE FOLLOWING IS THE CORRECT REPRESENTATION OF THE TOTAL DEBT RATIO

TOTAL ASSETS-TOTAL EQUITY/TOTAL ASSETS

TRUE OR FALSE A GOOD WORKING KNOWLEDGE OF FINANCIAL STATEMENTS IS DESIRABLE BECAUSE SUCH STATEMENTS ARE PRIMARY MEANS OFVCOMMUNICATING FINANCIAL INFORMATION BOTH WITHIN AND OUTSIDE THE FIRM

TRUE