Unit 5 Homework

A firm with inventory of $81, total current assets of $575, and current liabilities of $612 has a quick (acid test) ratio of ____. Round your answer to two decimal points; example 1.12.

.80

Dividends are best defined as: Question 2 options: 1)cash or stock payments to shareholders. 2)distributions of stock to current shareholders. 3)cash payments to either bondholders or shareholders. 4)cash payments to shareholders. 5)cash or stock payments to either bondholders or shareholders.

1)cash or stock payments to shareholders.

During the latest year, XYZ Corporation has total sales of $200,000, net income of 20,000, and its year-end total assets were $190,000. The firm's total debt to total assets ratio was 50%. What is firm's total assets turnover ratio? Enter your answer as a number rounded to 2 decimal places; example 1.12.

1.05

A firm with cost of goods sold of $1178 and inventories of $817 has an inventory turnover ratio of ____. Round your answer to two decimal points; example 1.12.

1.44

The addition of a risk security with higher beta to a fully diversified portfolio: Question 3 options: 1)may or may not affect the portfolio beta. 2)must increase the portfolio beta. 3)will have no effect on the portfolio beta or its expected return. 4)must decrease the portfolio's expected return.

2)must increase the portfolio beta.

What is the future value (in $) of cash flows 1-3 at the end of year 3, assuming a 6% interest rate (compounded annually)? End of year Cash flow 1 $500 2 878 3 690

2192.02

Which one of the following is the formula used to find the present value of an annuity? Question 1 options: 1)C × {1 - [r/(1 × r)t]} × r 2)C × {{1 - [1/(1 × r)t]} × r} 3)C × {{1 - [1/(1 + r)t]}/r} 4)C × {1 - [r/(1 + r)t]}/r 5)C × {1 - [1/(1 + r)t]} - r

3)C × {{1 - [1/(1 + r)t]}/r}

Stock A comprises 28 percent of Sally's portfolio. Which one of the following terms applies to the 28 percent? Question 3 options: 1)Portfolio beta 2)Portfolio expected return 3)Portfolio weight 4)Portfolio standard deviation

3)Portfolio weight

What is the market that allows shareholders to resell their shares to other investors? Question 2 options: 1)Primary 2)Proxy 3)Secondary 4)Initial 5)Inside

3)Secondary

During the latest year, XYZ Corporation has total sales of $400,000, net income of 10,000, and its year-end total assets were $250,000. The firm's total debt to total assets ratio was 30%. What is firm's return on assets (ROA)? (Enter your answers as a percentage rounded to 2 decimal places. For example, enter 8.43 (%) instead of 0.0843.

4%

Consider a portfolio comprised of four risky securities. Assume the economy has three states with varying probabilities of occurrence. Which one of the following will guarantee that the portfolio variance will equal zero? Question 3 options: 1)The portfolio beta must be 1.0. 2)The portfolio expected rate of return must be different for each economic state. 3)The portfolio risk premium must equal zero. 4)The portfolio expected rate of return is the same under each different economic state.

4)The portfolio expected rate of return is the same under each different economic state.

Calculate the gross profit margin for a firm with sales of $64,000,000 and cost of goods sold of $37,000,000. (Enter your answer as percentage rounded to two decimal points. For example, enter 1.53 instead of 0.0153.)

42.18

During the latest year, XYZ Corporation has total sales of $400,000, net income of 20,000, and its year-end total assets were $450,000. The firm's total debt to total assets ratio was 30%. What is firm's profit margin as a percentage? Enter your answers as a percentage rounded to 2 decimal places. For example, enter 8.43 (%) instead of 0.0843.

5

If a company's ROA is 5.0% and its total assets to total equity ratio is 1.5, what is its ROE (return on equity)? Enter your answers as a percentage rounded to 2 decimal places. For example, enter 8.43 (%) instead of 0.0843)

7.5

You have the following data: Earnings before interest and taxes $600 Depreciation $200 Taxes $58 operating cash flow in $ is_____. Round your answer to 2 decimal points; example 1.12.

742

Which one of the following statements is correct? Question 2 options: 1)Shareholders prefer noncumulative dividends over cumulative dividends. 2)From a legal perspective, preferred stock is a form of corporate debt. 3)Dividends are tax-free income for individual investors. 4)Common shareholders elect the corporate directors while the preferred shareholders generally do not have voting rights. 5)All classes of stock must have equal voting rights per share.

Common shareholders elect the corporate directors while the preferred shareholders generally do not have voting rights.

A company with a market-to-book ratio less than one is expected to grow it cash flow quickly. Question 9 options:TrueFalse

False

An increase in the average collection period is a good sign that a company's customers are paying their bills in a timely manner. Question 9 options:TrueFalse

False

The market value of owners' equity equals the firm's total assets minus its total liabilities. Question 4 options:TrueFalse

False

The market value of equity far exceeds the book value of equity. Which of the following is true? Question 1 options: Investors expect the firm's riskiness and future sales growth to be at the industry average Investors expect the firm to be an extremely risky investment with low future cash flows Investors expect great future sales growth and high future profits Investors expect weak future sales growth and weak future profits

Investors expect great future sales growth and high future profits

Which of the following rules apply to the financial statements of public companies in the United States? [SELECT ALL THAT APPLY] Question 14 options: Must be reviewed by an independent auditor Must produce a balance sheet, income statement, statement of cash flows, and statement of stockholders' equity Must be produced according to GAAP, the Generally Accepted Accounting Principles

Must be reviewed by an independent auditor Must produce a balance sheet, income statement, statement of cash flows, and statement of stockholders' equity Must be produced according to GAAP, the Generally Accepted Accounting Principles

(Book vs Market value) Assume the choices given all refer to the same firm. Which is greatest in value? Question 4 options: The book value of assets in a firm facing near certain bankruptcy within a week The market value of stock in a firm facing near certain bankruptcy within a week

The book value of assets in a firm facing near certain bankruptcy within a week

(Market vs Book) A firm with a long record of average performance just introduced a new product that instantly exceeded by far all expectations for sale and profits. The sales growth for this product is expected to continue for decades to come. Question 4 options: This firm's market value of equity (stock) is less than the book value of equity. This firm's market value of equity (stock) equals the book value of equity. This firm's market value of equity (stock) is greater than the book value of equity.

This firm's market value of equity (stock) is greater than the book value of equity.

A decrease in a firm's cost of good sold likely results in an increase in the firm's profit margin. Question 11 options:TrueFalse

True

An interest coverage ratio much greater than the industry average indicates that the firm will be able to make its contractual interest payments. Question 10 options:TrueFalse

True

More customers not paying bills on time will increase a firm's days sales outstanding ratio. Question 10 options:TrueFalse

True

The computation of cash flow depends on changes in the value of current liabilities. Which of the following are examples of current liabilities that might be changed to affect a firm's cash flow? [SELECT ALL THAT APPLY] Question 6 options: inventory accounts payable accrued (unpaid) wages and taxes accounts receivable

accounts payable accrued (unpaid) wages and taxes

A company's taxes paid as a percentage of its taxable income is its: Question 6 options: marginal tax rate average tax rate

average tax rate

The financial statement that shows the assets and liabilities of a company on a particular date is: Question 8 options: income statement statement of cash flows balance sheet statement of stockholders' equity

balance sheet

The computation of cash flow depends on the changes in the value of current assets. Which of the following are examples of current assets that might be changed to affect a firm's cash flow? [SELECT ALL THAT APPLY] Question 7 options: cash inventories accounts payable marketable securities

cash inventories marketable securities

When calculating a firm's operating cash flow from earnings before interest and taxes we must add back depreciation because: Question 3 options: depreciation is a non-cash expense. taxes do not account for depreciation expenses depreciation expense approximates the value of the fixed asset purchases during the year depreciation is unrelated to the amount of taxes paid during the year

depreciation is a non-cash expense.

When calculating a firm's operating cash flow from earnings before interest and taxes we must add back depreciation because: Question 7 options: depreciation is unrelated to the amount of taxes paid during the year depreciation expense approximates the value of the fixed asset purchases during the year taxes do not account for depreciation expenses depreciation is a non-cash expense.

depreciation is a non-cash expense.

The financial statement that shows the firm's sales and expenses during a period is: statement of stockholders' equity income statement balance sheet statement of cash flows

income statement

Why does a change in current assets during the year affect a firm's cash flow for the year? Because: [SELECT ALL THAT APPLY] Question 7 options: Only changes in inventory affect cash flow, not changes in any other current asset category. The statement is false. Changes in current assets do not affect cash flow for a firm. Increasing receivables by selling a product with a pay later plan takes company cash to pay for the the raw materials to make the product. Buying inventory requires cash which decreases cash flow

increasing receivables by selling a product with a pay later plan takes company cash to pay for the the raw materials to make the product. Buying inventory requires cash which decreases cash flow

A company's taxes paid on its last dollar of earnings is its: Question 6 options: marginal tax rate average tax rate

marginal tax rate

Accountants: [SELECT ALL THAT APPLY] Question 5 options: must apply Generally Accepted Accounting Principles to portray fairly how the firm has performed in the past. must apply Generally Accepted Accounting Principles to portray fairly how the firm will perform in the future. construct financial statements using the cash-based approach construct financial statements using the accrual-based approach

must apply Generally Accepted Accounting Principles to portray fairly how the firm has performed in the past. construct financial statements using the accrual-based approach

The financial statement that shows how much cash the firm had at the beginning of a period, the end of the period, and what it did to increase or decrease its cash is: Question 5 options: statement of stockholders' equity income statement balance sheet statement of cash flows

statement of cash flows

Pro forma financial statements may include projections of a firm's future financial statements. Question 15 options:TrueFalse

true