s7 c16

A corporation is about to go public. Its shares will be quoted on the OTCBB. A broker-dealer selling the securities in the aftermarket is required to deliver a prospectus to purchasers for how many days following the effective date of registration?

90

If a company pays a cash dividend, which of the following is TRUE?

Current assets decrease

If an analyst wants to determine a company's ability to pay its liabilities that will be maturing in one year with its liquid assets, he will be most interested in the:

Current ratio

Paid-in capital is BEST defined as which of the following?

The amount of any premium above the stock's par value that is paid by investors for the shares that a corporation sells publicly

Which of the following items is NOT found by reviewing a company's balance sheet?

The amount of interest paid on the company's bonds outstanding

What is the basic balance sheet equation?

Total Assets = Total Liabilities + Stockholders' Equity

If a company's total assets remain the same but stockholders' equity decreases, which of the following statements is TRUE?

Total liabilities increase

ABC Corporation has net income of $6,000,000. It had $1,000,000 in interest expense and is in the 34% tax bracket. ABC has 500,000 shares of common stock and 10,000 shares of 10% preferred stock ($100 par value) outstanding. What are the earnings per share for ABC?

$11.80

Wireless Communications is offering 2,000,000 common shares (par value $.10) at $15. Which TWO of the following choices describe the financial impact on the company? 1. An increase in paid-in capital 2. A reduction in the long-term debt ratio 3. A reduction in liquidity 4. An increase in fixed assets by $30,000,000

1 and 2

Which TWO of the following choices can be calculated by examining the income statement of a company? 1. The earnings before interest and tax (EBIT) 2. The debt-to-equity ratio 3. The operating profit margin 4. The amount of working capital

1 and 3

If a company declares a cash dividend, which of the following is TRUE?

Shareholders' equity decreases

When examining an earnings report for National Corporation, a registered representative sees that earnings per share is reported on both a primary and fully diluted basis. This indicates that: 1. The company has convertible bonds or convertible preferred stock outstanding 2. The company has cumulative and participating preferred stock outstanding 3. Earnings per share is calculated using current shares outstanding and also assuming that all convertible securities were converted 4. Earnings per share is calculated on a pretax and after-tax basis

1 and 3 only

A corporation purchases new machinery using cash. Which of the following choices are results of this transaction? 1. Working capital is reduced 2. Working capital remains the same 3. Total assets are reduced 4. Total assets remain the same

1 and 4

Which TWO of the following metrics can be calculated by examining the balance sheet of a company? 1. The debt-to-equity ratio 2. The operating profit margin 3. The bond coverage ratio 4. The current ratio

1 and 4

LRR Corporation has earned $1.10 per share in each of the last four quarters and has paid out 20% of its earnings in the form of a cash dividend. If the stock is selling at $48 a share, what is its price/earnings ratio?

10.9

A customer purchased an initial public offering of stock at $38 a share. The current market price is $24 and the EPS is 19 cents. If the company has no plans to pay a cash dividend, what is the price/earnings ratio of the company?

126.3

XYZ Corporation earned $4 per share and paid out $2 per share in dividends. XYZ Corporation is selling at $56 in the market. The price/earnings ratio of XYZ Corporation is:

14 to 1

A registered representative is reviewing a corporation's financial statements. Which TWO of the following statements are TRUE concerning an issuer's bond interest expense? 1. The annual interest payments are found on the balance sheet 2. The annual interest payments are found on the income statement 3. The interest payment is deducted from net income 4. The interest payment is deducted from EBIT

2 and 4

Which TWO of the following metrics can be calculated by examining the balance sheet statement of a company? The earnings before interest and tax (EBIT) The debt-to-equity ratio The operating profit margin The amount of working capital

2 and 4

A corporation's earnings per share on its common stock, after paying preferred dividends of $3.00 per share, is $5.00 per share. The corporation also paid a dividend of $2.00 per share on the common stock. The dividend payout ratio is:

40%

A corporation has $7,000,000 in income after paying preferred dividends of $500,000. The company has 1,000,000 shares of common stock outstanding. The market price of the stock is $56. What is the price-earnings ratio?

8 times

Regarding cash dividends, which of the following statements is TRUE?

A cash dividend becomes a current liability when it is declared

Cash dividends declared by a corporation:

Are a current liability to the corporation when declared

Which of the following will not influence the calculation of fully diluted earnings per share?

Call options

What term is used when a company sells stock to the public above par value?

Capital surplus

A fundamental analyst could use a corporation's balance sheet to determine all of the following metrics, EXCEPT:

Cash flow

Which of the following items is NOT included in an income statement?

Dividends payable

The American Telephone Company announced in an ad in The Wall Street Journal that it intends to call for the redemption of all its outstanding 10% callable bonds at 103 1/4 plus accrued interest. The market price of the bonds was 102 3/4 at the time of the announcement. All of the following statements are TRUE about this redemption, EXCEPT:

Dividends to the stockholders will be increased

Which inventory evaluation method shows the greater profit in a period of rising costs?

FIFO

Which of the following choices is the formula for earnings per share?

Net income less preferred dividends / Number of shares of common stock outstanding

Money received by a corporation when it sells its stock above its par value is called:

Paid-in capital

Which of the following choices is another way of expressing the earnings multiple?

Price-earnings ratio