Chapter 3 quiz

Which one of the following is a source of cash? a. acquisition of debt b. purchase of inventory c. granting credit to a customer d. payment to a supplier e. repurchase of common stock

a. acquisition of debt

Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a chosen point in time? a. common-base year statement b. common size statement c. statement of cash flows d. statement of standardization e. base reconciliation statement

a. common-base year statement

Which one of the following accurately describes the three parts of the Du Pont indentity? a. equity multiplier, profit margin, and total asset turnover b. operating efficiency, equity multiplier, and profitability ratio c. financial leverage, operating, efficiency, and profitability ratio d. return on assets, profit margin, and equity multiplier e. debt-equity ratio, capital intensity ratio, and profit margin

a. equity multiplier, profit margin, and total asset turnover

Relationships determined from a firm's financial information and used for comparison purposes are known as: a. financial ratios b. scenario analysis c. dimensional analysis d. identities e. solvency analysis

a. financial ratios

Which one of the following is a source of cash? a. increase in accounts payable b. increase in inventory c. decrease in common stock d. increase in accounts receivable e. decrease in notes payable

a. increase in accounts payable

A firm generated net income of $8.4. The depreciation expense was $4.4 and dividends were paid in the amount ${div}. Accounts payables decreased by $3.5, accounts receivables increased by $3.2, inventory decreased by $3.4, and net fixed assets decreased by ${nfa}. There was not interest expense. What was the net cash flow from operating activity? a. $930 b. 9.50 c. $802 d. $776 e. $922

b. 9.50 income+dep-inc ar+dec inv-dec ap

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of: a. net income b. sales c. taxable income d. total assets e. total equity

b. sales

A firm generated net income of $5.2. The depreciation expense was $8.9 and dividends were paid in the amount ${div}. Accounts payables decreased by $9.0, accounts receivables increased by $5.9, inventory decreased by $3.2, and net fixed assets decreased by ${nfa}. There was not interest expense. What was the net cash flow from operating activity? a. $802 b. $922 c. 2.40 d. $776 e. $930

c. 2.40

A firm generated net income of $1.5. The depreciation expense was $5.5 and dividends were paid in the amount ${div}. Accounts payables decreased by $4.6, accounts receivables increased by $8.0, inventory decreased by $3.3, and net fixed assets decreased by ${nfa}. There was not interest expense. What was the net cash flow from operating activity? Select one: a. $922 b. $802 c. $776 d. -2.30 e. $930

d. -2.30

The formula which breaks down the return on equity into three component part is referred to as which one of the following? a. profitability determinant b. equity performance formula c. equity equation d. Du Pont identity e. SIC formula

d. Du Pont identity

A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of the action? a. profit margin b. return on assets c. total asset turnover d. equity multiplier e. return of equity

d. equity multiplier

Which on of the following is a source of cash? a. decrease in common stock b. increase in accounts receivable c. decrease in notes payable d. increase in accounts payable e. increase in inventory

d. increase in accounts payable

Activities of a firm which require the spending of cash are known as: a. cash on hand b. cash collections c. sources of cash d. uses of cash e. cash receipts

d. uses of cash

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which on of the following? a. 2.0 b. 1.5 c. 1.0 d. 0.0 e. 0.5

e. 0.5

Which one of the following is a use of cash? a. decrease in accounts receivables b. increase in long-term debt c. decrease in inventory d. increase in notes payable e. decrease in common stock

e. decrease in common stock

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values. a. increase in the net working capital to total assets ratio b. increase in the cash ratio c. increase in the current ratio d. decrease in the cash coverage ratio e. decrease in the quick ratio

e. decrease in the quick ratio

The cash coverage ratio directly measures the ability of the firm's revenue to meet which on of its following obligations? a. payment of principle to a lender b. payment to supplier c. payment of a dividend to a shareholder d. payment to employee e. payment of interest to a lender

e. payment of interest to a lender

On a common-sized balance sheet all accounts are expressed as a percentage of: a. total assets for the base year b. total equity for the base year c. the base year sales d. sales for the period e. total assets for the current year

e. total assets for the current year