Corporate Finance Chapter 3: Working with Financial Statements

BC Corporation has 1,800 shares outstanding and earned $2,700 last year on assets of $2 million and equity of $1.5 million. What is the PE ratio if the stock is currently selling at $18 per share? (price per share divided by earnings per share) 8.3 times 12 times 27 times 10 times

12 times

Nestor's has net income pof $315,000, total sales of $3.52 million, total assets of $4.4 million, and total equity of $1.98 million. What is the return on equity? 13.67% 15.91% 8.95% 7.16%

15.91%

Vera's has earnings per share of $3 aand dividends per share of $1.20. The stock sells for $30 a share. What is the PE ratio? 10 times .4 times 2.5 times 25 times

10 times

AC Motors has net income of $51,750, total assets of $523,400, total debt of 267,000, and total sales of $491,400. What is the return on equity? 19.38% 20.18% 9.89% 10.53%

20.18%

Days' sales in receivables is given by the following ratio: 365/receivables turnover receivables turnover/365 365/sales account receivable/365

365/ receivables turnover

Alpha manufacturing has interest expense of $12 million, total assets of $184 million, sales of $176 million, long-term debt of $16.4 million, and net income of $15 million. How will interest expense be recorded in the common-size income statement? (interest paid/sales) 6.82% 7.32% 8.00% 6.52%

6.82%

Which of the following is(are) true of financial ratios? (multiple answers) Always reflect market values Are used for comparison purposes Are developed from a firm's financial information Are computed in the same manner by all firms Use balance sheet data

Are used for comparison purposes Are developed from a firm's financial information

What does a Times Interest Earned (TIE) Ratio of 3.5 times mean? The company's interest obligations are covered 3.5 times by its EBIT. The company's interest obligations are covered to 3.5%. The company's interest expense is 3.5% per year. The company's debt obligations are covered 3.5 times by its EBIT

The company's interest obligations ae covered 3.5 times by its EBIT.

Which of the following items are used to compute the current ratio? (multiple answers) equipment accounts payable earnings cash

accounts payable cash

Common-size statements are best used for comparing: (multiple answers) competitors year-to-year for your firm firms in different industries firms of different sizes

competitors year-to-year for your firm firms of different sizes

The cash ratio is found by dividing cash by: shareholders' equity current assets current liabilities inventory

current liabilities

The information needed to compute the profit margin can be found on the ___________. income statement cash flow statement balance sheet

income statement

The price-earning (PE) ratio is a ______________ ratio. turnover market value liquidity leverage

market value

How is the market-to-book ratio measured? market value of sales/book value of costs market value of bonds/book value of bonds book value per share/market value per share

market value per share/book value per share

BC Corporation has 1,800 shares outstanding and earned $2,700 last year on assets of $2 million and equity and $1.5 million. What is the PE ratio if the stock is currently selling at $18 per share? 8.3 times 27 times 10 times 12 times

12 times

Cal's Market has return on equity (ROE) of 15 percent. What does this mean? Cal's generated $.15 in profit every $1 of sales Cal's paid a dividend of $.15 per share to its shareholders this year Cal's generated $.15 in profit for every $1 of market value of equity Cal's generated $.15 in profit for every $1 of book value equity

Cal's generated $.15 in profit for every $1 of book value of equity

How is the price-earnings(PE)ratio computed? sales price per unit/earnings per share market price per share/earnings per share book value per share/earnings per share market capitalization/earnings per share

market price per share/earnings per share

Which of the following is the correct equation for return on equity? net income/sales net income/total equity total equity/net income sales/net income

net income/total equity

If a company has had negative earnings for several periods they might choose to use a ______________. price-sales ratio price-earnings ratio price-cash flow ratio

price-sales ratio

Return on assets (ROA) is a measure of _________________. leverage profitability utilization liquidity

profitability

Which of the following are traditional financial ratio categories? (multiple answers) profitability ratios financial leverage ratios turnover ratios competition ratios real options ratios

profitability ratios financial leverage ratios turnover ratios

Which of the following represents for the receivables turnover ratio? Cost of goods/Accounts receivable Sales/accounts receivable Accounts receivable/Cost of goods sold Account receivable/Sales

sales/ accounts receivable

Which one of the following equations defines the total asset turnover ratio? total assets/sales current assets/sales sales/fixed assets sales/total assets

sales/total assets