Unit 15 Knowledge/Quiz/Exam Questions

Which of the following is used to calculate a company's net worth? A) Assets + liabilities B) Assets − liabilities C) Debt − equity D) Liabilities ‒ assets

B) Assets − liabilities

Which of the following is not a measure of a company's short-term liquidity? A) Working capital B) Debt ratio C) Acid test ratio D) Current ratio

B) Debt ratio

Reports of rising inventories generally occur during which period of the business cycle? A. Recovery B. Contraction C. Expansion D. Peak

B. Contraction

ABC has the following recorded on its balance sheet: Current Assets$50,000 Fixed Assets$100,000 Notes payable$40,000 Accounts Payable$25,000 ABC's net worth is A) $110,000. B) $35,000. C) $85,000. D) -$35,000.

C) $85,000.

Where on a balance sheet would you find the estimated value of a retail company's inventory? A) Current liabilities B) Net worth C) Current assets D) Fixed assets

C) Current assets

A toy company is experiencing sudden strong demand for a game. Purchasing this company's stock may prove profitable in the short run. This company's stock might best be termed as A) a growth. B) a short sale. C) a special situation. D) a cyclical.

C) a special situation.

All of the following would be considered current assets except A) inventory. B) cash. C) a warehouse. D) marketable securities.

C) a warehouse.

Industries that tend to be highly sensitive to inflation, deflation and the ups and downs of business trends would best be described as A) defensive. B) Keynesian. C) cyclical. D) growth.

C) cyclical.

All the following are cyclical industries except A) heavy equipment. B) automobiles. C) precious metals. D) home appliances.

C) precious metals.

The business cycle is generally viewed as having how many stages? A) Three B) Six C) Two D) Four

D) Four

Which of the following would likely be classified as a countercyclical industry? A) Food production B) Auto manufacturing C) Home building D) Gold mining

D) Gold mining

In order to calculate the earnings per share you would need information from A) the balance sheet and current market value. B) just the balance sheet. C) just the income statement. D) both the balance sheet and the income statement.

D) both the balance sheet and income statement

ABC and MNO both have same market price and shares outstanding for their common stock. if ABC's PE ratio is higher, that would indicate A. ABC sales are lower than MNO's B. ABC's net income is higher than MNO's C. ABC's sales are higher than MNO's D. ABC's net income is less than MONo's

D. ABC's net income is less than MONo's

What is the formula for calculating working capital? A) Current assets - current liabilities B) Assets - liabilities C) Current assets ÷ current liabilities D) Assets + liabilities

A) Current assets - current liabilities

In what order do the following economic phases typically occur? I. Recovery II. Trough III. Decline IV. Prosperity A) I, IV, III, II B) IV, III, I, II C) II, I, III, IV D) III, IV, I, II

A) I, IV, III, II

Which of the following is an example of a company in a defensive industry? A) Major Mills Grain Company, a grain and cereal producer B) National Motors, an automobile manufacturer C) Pan American Aircraft, an airplane producer D) Centipede Equipment, a heavy equipment manufacturer

A) Major Mills Grain Company, a grain and cereal producer

Assets = liabilities + net worth is the A) basic balance sheet equation. B) price to book ratio. C) working capital formula. D) fully diluted earnings ratio.

A) basic balance sheet equation.

An industry whose products stay in high demand, and whose companies grow, without regard to the business cycle are called A) growth industries. B) emerging industries. C) defense industries. D) cycling industries.

A) growth industries.

ABC, with 3 million shares outstanding, reports after-tax earnings of $7.5 million. ABC stock is trading at $50 a share. The P/E ratio is A. 20. B. 25. C. 33. D. 40.

A. 20 ( 7,500,000/3,000,000 = 2.5 50/2.5=20)

Those industries that are least affected by normal business cycles are A) cyclical industries. B) defensive industries. C) special situation. D) growth industries.

B) defensive industries.

Seabird Coffee Company has just reported an unexpected increase in EBITDA this past quarter. This means they experience an increase in A) earnings available to common shareholders. B) earnings before interest, taxes, depreciation, and amortization. C) inventory turnover. D) employee benefit costs.

B) earnings before interest, taxes, depreciation, and amortization.

all of the following ratios are measures of the liquidity of a corporation EXCEPT A. acid ratio B. debt-to-equity ratio C. current ratio D. quick ratio

B. debt-to-equity ratio

The economy appears to be moving into a strong expansion. Which of the following companies will likely benefit the most from this expansion? A) Hinckley Gold and Silver Corp. B) Daisy Dairy Company C) Old Bess Steel, Inc. D) Dino Oil and Gas, Co.

C) Old Bess Steel, Inc.

When the economy shows high unemployment and is failing to expand as measured by a lack of consumer demand and business activity, but prices for goods and services are still rising, this could be described as what? A) Deflation B) Stagnation C) Stagflation D) Inflation

C) Stagflation

ABC corporation's earnings remained steady while its shares outstanding increased by 5%. How does this impact ABC's earnings per share (EPS)? A. EPS has increased B. EPS has stayed the same C. EPS has decreased D. Not enough information to answer the question

C. EPS has decreased

the economy appears to be moving into recession. Which of the following companies will likely deliver the best returns if the recession fears prove accurate? A. southern utah gas and electric B. seabird airlines C. hinckley gold and silver mining D. butterfly heavy equipment

C. hinckley gold and silver mining

profits that are not distributed to shareholders are called A. capital surplus B. dividends C. retained earnings D. interest

C. retained earnings

a company's net worth belongs to its A. bond holders B. president and CEO C. stockholders D. board of directors (BOD)

C. stockholders

Irksome Inc., makes components and peripherals for smart phones. Their line of bright florescent sparkly earbuds has taken off in Asia and is starting to gain popularity in the Americas and Europe, even in countries experiencing harder economic times. Irksome is an example of a A) countercyclical company. B) cyclical company. C) defensive company. D) growth company.

D) growth company.

which of the following stocks is regarded as a defensive stock A. aerospace stock B. stock selling close to its support level C. stock with a strong cash position and low ratio of debt D. electric utility stock

D. electric utility stock