Finance Test 1
The debt to equity ratio for a company with $1 million in total debt and $2 million in equity is _________?
.50
Which of the following are traditional financial ratio categories?
- Turnover Ratios - Profitability Ratios - Financial Leverage Ratios
Based on the sustainable growth rate, which of the following factors affect a firm's ability to sustain growth?
-Profit margin -Financial policy -Dividend policy
The primary responsibility of financial managers is to increase the value of
the existing shares of stock
Which corporate officer is responsible for managing the firm's cash?
treasurer
If a company's balance sheet shows $400 in cash, $100 in inventory, and $200 in current liabilities, its cash ratio is ______.
2.0
Ensuring that the firm has sufficient funds to continue operations of day-to-day basis comes under the heading of _____ management
working capital
AD corporation had sales of $750,000 and cost of goods sold of $350,000. Inventory at year end was $87,500. the firm's inventory turnover is ______.
4.00
Rock construction has current assets of $45 million, total liabilities and equity of $67 million, and sales of $59 million. how would current assets be expressed on a common-size balance sheet?
67%
Alpha Manufacturing has cost of goods sold of $90 million and a new income of $9.6 millions on total sales of $120 million. Total assets are $150 million. A common-size income statement will show cost of goods sold of 75% and a net profit of ___%.
8
Which of the following is (are) true of financial ratios?
Are used for comparison purposes and Are developed from a firm's financial information
One of the important questions in the area of investments includes the potential risks and reward associated with investing in ______ assets
Financial
Business finance is broadly concerned with which of the following?
How to manage day-to-day finances of the firm, how to finance long-term investments, which long-term investment to make
A good financial decision will do what?
Increase the value of the firm's stockholders' equity and existing stock
Which of the following is true about the sustainable growth rate?
It is the MAXIMUM rate of growth a firm can maintain WITHOUT INCREASING its financial leverage
Which of the following are true of a sole proprietorship?
It is the simplest form of business, and it has a limited life
How is price-earnings (PE) ratio computed?
Market price per share / Earnings price per share
The profit margin is equal to net income divided by ___.
Sales
_____ financial statements provide comparisons for firms who differ in size
Standardized
The owners of a corporation are called?
Stockholders
The controller is responsible for:
Tax reporting and financial accounting
When a corporation is formed, it is granted which of the following rights?
The ability to issue stock, legal powers to sue
A shareholder's liability is limited to what?
The amount the shareholder invested in the corporation
What does it mean when a firm has a days' sales in receivables of 45?
The firm collects its credit sales in 45 days on average
Which of the following positions report to the CFO?
Treasurer and controller
What three questions are the financial manager concerned with?
capital budgeting, capital structure, working capital management
Which of the following items is used to compute the current ratio?
cash and accounts payable
A firm with a market-to-book value that is greater than 1 is said to have ________ value for its shareholders
created
Common-size statements are best used for comparing:
firms of different sizes, year-to-year for your firm, competitors
If a company has inventory, the quick ratio will always be _____ the current ratio
less than
Current assets on the common size balance sheet over the past three years have increased from 32 to 35% while current liabilities have decreased from 29 to 25%. This indicates the firm has increased its _____.
liquidity
Capital budgeting is concerned with making and managing expenditures on
long-term assets
Which of the following are included in a firm's capital structure?
long-term debt, equity
The price-earnings (PE) ratio is a ____ ratio
market value
Based on the DuPont Identity, an increase in sales, all else held, ____ ROE.
may increase or decrease, may not change
A _______ is similar to proprietorship, except that there are two or more owners.
partnership
If a company has had negative earnings for several periods they might choose to use a _____
price-sales ratio
Which term applies to the mixture of debt and equity maintained by a firm?
Capital structure
The federal government taxes?
Corporate earnings and shareholder dividends
How is the ownership transferred in a corporation?
Ownership is transferred by gifting and selling of stocks
Which of the following is NOT one of the basic areas of finance?
Personal Finance
Corporations in other countries are often called
Public limited companies, limited liability and Joint stock companies
The conflict of interest between an agent and a principal is called an
agency problem
