a $33.17 $33.33 $33.50 $28.57

Transcription

1 What is the book value per share for a company that has total stockholders' equity of $10,000,000, preferred stock of $50,000, and 300,000 common shares outstanding? a $33.17 $33.33 $33.50 $28.57 "'Your answer is correct. ]

2 The correct answer is shown. Vertical analysis focuses on the relations among financial statement items at a given point in time.

3 If a company has current assets of $225,000 and current liabilities of $200,000, what is the working capital?._,your answer Is correct. $(25,000) & $25,000 $425,000 ] 1.125%

4 The correct answer is shown. Analyzing financial data over time is horizontal analysis. (Enter only one word per blank.)

5 If a company had earnings before interest expense and income taxes of $2,000,000 and Interest expense of $400,000, what is the times interest earned ratio? a_5 4 ~Your answer Is correct

6 The correct answer is shown. A(n) common-size financial statement is a vertical analysis in which each financial statement item is expressed as a percentage.

7 If a company has sales on account of $400,000 and average accounts receivable balance of $50,000, what is the accounts receivable turnover? $450,000 '-'Your answer is correct. ~8~~~~~~~~~~~~~~~~~-) $350,000

8 If a company has cost of goods sold of $20,000,000, a beginning inventory balance of $4,000,000 and an ending inventory balance of $4,500,000, what is the inventory turnover ratio? "'Your answer is correct. a_4_.7,j

9 If a company has cash of $30,000, marketable securities of $40,000, accounts receivable of $50,000, inventory of $20,000, short-term notes receivable of $30,000, and current liabilities of $60,000, what is its acid-test ratio? a _.5,,J

10 If a company has total liabilities of $500,000 and stockholders' equity of $700,000, what is the debtto-equity ratio? 1.71 "'Your answer is correct. lfal_o_.11 )

11 The correct answer is shown. Long-term creditors are concerned with a company's ability to keep a reasonable balance between its liabilities and stockholders' equity. This balance is measured by the debt-to-equi~ ratio.

12 A company has earnings per share of $7 and market price per share of $49. What is the priceearnings ratio? a_

13 The correct answer is shown. The ratio that excludes inventories and prepaid expenses from total current assets, leaving only the more liquid (or "quick") assets to be divided by current liabilities, is the acid-test ratio.

14 What are the three types of analytical techniques that are widely used when comparing financial statements? (Check all three techniques.) ~Your answer Is correct. Interviewing key executives & Ratios a Common-size statements Dollar and percentage changes on statements ) ) )

15 If a company has current assets of $200,000 and current liabilities of $120,000, what is the current ratio? $320,000 $80,000 if1_1_.67 ) 0.6

16 The correct answer is shown. The accounts receivable turnover is computed by dividing sales on account (credit sales) by the average accounts receivable balance for the year.

17 Calculate earnings per share if net income is $100,000, preferred dividends are $20,000 and the average number of common shares outstanding is 20,000. $6 $5 a_$4 1

18 If a company had Net income of $60,000, Preferred dividends of $20,000, Average total stockholders' equity of $300,000 and Average preferred stock of $50,000, then the return on common stockholders' equity is: 32% lfl_1_6o/c_o ) 22.9% 20%

19 The correct answer is shown. The relationship between the market price of a share of stock and the stock's current earnings per share is often stated in terms of the uric~-earnings ratio. (Enter only one word per blank.)

20 Which of the following are examples of performing financial statement analysis? (Check all that apply.) Examining trends in key economic data Analyzing financial ratios to assess the financial health of a company a Examining trends in key financial data a Comparing financial data across companies ) Understanding how an income statement works

21 The correct answer is shown. The ividend payou ratio gauges the portion of current earnings being paid out in dividends.

22 The correct answer is shown. Inventory Turnover ratio measures how many times a company's inventory has been sold and replaced during the year. ~ Your answer is correct.

23 Which of the following is the excess of current assets over current liabilities? Working capital Another way to state this is current assets - current liabilities. Gross margin percentage Return on total assets Financial leverage

24 Sam's has a market price per share of $30 and a dividend per share of $3. What is the dividend yield ratio? 110% ~Your answer Is correct. a 90% 1_0%_ %

25 If a company has an inventory turnover of 4, what is the average sale period? a 91.25days 365 days 4 days 93 days ~Your answer Is correct. )

26 The correct answer is shown. Book Value per share measures the amount that would be distributed to holders of each share of common stock if all assets were sold at their balance sheet carrying amounts and if all creditors were paid off. (Enter only one word per blank.)

27 The correct answer is shown. The current ratio is found by dividing current assets by current liabilities. ~ Your answer is correct. ChaUenge

28 If Sales are $10,000, cost of goods sold is $6,000, and gross margin is $4,000, what is the gross margin percentage? 250% 60% ~Your answer Is correct. ~4_0%_o ) 160%

29 Which of the following is found by showing data for several years as a percentage of a base year? lfl Trend percentage Dividend yield ratio Vertical analysis Gross margin percentage ~Your answer Is correct. ) Cha'llenge

30 The correct answer is shown. The return on total 1ssets is a measure of operating performance.(enter only one word per blank)

31 The correct answer is shown. The ividend yield ratio measures the rate of return, in the form of cash dividends only, that would be earned by an investor who buys common stock at the current market price.

32 What is the average collection period when accounts receivable turnover is 12.3? lfl 30 days 45 days 12 days Less than one day ~Your answer Is correct. ) Cha'llenge

33 The return on which of the following is computed by subtracting preferred dividends from net income and dividing that total by the average common stockholders' equity? a Common stockholders' equity Total assets Book value per share Working capital "Your answer is correct. )

34 Which of the following ratios measure how well a company is doing from the standpoint of the common stockholder? (Check all that apply.) '-'Your answer is correct. Inventory turnover a Return on common stockholders' equity Return on total assets Accounts receivable turnover a Earnings per share ) ) )

35 The correct answer is shown. In a horizontal analysis, the dollar changes highlight the changes that are the most important economically; the oercentaga changes highlight the changes that are the most unusual. (Enter only one word per blank.) ~ Your answer is correct.

36 The correct answer is shown. 365 days can be divided by the accounts receivable turnover to determine the average number of days required to receive payment on an account, which is known as the average collecuo period.

37 If a company has average total assets of $2,000,000, net income of $400,000, interest expense of $10,000 and a tax rate of 35%, what is the return on total assets? ~Your answer Is correct % & 20.33% ) 13.33% 20%

38 Which of the following are examples of performing financial statement analysis? (Check all that apply.) Understanding how an income statement works Comparing financial data across companies Analyzing financial ratios to assess the financial health of a company Examining trends in key economic data a Examining trends in key financial data )

39 The correct answer is shown. In order to compare the financial results of two different companies, both companies need to use the same accounting 1 riethods. (Enter only one word per blank)

40 Which of the following refers to the difference between the rate of return the company earns on investments on its own assets and the rate of return that the company must pay its creditors? a Financial leverage Book value per share ) "Your answer is correct. Times interest earned ratio Working capital

41 If a company has a dividend per share of $1.50 and earnings per share of $4.00, what is the dividend payout ratio? a 37.5% 600% 64% 267% ]

42 Which of the following statements are true in regard to comparative and common-size financial statements? (Check all that apply.) Comparative financial statements report both the dollar change and percentage change from one year to the next. Common-size financial statements report each item as percentage of total assets or total sales. Comparative financial statements, such as an income statement, report each item as a percentage of sales.

43 The correct answer is shown. When computing earnings per share, net income available for common stockholders is net income minus d1v1dends paid to the owners of the company's preferred stock. (Enter only one word per blank.)

44 Why is the times interest earned ratio based on earnings before interest expense and income taxes? Interest expense and income taxes are not actual expenses of business operations. Income tax expense is unknown at the time the income statement is prepared. Earnings before interest expense and income taxes is the amount available for making interest payments. The amount of interest expense is variable and changes as payments are made or money is borrowed.

45 The correct answer is shown. A company with an inventory turnover ratio that is much ower than the average for its industry may have too much inventory.

46 Which of the following measures a company's ability to protect its long term creditors? a Times interest earned ratio Price-earnings ratio Current ratio Accounts receivable turnover )

47 With which of the following financial ratios would a long-term creditor be most concerned? (Check all that apply.) a Times interest earned ratio a Debt-to-equity ratio Average collection period Inventory turnover Working capital "'Your answer is correct. ] ]

48 Which ratio is found by dividing gross margin by sales? a Gross margin analysis Gross margin percentage Price-earnings ratio ) Earnings per share

49 For which group would working capital, current ratio, and inventory turnover be the most useful? Board of directors Stockholders '-'Your answer is correct. a Long-term creditors Short-term creditors )

50 In addition to financial ratios, which of the following are typical ways used to analyze a company? (Check all that apply.) Evaluation of how much production takes place each day a Evaluation of industry trends a Evaluation of changes in consumer tastes Evaluation of changes within the company

51 When constructing a common-size comparative income statement, the changes in accounts from one year to the next are usually expressed as a percentage of which account? Retained earnings Gross profit "Your answer is correct. lflsales Net income )

52 True or false: Although financial statement analysis is a useful tool, there are very important limitations to it. False lfl_r _ru_e ~]

53 The correct answer is shown. A high price-earnings ratio means that investors are willing to pay a premium for the company's stock because the company is expected to have greater than average future earnings growth. On the other hand, if investors believe a company's future earnings growth is limited, then a lo\v' price-earnings ratio would result.

54 Why would an investor be interested in knowing a company's earnings per share? "'Your answer is correct. An investor's only goal in purchasing stock is to receive high dividends, and the higher the net income, the greater the dividend payout. The greater the number of shares an investor owns, the greater the value per share. Earnings form the basis of dividend payments and future increases in the value of shares. The greater the earnings per share, the higher the dividend payment will be.

55 The correct answer is shown. Marke value reflects expectations about future earnings and dividends, whereas boo value reflects the results of events that have occurred in the past.

56 If the average collection period for a company is calculated to be 35 days, what does this mean? On average, customers are allowed 35 days to return their purchases. a On average, it takes 35 days to collect a credit sale. On average, it takes 35 days to process and calculate the balance in accounts receivable. ] On average, it takes 35 days to sell inventory.

57 The correct answer is shown. In industries with little financial risk, creditors tolerate high debt-to-equity ratios, and in industries with more financial risk, creditors demand low debt-to-equity ratios.

58 When evaluating the trend in a company's current ratio, a(n) ratio might be a sign of eliminating obsolete inventory whereas a(n) ratio might be the result of stockpiling inventory. '-'Your answer is correct. a improving, declining declining, improving )

59 The correct answer is shown. The acid-test ratio is designed to measure how well a company can meet its obligations without having to liquidate or depend too heavily on its inventory. VYour answer is correct.

60 Which of the following helps managers figure out how well the company and its business units are performing? Financial objectives a Financial ratios Past due accounts payable ] Financial predictions

61 The correct answer is shown. Maintaining large amounts of working capital is costly because it must be financed with long-term debt and equity.

62 How can a company assess how well they are doing from the standpoint of its stockholders? a Financial ratios Looking at the revenues Looking at the net income Asking for stockholder input ]

63 When constructing a common-size comparative balance sheet, the changes in account balances from one year to the next are usually expressed as a percentage of: "Your answer is correct. total liabilities D total assets total stockholders' equity ) total sales