PLEASE HIGHLIGHT ALL ANSWERS AND LEAVE IN THIS FORMAT.
1. Which of the following use financial statement data to make decisions?
a. Customers
b. Investors
c. Suppliers
d. All of these
2. Which statement would best provide information about a company's current liquidity?
a. Balance Sheet
b. Income Statement
c. Statement of Cash Flows
d. None of these
3. A banker is analyzing a company that operates in the petroleum industry. Which of the following might be a major consideration in determining whether the company should receive a loan?
a. The petroleum industry suffers from political pressures concerning the selling price of its products
b. Infalation has been high for several years in a row
c. All companies in the petroleum industry use the same accounting principles
d. The company has a large amount of interest payments related to many outstanding loans
4. Which type of analysis compares a single corporation across time?
a. Cross Sectional Analysis
b. Time series Analysis
c. Timetable Analysis
d. Company Analysis
5. Which of the following types of analysis compares on corporation to another corporation and to industry averages?
a. Cross Sectional Analysis
b. Time Series Analysis
c. Timetable Analysis
d. Company Analysis
6. How is the current ratio calculated?
a. (Cash + Marketable Securities + Accounts Receivables) / Current Liabilities
b. (Cash + Market Securities) / Current Liabilities
c. Current Assets / Current Liabilities
d. Cash Flows from Operating Activities / Current Liabilities
7. Partial information from Fabray Company's balance sheet is as follows:
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Current Assets
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Current Liabilities
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Cash
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$1,200,000
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Notes Payable
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$750,000
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Marketable Securities
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$3,750,000
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Accounts Payable
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$9,750,000
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Accounts Receivable
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$28,800,000
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Accrued Expenses
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$6,250,000
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Inventories
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$33,150,000
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Income Taxes Payable
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$250,000
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Prepaid Expenses
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$600,000
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Total Current Assets
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$17,000,000
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Total Current Assets
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$67,500,000
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What is Fabray's current ratio?
a. 0.25
b. 3.0
c. 1.8
d. 3.97
8. Hummel Inc. has $30,000 in current assets and $15,000 in current liabilities. What is Hummel's current ratio?
a. 0.5
b. 1
c. 2
d. 3
9. How is the cash ratio calculated?
a. (Cash + Marketable Securities + Accounts Receivables) / Current Liabilities
b. (Cash + Market Securities) / Current Liabilities
c. Current Assets / Current Liabilities
d. Cash Flows from Operating Activities / Current Liabilities
10. Schuester Company has $40,000 in current liabilities, $20,000 in cash, and $25,000 in marketable securities. What is Schuester's cash ratio?
a. 1.125
b. 0.889
c. 1.6
d. 0.625
11. What ratio is used to measure a firm's liquidity?
a. Debt Ratio
b. Asset Turnover
c. Current Ratio
d. Return on Equity
12. Which of the following transactions could increase a firm's current ratio?
a. Purchase of Inventory for Cash
b. Payment of Accounts Payable
c. Collection of Accounts Receivable
d. Purchase of Temporary Investments for Cash
13. Total Liabilities / Total Equity =
a. Times Interest Earned Ratio
b. Accounts Payable Turnover
c. Receivables Turnover Ratio
d. Debt-to-Equity Ratio
14. When analyzing a company's debt-to-equity ratio, if the ratio has a value that is greater than 1, then the company has:
a. Less debt than equity
b. More debt than equity
c. Equal amounts of debt and equity
d. None of these are correct
15. Cost of goods sold / average inventory is the formula to compute:
a. Accounts Receivable Turnover
b. Gross Profit Percentage
c. Inventory Turnover
d. Return on Sales Percentage
16. Which of the following is the formula to compute the net profit margin percentage?
a. Net Income / Net sales
b. Operating Income / Net sales
c. Net Income / Average Equity
d. Net Income [Interest Expense X (1 - Tax Rate)] / Average Total Assets
17. If Abrams Company has an inventory turnover of 7.3 and a receivables turnover of 9.6, approximately how long is its operating cycle?
a. 72 days
b. 88 days
c. 95 days
d. There is not enough information to calculate the operating cycle
18. Which of the following ratios is used to measure the profit earned on each dollar invested in a firm?
a. Current Ratio
b. Asset Turnover Ratio
c. Return on Sales Ratio
d. Return on Equity
19. Pillsbury Corporation has $65,000 of cost of goods sold and average inventory of $30,000. What is Pillsbury's inventory turnover rate?
a. 0.46
b. 1.17
c. 1.46
d. 2.17
20. Selected information for Berry Company is as follows:
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Average Common Stock
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$600,000
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Average Additional paid-in capital
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$250,000
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Average Retained Earnings
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$370,000
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Sales Revenue for Year
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$915,000
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Net Income for Year
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$240,000
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Berry's return on equity, rounded to the nearest percentage point is:
a. 20%
b. 21%
c. 28%
d. 40%
21. Which of the following ratios is used to measure a firm's profitability?
a. Liabilities / Equity
b. Sales Assets
c. Net Income / Net Sales
d. Assets / Equity
22. If a company has a higher net profit margin than most of its competitors, this means that:
a. The company is more efficient with its assets
b. The company has more liyal customers
c. The company has a lower proportion of debt financing
d. The company has a higher proportion of each sales dollar that is profit
23. When DuPont analysis reveals that a company has much higher than average asset turnover and much lower than average profit margin, what can be concluded about the company's strategy?
a. It is a product differentiator
b. It is a low-cost provider
c. It has no strategy
d. It needs to concentrate on improving it profit margins
24. Gross Profit Margin =
a. Sales Revenue - Cost of Goods Sold / Sales Revenues
b. (Sales Revenues - Operating Expenses) / Sales Revenues
c. Current Assets / Current Liabilities
d. Inventory / (Cost of Goods Sold / 365)
25. Investors should have strong confidence in a firm's outlook and earnings growth if the Price-to-Earnings Ratio is over ___.
a. 12
b. 10
c. 20
d. 5