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Chapter 3 fundamentals of corporate finance 9th edition test

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Tài chính doanh nghiệp (Trường Đại học Kinh tế Thành phố Hồ Chí Minh)

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03
Student: ___________________________________________________________________________

1. Act ivit ies of a fir m whi ch require the spending of cash are known as:
A. sources of cash.
B. uses of cash.
C. cash collections.
D. cash receipts.
E. cash on hand.

2. The so urces and uses of ca sh over a stated period of t ime are refected on the:
A. income statement.
B. balance sheet.
C. tax reconciliation statement.
D. statement of cash fows.
E. statement of operating position.

3. A com mon-size income statement is an accounting s tatement that expresses all of a firm 's expenses as
percentage of:
A. total assets.
B. total equity.
C. net income.
D. taxable income.
E. sales.

4. Which on e of the followin g standardizes ite ms on the incom e statement and balance sheet relative to their
values as of a common point in time?
A. statement of standardization
B. statement of cash fows
C. common-base year statement
D. common-size statement
E. base reconciliation statement

5. Relation ships determined from a firm's financial informati on and used for comparison purposes are
known as:
A. financial ratios.
B. identities.
C. dimensional analysis.
D. scenario analysis.
E. solvency analysis.
6. The for mula wh ich break s down the return on equity into three component parts is referred to as which
one of the following?
A. equity equation
B. profitability determinant
C. SIC formula
D. DuPont identity
E. equity performance formula

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7. The U. S. gov ernment coding sy stem that classi fies a f irm by the nature of it s business operations is
known as the:
A. NASDAQ 100.
B. Standard & Poor's 500.
C. Standard Industrial Classification code.
D. Governmental ID code.
E. Government Engineered Coding System.

8. Which one of the foll owi ng i s a source of c ash?

A. increase in accounts receivable
B. decrease in notes payable
C. decrease in common stock
D. increase in accounts payable
E. increase in inventory

9. Which one of the foll owi ng i s a use of cash?

A. increase in notes payable
B. decrease in inventory
C. increase in long-term debt
D. decrease in accounts receivables
E. decrease in common stock
10. Whic h one of the fo llow ing is a sou rce of cas h?
A. repurchase of common stock
B. acquisition of debt
C. purchase of inventory
D. payment to a supplier
E. granting credit to a customer

11. Whic h one of the fo llow ing is a sou rce of cas h?

A. increase in accounts receivable
B. decrease in common stock
C. decrease in long-term debt
D. decrease in accounts payable
E. decrease in inventory

12. On the Stat ement of Cash F lows, whi ch of the follow ing are consid ered financi ng activitie s?
I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid
A. I and IV only
B. III and IV only
C. II and III only
D. I, III, and IV only
E. I, II, III, and IV

13. On the Stat ement of Cash F lows, whi ch of the follow ing are consid ered operating activitie s?
I. costs of goods sold
II. decrease in accounts payable
III. interest paid
IV. dividends paid
A. I and III only
B. III and IV only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV

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14. According t o the Statement of Cash Fl ows, a decre ase in accounts r eceivable w ill _____ the cas h fow
from _____ activities.
A. decrease; operating
B. decrease; financing
C. increase; operating
D. increase; financing
E. increase; investment

15. According to the St atement of Cash Fl ows, an increas e in interest expense wi ll _____ the cash fow from
_____ activities.
A. decrease; operating
B. decrease; financing
C. increase; operating
D. increase; financing
E. increase; investment

16. On a comm on-size ba lance sheet all accou nts are expressed as a percentage of:
A. sales for the period.
B. the base year sales.
C. total equity for the base year.
D. total assets for the current year.
E. total assets for the base year.

17. On a common-bas e year financial stat ement, accounts receivabl es will be expressed rel ative to which one
of the following?
A. current year sales
B. current year total assets
C. base-year sales
D. base-year total assets
E. base-year accounts receivables

18. A firmhas
2009 uses
an2008 as thevalue
inventory base of
year forThis
1.08. its fina ncial statem
is interpreted ents. The
to mean thatcomm on-size,
the 2009 base -year
inventory statement
is equal to 108for
percent of which one of the following?
A. 2008 inventory
B. 2008 total assets
C. 2009 total assets
D. 2008 inventory expressed as a percent of 2008 total assets
E. 2009 inventory expressed as a percent of 2009 total assets

19. Which of t he follow ing ratios are measures of a fir m's liqui dity?
I. cash coverage ratio
II. interval measure
III. debt-equity ratio
IV. quick ratio
A. I and III only
B. II and IV only
C. I, III, and IV only
D. I, II, and III only
E. I, II, III, and IV

20. An increase in curre nt liabilitie s will have which one of the follow ing effects, all els e held constant?
Assume all ratios have positive values.
A. increase in the cash ratio
B. increase in the net working capital to total assets ratio
C. decrease in the quick ratio
D. decrease in the cash coverage ratio
E. increase in the current ratio

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21. An increaseni which one of theollowing

f will increase a irm's
f quick atio
r withou
t affecting ts
i cash
ratio?
A. accounts payable
B. cash
C. inventory
D. accounts receivable
E. fixed assets

22. A supplier,who require

s payment within ten days,hould
s be most co
ncerned wit
h which one of the
following ratios when granting credit?
A. current
B. cash
C. debt-equity
D. quick
E. total debt

23. A firm has an interval measure of 48. This means that the
irm
f has sufcient liquid sasets to do whic
h one
of the following?
A. pay all of its debts that are due within the next 48 hours
B. pay all of its debts that are due within the next 48 days
C. cover its operating costs for the next 48 hours
D. cover its operating costs for the next 48 days
E. meet the demands of its customers for the next 48 hours

24. Over the past year, the qui

ck ratio for a firm increas
ed while the current io
ratremained const
ant. Given
this information, which one of the following must have occurred? Assume all ratios have positive
values.
A. current assets increased
B. current assets decreased
C. inventory increased Quick ratio = ( CA -IN) /CL = CA/CL -IN/CL
D. inventory decreased
E. accounts payable increased
25. Ratios that measur
e a firm'sfinancialleverage rae known sa _____ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. book value

26. Whichone ofthe followingstatement s is correct?

A. If the total debt ratio is greater than .50, then the debt-equit
y ratio must be less than 1.0.
B. Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5.
C. The debt-equity ratio can be computed as 1 plus the equity multiplier.
D. An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity.
E. An increase in the depreciation expense will not affect the cash coverage ratio.

27. If a firm has a debt

-equity rat
io of 1.0, thentsi total debt tio
ra must be whi
ch one of the foll
owing?
A. 0.0
B. 0.5
C. 1.0 Deb-equity = 1  TD=TE
D. 1.5
TA=TD+TE
E. 2.0
TDR=(TA-TE)/TA = TD/TA =1/2

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28. The cash cove

rage ratio dir
ectly measu
res the abilit
y of a firm's rev
enues to meethich
w one of its
following obligations?
A. payment to supplier
B. payment to employee
C. payment of interest to a lender
D. payment of principle to a lender
E. payment of a dividend to a shareholder

29. Jasper Unit

ed had sales of $21
,000 in 2008 and $24
,000 in 2009. he
T firm's cu
rrent accoun
ts remained
constant. Given this information, which one of the following statements must be true?
A. The total asset turnover rate increased.
B. The days' sales in receivables increased.
C. The net working capital turnover rate increased.
D. The fixed asset turnover decreased.
E. The receivables turnover rate decreased.

30. The Corner H ardware has cceeded

su in inc
reasing the am
ount of goods itlls
sewhile hol
ding the amoun
t
of inventory on hand at a constant level. Assume that both the cost per unit and the selling price per unit
also remained constant. This accomplishment will be refected in the firm's financial ratios in which one
of the following ways?
A. decrease in the inventory turnover rate
B. decrease in the net working capital turnover rate
C. no change in the fixed asset turnover rate
D. decrease in the day's sales in inventory
E. no change in the total asset turnover rate

31. Dee's has a fixed asset turnov

er rate of 1.12 dana total assetrnover
tu rate of91.
0. Sam's ha
s a fixed asset
turnover rate of 1.15 and a total asset turnover rate of 0.88. Both companies have similar operations.
Based on this information, Dee's must be doing which one of the following?
A. utilizing its fixed assets more efciently than Sam's
B. utilizing its total assets more efciently than Sam's
C. generating $1 in sales for every $1.12 in net fixed assets
D. generating $1.12 in net income for every $1 in net fixed assets
E. maintaining the same level of current assets as Sam's

32. Ratios that m

easure how eff
iciently a firm managestsi assets and ope
rations to gene
rate net incom
e are
referred to as _____ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. turnover

33. If a firm produces a twelve pe

rcent return onssets
a and also a elve
tw percenteturn
r on equity
, then the
firm:
A. may have short-term, but not long-term debt.
B. is using its assets as efciently as possible.
C. has no net working capital.
D. has a debt-equity ratio of 1.0.
E. has an equity multiplier of 1.0.

34. Which one of theollowing

f will decreasef ia firm can decr
ease its opera
ting costs, llaelse consta
nt?
A. return on equity
B. return on assets
C. profit margin
D. equity multiplier
E. price-earnings ratio

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35. Al's has a pric e-earnings r atio of 18.5. B en's also has a pri ce-earning s ratio of 18.5. Which one of the
following statements must be true if Al's has a higher PEG ratio than Ben's?
A. Al's has more net income than Ben's.
B. Ben's is increasing its earnings at a faster rate than the Al's.
C. Al's has a higher market value per share than does Ben's.
D. Ben's has a lower market-to-book ratio than Al's.
E. Al's has a higher net income than Ben's.

36. Tobin's Q re lates the market value of a fir m's assets to which one of the fo llowing?
A. initial cost of creating the firm
B. current book value of the firm
C. average asset value of similar firms
D. average market value of similar firms
E. today's cost to duplicate those assets

37. The price- sales ratio is e specially us eful when anal yzing firms t hat have whic h one of the follow ing?
A. volatile market prices
B. negative earnings
C. positive PEG ratios
D. a negative Tobin's Q
E. increasing sales
38. Sharehol ders probably ha ve the most interest in whic h one of the follow ing sets of rati os?
A. return on assets and profit margin
B. long-term debt and times interest earned
C. price-earnings and debt-equity
D. market-to-book and times interest earned
E. return on equity and price-earnings

39. Which one of the f ollowing ac curately des cribes the three parts of the Du P ont identity?
A. operating efciency, equity multiplier, and profitability ratio
B. financial leverage, operating efciency, and profitability ratio
C. equity multiplier, profit margin, and total asset turnover
D. debt-equity ratio, capital intensity ratio, and profit margin
E. return on assets, profit margin, and equity multiplier

40. An increase i n which of the fol lowing wi ll increase th e return on equity, all else con stant?
I. sales
II. net income
ROE= PM+ TAT + EM
III. depreciation
IV. total equity = NI / TE
A. I only =NI/SALE X SALE/ASET X ASSET /TE =ROE X ASSET / TE
B. I and II only = ROE X EM
C. II and IV only
D. II and III only
E. I, II, and III only

41. Which of t he follow ing can be us ed to compute the return on equity?

I. Profit margin × Return on assets
II. Return on assets × Equity multiplier
III. Net income/Total equity
IV. Return on assets × Total asset turnover
A. I and III only
B. II and III only
C. II and IV only
D. I, II, and III only
E. I, II, III, and IV

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42. The Du Pont identity can be used to help managers answer which of the following questions related to a
firm's operations?
I. How many sales dollars has the firm generated per each dollar of assets?
II. How many dollars of assets has a firm acquired per each dollar in shareholders' equity?
III. How much net profit is a firm generating per dollar of sales?
IV. Does the firm have the ability to meet its debt obligations in a timely manner?
A. I and III only
B. II and IV only

C. I, II, and III only

D. D. II, III and IV only
E. I, II, III, and IV

43. A firm currently has $600 in debt for every $1,000 in equity. Assume the firm uses some of its cash to
decrease its debt while maintaining its current equity and net income. Which one of the following will
decrease as a result of this action?
A. equity multiplier
B. total asset turnover
C. profit margin
D. return on assets
E. return on equity

44. Which one of the following statements is correct?

A. Book values should always be given precedence over market values.
B. Financial statements are frequently used as the basis for performance evaluations.
C. Historical information provides no value to someone who is predicting future performance.
D. Potential lenders place little value on financial statement information.
E. Reviewing financial information over time has very limited value.

45. It is easier to evaluate a firm using financial statements when the firm:
A. is a conglomerate.
B. has recently merged with its largest competitor.
C. uses the same accounting procedures as other firms in the industry.
D. has a different fiscal year than other firms in the industry.
E. tends to have many one-time events such as asset sales and property acquisitions.

46. The most acceptable method of evaluating the financial statements of a firm is to compare the firm's current:
A. financial ratios to the firm's historical ratios.
B. financial statements to the financial statements of similar firms operating in other
C. countries.
D. financial ratios to the average ratios of all firms located within the same geographic area.
E. financial statements to those of larger firms in unrelated industries.

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F. financial statements to the projections that were created based on Tobin's Q.

47. Which of the following represent problems encountered when comparing the financial statements of two
separate entities?
I. Either one, or both, of the firms may be conglomerates and thus have unrelated lines of business.
II. The operations of the two firms may vary geographically.
III. The firms may use differing accounting methods.
IV. The two firms may be seasonal in nature and have different fiscal year ends.
A. I and II only
B. II and III only
C. I, III, and IV only
D. I, II, and III only
E. I, II, III, and IV

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48. Wise's Cor ner Grocer ha d the followi ng current acc ount values. W hat effect di d the change in net
working capital have on the firm's cash fows for 2009?

A. net use of cash of $37

B. net use of cash of $83
C. net source of cash of $83
D. net source of cash of $111
E. net source of cash of $135

49. During the ye ar, Kitche n Supply incr eased its accounts receivab le by $130, decr eased its inve ntory by
$75, and decreased its accounts payable by $40. How did these three accounts affect the firm's cash fows
for the year?
A. $245 use of cash
B. $165 use of cash
C. $95 use of cash
D. $95 source of cash
E. $165 source of cash
50. A firm gener ated net income of $878. The d epreciation expense was $4 7 and dividends w ere paid in the
amount of $25. Accounts payables decreased by $13, accounts receivables increased by $22, inventory
decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net
cash fow from operating activity?
A. $876
B. $902
C. $904 878+47+14-22 -13
D. $922
E. $930

51. A firm has sal es of $2,190, n et income of $17 4, net fixed ass ets of $1,600, and current assets of $720.
The firm has $310 in inventory. What is the common-size statement value of inventory?
A. 13.36 percent
B. 14.16 percent
C. 19.38 percent
310/ (720+ 1600 )= 13,36
D. 30.42 percent
E. 43.06 percent

52. A firm has sal es of $3,400, n et income of $39 0, total assets of $4,500, a nd total equity o f $2,750. Int erest
expense is $40. What is the common-size statement value of the interest expense?
A. 0.89 percent
B. 1.18 percent
C. 3.69 percent
D. 10.26 percent
E. 14.55 percent

53. Last year, w hich is used as the ba se year, a firm had cash of $52, a ccounts recei vable of $218, i nventory
of $509, and net fixed assets of $1,107. This year, the firm has cash of $61, accounts receivable of $198,
inventory of $527, and net fixed assets of $1,216. What is the common-base year value of accounts
receivable?
A. 0.08
B. 0.10
C. 0.88 198/218 = 0,91
D. 0.91
E. 1.18

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54. Russell's Deli has cash of136

$ , account
s receivablefo$87, account
s payable of $215,
and inventoryf o
$409. What is the value of the quick ratio?
A. 0.31
B. 0.53
C. 0.71 (136 + 87) /215
D. 1.04
E. 1.07

55. Uptown Me n's Wear has acc

ounts payablef $2,214,
o inv
entory of $7,9
50, cash of $1,
263, fixed ass
ets of
$8,400, accounts receivable of $3,907, and long-term debt of $4,200. What is the value of the net working
capital to total assets ratio?
A. 0.31 NET WORKING CAPITAL = CA-CL NET=
B. 0.42
7950+1263+3907-2214 = 10906
C. 0.47
D. 0.51  10906/TA=0,51
E. 0.56

56. A firm has tot

al assets of $31
1,770 and net fix
ed assets of $167
,532. The verage
a daily op
erating cost
s
are $2,980. What is the value of the interval measure?
A. 31.47 days
B. 48.40 days (311,770-167,532)/2980 = 48,40
C. 56.22 days
D. 68.05 days
E. 104.62 days

57. A firm has a debt-e

quity rati
o of 0.42.What ishe
t total de
bt ratio?
A. 0.30
B. 0.36
C. 0.44 Giả sử TD = 42 , TE = 100  TA = 142 TDR = 42/142
D. 1.58
E. 2.38

58. A firm has tot

al debt of $4,62
0 and a debt-equi
ty ratio of 0.5
7. What is the lue
va of the totalsets?
as
A. $6,128.05
B. $7,253.40
C. $9,571.95 Debt-euity= 0,57  TE= 8105
D. $11,034.00  TA= TE + TD= 12725
E. $12,725.26

59. A firm has sales of $68,40

0, costs of $42,900,terest
in paid of $2,100
, and depreciatio
n of $6,500. The tax
rate is 34 percent. What is the value of the cash coverage ratio?
A. 12.14
B. 15.24
CASH COVERAGE RATIO = EBITDA/INTEREST
C. 17.27
D. 23.41 =(68400-42900)/2100 = 12,14
E. 24.56

60. The Bike Shop paid $2,310

n interest
i and,850
$1 in divide
nds last year.
The times in
terest earne
d ratio is
2.2and the depreciation expense is $460. What is the value of the cash coverage ratio?
A. 1.67
B. 1.80
C. 2.21 EBIT = 2.2 × 2,310 = 5,082;
D. 2.40
Cash coverage ratio = (5,082 +
E. 2.52
460)/2,310 = 2.40

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61. Al's Sport Store has sal

es of $897,400,
costs of goods ld
soof $628,300
, inventory of208,400
$ , and
accounts receivable of $74,100. How many days, on average, does it take the firm to sell its inventory
assuming that all sales are on credit?
A. 74.19 days Inventory turnover = 628,300/208,400
B. 84.76 days = 3.014875
C. 121.07 days Days in inventory = 365/3.014875 =
D. 138.46 days 121.07 days
E. 151.21 days

62. The Flower hS oppe has accounts rece

ivable of $3,709,ventory
in of $4,407,ales
s of $218,640, and tcos
of goods sold of $167,306. How many days does it take the firm to both sell its inventory and collect the
payment on the sale assuming that all sales are on credit?
A. 14.67 days INVENTORY TỦNOVER =167,306/4,407= 37,9
B. 15.81 days DAYS= 365/37,9 = 9,6 DAYS
C. 16.23 days RECEVABLES TỦNOVER=SALE/a. Recevable=58,9
D. 17.18 days Days= 365/58,9= 6,2
E. 17.47 days Total days in inventory and receivables = 9.614 + 6.192 = 15.81

63. A firm has net orking

w capi
tal of $2,715,
net fixed asset
s of $22,407,ales
s of $31,35
0, and curren
t
liabilities of $3,908. How many dollars worth of sales are generated from every $1 in total assets?
A. $1.08
B. $1.14
Total asset turnover = $31,350/($2,715 + $22,407
C. $1.19
+ $3,908) = 1.08
D. $1.26
E. $1.30 Every $1 in total assets generates $1.08 in sales.

64. The Purple Martin has ann

ual sales of $687
,400, totalebt
d of $210,000, total equi
ty of $365,000,
and a
profit margin of 5.20 percent. What is the return on assets?
A. 6.22 percent
B. 6.48 percent NET INCOME= PM X SALE = 687400 X 5,2
C. 7.02 percent TA= TE+TD= 36500+210000
D. 7.78 percent ROA= NET INCOME/TA = 6,21
E. 9.79 percent

65. Reliable Cars has sales of $807,200,

taltoassets of $1,105,
100, and a profit margin9.6
of8 percent. The
firm has a total debt ratio of 78 percent. What is the return on equity?
A. 13.09 percent
B. 16.67 percent Total debt= (ta-te)/ta  TE= 243122
C. 17.68 percent NET INCOME = PM X SALE=7813696
D. 28.56 percent
E. 32.14 percent Roe= Net income/TE = 32,14

66. The Meat Ma rket has $747,

000in sales. The profit mar
gin is 4.1 perc
ent and the firmash7,500 share
s of
stock outstanding. The market price per share is $27. What is the price-earnings ratio?
A. 6.61
B. 8.98 Earnings per share = NET INCOME/ SHARE...
C. 11.42 (.041 × $747,000)/7,500 = 4.0836
D. 13.15
E. 14.27 Price-earnings ratio = $27/4.0836 = 6.61

67. Big Guy Subs has net incomef $150,980,

o a ice-earni
pr ngs ratio of 12.
8, and earning
s per share of $0.
87.
How many shares of stock are outstanding?
A. 13,558
B. 14,407
C. 165,523 Number of shares = $150,980/$0.87 =
D. 171,000
E. 173,540 173,540

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68. A firm has 160,000 shares oftock

s outstand ing, sales of 1$.94 million, net incom
e of $126,400, arice-
p
earnings ratio of 18.7, and a book value per share of $9.12. What is the market-to-book ratio?
A. 1.62
B. 1.84 Earnings per share = $126,400/160,000 = $0.79
C. 2.23 Price per share = $0.79 × 18.7 = $14.773
D. 2.45 Market-to-book ratio = $14.773/$9.12 = 1.62
E. 2.57

69. Oscar's Dog House has a prof

it margin of 5.
6 percent, a re
turn on assets of2.5
1 percent
, and an equity
multiplier of 1.49. What is the return on equity?
A. 17.14 percent
B. 18.63 percent
C. 19.67 percent Return on equity = 12.5 × 1.49 = 18.63
D. 21.69 percent
E. 22.30 percent

70. Taylor's Men's Wear has a de

bt-equity ra
tio of 42 percent
, sales of $749
,000, net inc
ome of $41,30
0, and
total debt of $198,400. What is the return on equity?
A. 7.79 percent
B. 8.41 percent
C. 8.74 percent Return on equity = $41,300/($198,400/0.42) = 8.74
D. 9.09 percent
E. 9.16 percent

71. A firm has a deb

t-equity rat
io of 57 percent,
a total asset rnover
tu of 1.12
, and a profit ma
rgin of 4.9
percent. The total equity is $511,640. What is the amount of the net income?
A. $28,079
B. $35,143 Return on equity = .049 × 1.12 × (1 + 0.57) = .
C. $44,084 0861616
D. $47,601
Net income = $511,640 × .0861616 = $44,084
E. $52,418

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72. What is the quic k ratio fo r 2009?

A. 0.56
B. 0.60
C. 1.32
D. 1.67
E. 1.79

73. How m any days of sales are in receivable s? (Use 2009 value s)
A. 17.08 days
B. 23.33 days
C. 26.49 days
D. 29.41 days
E. 32.97 days

74. What is th e price-sales ratio for 2009 if the market price is $ 18.49 per share?
A. 2.43
B. 3.29
C. 3.67
D. 4.12
E. 4.38

75. What is de bt-equity ratio ? (Use 200 9 values )

A. 0.52
B. 0.87
C. 0.94
D. 1.01
E. 1.06

76. What i s the cash cover age ratio for 20 09?

A. 9.43
B. 10.53

C. 11.64 D. 11.82
E. 12.31

77. What i s the return on equity? (Us e 2009 values)

A. 10.26 percent
B. 16.38 percent
C. 20.68 percent
D. 29.96 percent
E. 40.14 percent

78. What i s the amount of the divid ends paid for 20 09?
A. $11,100
B. $15,000
C. $32,600
D. $41,200
E. $45,100

79. What is th e amount of the cash f low from investment activit y for 2009?
A. $18,100
B. $24,800
C. $29,300
D. $32,000
E. $39,400

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80. A.
What is th
24.18 e net work
percent ing capital to totalassets rat
io for 2009?
B. 36.82 percent
C. 45.49 percent
D. 51.47 percent
E. 65.83 percent

81. How many da ys on average doest take

i Precis
ion Tool to sell its inventor
y? (Use 2009 val
ues)
A. 164.30 days
B. 187.77 days
C. 219.63 days
D. 247.46 days
E. 283.31 days
82. How many dol
lars of sales rae being genera
ted from ever
y dollar of net fix
ed assets? (U
se 2009 values.
)

A. $0.88
B. $1.87
C. $2.33
D. $2.59
E. $3.09

83. What si the equi

ty multiplier for 2009?
A. 1.72
B. 1.67
C. 1.88
D. 1.93
E. 2.03

84. What si thetimesinterestearnedratiofor 2009?

A. 9.63
B. 10.12
C. 12.59
D. 14.97
E. 16.05

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85. What isthe retur

n on equ
ity for2009? (Use 2009values)
A. 15.29 percent
B. 16.46 percent
C. 17.38 percent
D. 18.02 percent
E. 18.12 percent

86. What isthe netcash fowfrom investmentactivityfor 2009?

A. -$1,840
B. -$1,680
C. -$80
D. $80
E. $1,840

87. How doesaccounts re ceivable ff

a ect the tatement
s of cash fows for 2009?
A. a use of $4,218 of cash as an investment activity
B. a source of $807 of cash as an operating activity
C. a use of $4,218 of cash as a financing activity
D. a source of $807 of cash as an investment activity
E. a use of $807 of cash as an operating activity

88. BL Lumber has earningserp share of $1.2

1. The firm's earnings ha
ve been increas
ing at an average
rate of 3.1 percent annually and are expected to continue doing so. The firm has 21,500 shares of stock
outstanding at a price per share of $18.70. What is the firm's PEG ratio?
A. 0.48
B. 1.24 PEG ratio = ($18.70/$1.21)/(.031 ×
C. 2.85
D. 3.97
100) = 4.99
E. 4.99

89. Townsend Enterprises has a PE

G ratio of 5.3, net incom
e of $49,200, a price-ea
rnings ratio of 17.6,nda a

profit
A. 0.33margin of 7.1 percent. What is the earnings growth rate?
percent
B. 1.06 percent
C. 3.32 percent 5.3 = 17.6/(Earnings growth rate × 100);
D. 5.30 percent Earnings growth rate = 3.32
E. 10.60 percent

90. A firm has tot

al assets wi
th a current booklue
va of $68,700
, a current ma
rket value of $74
,300, and a
current replacement cost of $75,600. What is the value of Tobin's Q?
A. .85
B. .87
C. .92 Tobin's Q = $74,300/$75,600 = .98
D. .95
E. .98

91. Dixie Supply has total ass

ets with a curr
ent book value of 68,900
$3 and a cur
rent replace
ment cost of
$486,200. The market value of these assets is $464,800. What is the value of Tobin's Q?
A. .86
B. .92
C. .96
D. 1.01 Tobin's Q = $464,800/$486,200 = .96
E. 1.06

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92. Dandelion ields

F has a Tobi
n's Q of .96. he
T replacem
ent cost of therm's
fi assetss i$225,000 and
het
market value of the firm's debt is $109,000. The firm has 20,000 shares of stock outstanding and a book
value per share of $2.09. What is the market to book ratio?
A. 2.56 times
B. 3.18 times Market value of assets = .96 × $225,000 = $216,000
C. 3.54 times Market value of equity = $216,000 - $109,000 = $107,000
D. 4.01 times Market value per share $107,000/20,000 = $5.35
E. 4.20 times

93. A firm has ann

ual sales of $320
,000, a price
-earnings ra
tio of 24, and a pro
fit margin of.2
4 percent.
There are 14,000 shares of stock outstanding. What is the price-sales ratio?
A. 0.97
B. 1.01
C. 1.08
D. 1.15
E. 1.22

94. Lassiter ndustries

I ha
s annual sales of220,000
$ with 10,000 share
s of stock outsta
nding. Theirm
f has a
profit margin of 7.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?
A. 14
B. 16
C. 18
D. 20
E. 22

95. Assume a fir

m has a positiv
e cash balancehich
w is increa
sing annually
. Why then is it im
portant to
analyze a statement of cash fows?

96. You need to anal

yze a firm's pe
rformancenirelation tositpeers. You ca
n do this either by
omparing
c th
e
firms' balance sheets and income statements or by comparing the firms' ratios. If you only had time to use
one means of comparison which method would you use and why?

97. In general, h
wat does a highobin's
T Q valuendicate
i and how
reliable doe
s that value ten
d to be?

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98. What value doesthe PEG ratioprovide ot financial analysts?

99. What value ca

n the price-sal
es ratio provi
de to financia
l managers th
at the price-e
arnings rati
o cannot?

100.It is commonly recommended that the managers of a firm compare the performance of their firm to
that of its peers.
comparisons Increasingly,
of this this is becoming
type can frequently a more
be either difcult
difcult task. Explain
to perform some misleading
or produce of the reasons why
results.

101.The Burger Hut has sales of $29 million, total assets of $43 million, and total debt of $13 million. The
profit margin is 11 percent. What is the return on equity?
A. 7.42 percent
B. 10.63 percent
C. 11.08 percent
D. 13.31 percent
E. 14.28 percent

102.The Home Supply Co. has a current accounts receivable balance of $300,000. Credit sales for the year
just ended were $1,83
0,000. How many days on averag
e did it take for creditustomers
c to pay off the
ir
accounts during this past year?
A. 54.29 days
B. 56.01 days
C. 57.50 days
D. 59.84 days
E. 61.00 days

103.BL Industries has ending inventory of $300,000, and cost of goods sold for the year just ended was
$1,410,000. On average, how long does a unit of inventory sit on the shelf before it is sold?
A. 17.16 days
B. 21.43 days
C. 77.66 days
D. 78.29 days
E. 83.13 days

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104.Coulter Supply has a total debt ratio of 0.47. What is the equity multiplier?
A. 0.89
B. 1.13
C. 1.47
D. 1.89
E. 2.13

105.High Mountain Foods has an equity multiplier of 1.55, a total asset turnover of 1.3, and a profit margin of
7.5percent. What is the return on equity?
A. 8.94 percent
B. 10.87 percent
C. 12.69 percent
D. 14.38 percent
E. 15.11 percent

106.Lancaster Toys has a profit margin of 9.6 percent, a total asset turnover of 1.71, and a return on equity of
21.01percent. What is the debt-equity ratio?
A. 0.22
B. 0.28
C. 0.46
D. 0.72
E. 0.78

107.Charlie's Chicken has a debt-equity ratio of 2.05. Return on assets is 9.2 percent, and total equity is
$560,000. What is the net income?
A. $105,616
B. $148,309
C. $157,136
D. $161,008
E. $164,909

108.Canine
equity isSupply has sales
15 percent. Whatof $2,200, total
is the net assets of $1,400, and a debt-equity ratio of 0.3. Its return on
income?
A. $138.16
B. $141.41
C. $152.09
D. $156.67
E. $161.54

109.Billings, Inc. has net income of $161,000, a profit margin of 7.6 percent, and an accounts receivable
balance of $127,100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables?

A. 21.90 days
B. 27.56 days
C. 33.18 days
D. 35.04 days
E. 36.19 days

110.Gladstone Pavers has a long-term debt ratio of 0.6 and a current ratio of 1.3. Current liabilities are $700,
sales are $4,440, the profit margin is 9.5 percent, and the return on equity is 19.5 percent. How much does
the firm have in net fixed assets?
A. $4,880.18
B. $5,197.69
C. $5,666.67
D. $5,848.15
E. $6,107.70

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111.A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent. What is the
return on equity?
A. 26 percent
B. 50 percent
C. 65 percent
D. 84 percent
E. 135 percent

112.The Dockside Inn has net income for the most recent year of $8,450. The tax rate was 38 percent. The
firm paid $1,300 in total interest expense and deducted $1,900 in depreciation expense. What was the
cash coverage ratio for the year?
A. 10.48 times
B. 11.48 times
C. 12.39 times
D. 12.95 times
E. 13.07 times

113.Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 3.2, and a
current ratio of 2.9. What is the cost of goods sold?
A. $980,000
B. $1,060,000
C. $1,200,000
D. $1,400,000 Current assets = 2.9 × $350,000 = $1,015,000
E. $1,560,000 ($1,015,000 - Inventory)/$350,000 = 1.65;
Inventory = $437,500
Costs of goods sold = 3.2 × $437,500 =
$1,400,000

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