P2

1.Each line item is expressed as a percentage of some base year level when doing an analysis.

A.Horizontal analysis

B.Ratio analysis

C.Vertical analysis

D.Discounted cash flows

2. What causes the asset turnover ratios to be too low?

A.High profitability.

B.Too large an investment in assets and sluggish sales.

C.Too small an investment in assets and robust sales.

D.Downsizing.

3. Which of the following has an incorrect grouping?

A.Debt Ratio, Debt/Capital Ratio, Long-Term Debt/Shareholders' Equity Ratio

B.Inventory Turnover, Payables Turnover, Total Asset Turnover, Times Interest Earned Ratio

C.Current Ratio, Quick Ratio, Cash Ratio

D.Gross Profit Margin, Net Profit Margin, ROA, ROE

4. If a company has projected revenues of $10 billion, a gross profit margin of 65%, and projected SG&A expenses of $2 billion, what is the company's operating (EBIT) margin?

A.55%

B.20%

C.80%

D.45%

5. Which of the following statements about inventory turnover is false?

A.Inventory turnover is calculated with cost of goods sold in the numerator.

B.Inventory turnover is a gauge of the liquidity of a firm's inventory.

C.Inventory turnover measures the efficiency of the firm in managing and selling inventory.

D.A low inventory turnover is generally a sign of efficient inventory management.

6. Which of the following items should NOT be projected as a percentage of revenue?

A.Accrued Expenses

B.Inventory

C.Capital Expenditures

D.Accounts Receivable

7. Which of the following is NOT an efficiency ratio?

A.Days Sales Outstanding

B.Receivables Turnover

C.Times Interest Earned

D.Asset Turnover

8.

Use the following information to answer the question: Cash & cash equivalents 2,106 PP & E 12,138 Accounts receivable 2,632 Long-term debt 4,477 Other long-term liabilities 2,067 Shareholders' equity 19,454 Equity method investments 9,059 Prepaid expenses 284 Accounts payable 4,635 Inventories 6,852 Net sales 72,217 Interest expense 165 Short-term borrowings 570 Deferred tax liabilities 600 Cost of goods sold 51,098 Tax expense 1,445 Interest income 120 SG & A expenses 17,179 Goodwill 2,410 Accrued expenses 3,678