Question 1(0.2 points)

The Standard Industrial Classification (SIC) codes are four-digit numbers in which the last two digits describe the type of business or industry in which the firm is engaged.

Question 1 options:

TrueFalse

Question 2(0.2 points)

The balance sheet identifies the productive resources (assets) that a firm uses to generate income, as well as the sources of funding from creditors (liabilities) and owners (shareholders' equity) that were used to buy the assets.

Question 2 options:

TrueFalse

Question 3(0.2 points)

Bathez Corp. has receivables of $334,227, inventory of $451,000, cash of $73,913, and accounts payables of $469,553. What is the firm's current ratio? Round your final answer to two decimal places.

Question 3 options:

1.67

1.83

0.73

None of these.

Question 4(0.2 points)

Making and collecting loans, issuing and paying out on insurance contracts, and buying and selling debt or equity instruments of other firms are examples of financing activities.

Question 4 options:

TrueFalse

Question 5(0.2 points)

Ronaldinho Trading Co. is required by its bank to maintain a current ratio of at least 1.75, and its current ratio now is 2.1. The firm plans to acquire additional inventory to meet an unexpected surge in the demand for its products and will pay for the inventory with short-term debt. How much inventory can the firm purchase without violating its debt agreement, if their total current assets equal $3.5 million? Round your final answer to the nearest dollar.

Question 5 options:

$0

$777,777

$1 million

None of these.

Question 6(0.2 points)

During rising prices, a company using the FIFO method will sell its newest, highest-cost inventory first.

Question 6 options:

TrueFalse

Question 7(0.2 points)

The key financial statement that ties the other three statements together is the statement of cash flows, which summarizes changes in the balance sheet from the beginning of the year to the end.

Question 7 options:

TrueFalse

Question 8(0.2 points)

Accounting standards prescribed by generally accepted accounting principles (GAAP) are important because:

Question 8 options:

they allow one to examine a firm's performance with ease over a period of time.

they make the financial statements of all firms standardized.

All of these.

they make it possible for management or analysts to compare a firm's performance with that of other competitors.

Question 9(0.2 points)

Chartworth Associates' financial statements indicated that the company has EBITDA of $3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was 7.5%. The company is likely to owe $822,512 in taxes. What are the marginal and average tax rates for this company?

Tax RateTaxable Income

15%$0 to $50,000

2550,001 - 75,000

3475,001 - 100,000

39100,001 - 335,000

34335,001 - 10,000,000

3510,000,001 - 15,000,000

3815,000,001 - 18,333,333

35More than $18,333,333

Question 9 options:

none of these

34%, 34%

35%, 34%

34%, 35%

Question 10(0.2 points)

Which of the following statements is correct?

Question 10 options:

The tax benefit from using debt financing reduces a firm's risk.

The lower the level of a firm's debt, the lower the firm's equity multiplier.

The lower the level of a firm's debt, the higher the firm's equity multiplier.

The lower the level of a firm's debt, the higher the firm's leverage.

Question 11(0.2 points)

Which of the following statements is NOT true of the asset turnover ratio?

Question 11 options:

The ratio is quite useful in identifying the inefficient use of current and long-term assets.

The higher the total asset turnover, the more efficiently management is using total assets.

The fixed assets turnover ratio is less significant for equipment-intensive manufacturing industry firms than the total assets turnover ratio.

Asset turnover ratio measures the dollar amount of sales per dollar of assets that the firm has.

Question 12(0.2 points)

Common-size financial statements:

Question 12 options:

are prepared by having each financial statement item expressed as a percentage of some base number, such as total assets or total revenues.

allow us to make meaningful comparisons between the financial statements of two firms that are different in size.

All of these are true.

are a specialized application of ratio analysis.

Question 13(0.2 points)

An individual analyzing a firm's financial statements should do all but which one of the following?

Question 13 options:

Use unaudited financial statements

Compare the firm's performance to that of its direct competitors

Perform a benchmark analysis

Perform a trend analysis

Question 14(0.2 points)

Which of the following statements is NOT a limitation associated with market valuation of balance sheet accounts?

Question 14 options:

Marking to market provides decision makers with a better chance of making the correct economic decision, given the information available.

Mark-to-market accounting can become inaccurate if market prices deviate from the "fundamental" values of assets and liabilities.

The estimates of market value can involve complex financial modeling, and the resulting numbers can be open to manipulation and abuse.

It can be difficult to identify the market value of an asset, particularly if there are few transactions involving comparable assets.

Question 15(0.2 points)

For a given share price of a firm's stock, the lower the EPS the lower the price-earnings ratio.

Question 15 options:

TrueFalse

Question 16(0.2 points)

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is

Question 16 options:

$68,931.

None of these

$63,510.

$69,655.

Question 17(0.2 points)

If firm A has a higher debt-to-equity ratio than firm B, then:

Question 17 options:

firm A has a lower equity multiplier than firm B.

None of these.

firm B has a lower equity multiplier than firm A.

firm B has higher financial leverage than firm A.

Question 18(0.2 points)

Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount of $230,000 for 10 years. Its market value on December 31, 2008 is $1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The net value of the asset that should be reported on the balance sheet is:

Question 18 options:

$2.3 million.

$1.75 million.

$230,000.

$1.61 million.

Question 19(0.2 points)

A firm increased its day's sales outstanding from 35 days to 43 days. This implies the firm is more efficient in collecting the debts.

Question 19 options:

TrueFalse

Question 20(0.2 points)

The income statement identifies the major sources of revenues generated by the firm and the corresponding expenses that were needed to generate those revenues.

Question 20 options:

TrueFalse

Question 21(0.2 points)

Which of the following sections do annual reports typically contain?

Question 21 options:

Information about the company, its products, and its activities

All three of thesesections are included in the annual report.

Financial summary related to the past year's performance

Audited financial statements, including limited historical financial data

Question 22(0.2 points)

If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables? Round your final answer to the nearest dollar.

Question 22 options:

$881,234

$13,403,567

$81,234

$1,340,357

Question 23(0.2 points)

Typical financing activities include cash payments on the principal of long-term debt, cash payments of dividends to shareholders, and cash purchases of treasury stock.

Question 23 options:

TrueFalse

Question 24(0.2 points)

The higher the times-interest-earned ratio, the more comfortable a firm is in meeting its interest obligations.

Question 24 options:

TrueFalse

Question 25(0.2 points)

On June 23, 2008, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation, with the payment to be made in 90 days on September 20. The goods were shipped to Rynex on July 2. The firm's accountants should recognize the sale on:

Question 25 options:

None of these

June 23, 2008.

July 2, 2008.

September 20, 2008.

Question 26(0.2 points)

Your uncle, who has a second home in Bethany Beach, Delaware, is planning to sell it in the next few weeks. You are interested in buying this beachside property, so your agent negotiates a price for the house with your uncle's agent. This transaction is an example of:

Question 26 options:

the cost principle.

the assumption of arm's-length transactions.

the going concern assumption.

the realization principle.

Question 27(0.2 points)

The most frequent method used for creating a common-size balance sheet is to divide each of the accounts by total assets, expressing each account as a percentage of total assets.

Question 27 options:

TrueFalse

Question 28(0.2 points)

Which of the following is NOT a cash flow from operating activities?

Question 28 options:

Cash payments on the principal of long-term debt

Cash receipts from selling goods and services

Payments for utilities and rent

Payments to purchase raw materials

Question 29(0.2 points)

The major disadvantages of market-value accounting include:

Question 29 options:

the resulting numbers are potentially open to abuse.

All of the theseare disadvantages of market-value accounting.

the difficulty in applying some of the valuation models used to estimate market values.

the difficulty in estimating the current value for some assets.

Question 30(0.2 points)

The net book value of an asset is the historical cost less the accumulated depreciation.

Question 30 options:

TrueFalse

Question 31(0.2 points)

Which of the following does NOT belong to an income statement?

Question 31 options:

Depreciation expense

Extraordinary items

Amortization expense

Goodwill

Question 32(0.2 points)

Depreciation and amortization are examples of prepaid expenses.

Question 32 options:

TrueFalse

Question 33(0.2 points)

Andrade Corp has debt of $2,834,950, total assets of $5,178,235, sales of $8,234,121, and net income of $812,355. What is the firm's return on equity? Round your final answer to one decimal place.

Question 33 options:

28.1%

34.7%

43.2%

7.1%

Question 34(0.2 points)

What will be a firm's equity multiplier given a debt ratio of 0.45? Round your final answer to two decimal places.

Question 34 options:

2.22

1.28

None of these

1.82

Question 35(0.2 points)

Which of the following is true of a firm that has no debt in its capital structure?

Question 35 options:

None of these.

Its return on equity (ROE) will be lesser than its return on asset (ROA).

Its return on equity (ROE) will be equal to its return on asset (ROA).

Its return on equity (ROE) will be greater than its return on asset (ROA).

Question 36(0.2 points)

Which of the following is the best example of how a market-value balance sheet item differs from the firm's book-value balance sheet item?

Question 36 options:

A firm sold common stock twenty-years ago for $20.00 a share. The firm's common stock is currently selling for $96.50 per share.

A firm issued preferred stock ten-years ago. These shares of preferred stock currently are selling for par value.

A firm issued long-term bonds five-years ago that currently sell for par value.

A firm has $5 million of accrued liabilities on the books.

Question 37(0.2 points)

Fahr Company had depreciation expenses of $630,715, interest expenses of $112,078, and an EBIT of $1,542,833 for the year ended June 30, 2006. What are the times interest earned and cash coverage ratios for this company? Round your final answers to one decimal place.

Question 37 options:

13.8 times; 19.4 times

17.3 time; 11.4 times

None of these

19.4 times; 12.7 times

Question 38(0.2 points)

A financial statement analysis conducted over a period of time is called trend analysis.

Question 38 options:

TrueFalse

Question 39(0.2 points)

Which one of the following statements is NOT correct?

Question 39 options:

A leveraged firm is riskier than a firm that is not leveraged.

A firm that does not use debt incurs opportunity cost of increasing value of

A leveraged firm is less risky than a firm that is not leveraged.

A firm that uses debt magnifies the return to its shareholders.

Question 40(0.2 points)

Perez Electronics Corp. has reported that its net income for 2006 is $1,276,351. The firm has 420,000 shares outstanding and a PE ratio of 11.2 times. What is the firm's share price?

Round your intermediate and final answer to two decimal places.

Question 40 options:

$34.05

$11.20

$3.68

$36.80

Question 41(0.2 points)

There are people who believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation of financial statement analysis?

Question 41 options:

Thorough ratio analysis requires the analyst to refer to benchmarking, which is very easy to misinterpret.

Proper ratio analysis requires the analyst to rely upon audited financial statements, which can be easily manipulated.

Ratio analysis requires the analyst to utilize accounting data that is based on historical costs instead of current market values.

Ratio analysis requires the analyst to evaluate a firm's performance over a period of time to be of any value.

Question 42(0.2 points)

A firm's management analyzes financial statements so that:

Question 42 options:

a)

they can get feedback on their investing, financing, and working capital decisions by identifying trends in the various accounts that are reported in the financial statements.

b)

similar to shareholders, they can focus on profitability, dividend, capital appreciation, and return on investment.

c)

they can get more stock options.

d)

Both a and b

Question 43(0.2 points)

Natural Lite, Inc. reported the following items during fiscal 2010. The firm purchased marketable securities of $87,500, paid down a long-term loan in the amount of $650,000, purchased $4,250,000 of new equipment. The firm also issued $6,250,000 of common stock, paid $350,225 in dividends to its common shareholders, and repurchased $1,250,000 of common stock in the open market. What is the net cash provided by financing activities?

Question 43 options:

$4,575,210

$3,999,775

$1,733,285

$2,467,915

Question 44(0.2 points)

Which of the following is NOT a cash flow from investing activities?

Question 44 options:

Buying and selling bonds of other firms

Cash payments of dividends to shareholders

Buying and selling stocks of other firms

Buying or selling of land, buildings, and plant and equipment

Question 45(0.2 points)

A company can improve its liquidity by increasing its accounts payable, while maintaining the other accounts constant.

Question 45 options:

TrueFalse

Question 46(0.2 points)

Spartan, Inc., is a manufacturer of automobile parts located in Greenville, South Carolina. At the end of the current fiscal year, the company had net working capital of $157,903. The company showed accounts payables of $94,233, accounts receivables of $83,112, inventory of $171,284, and cash and marketable securities of $12,311. Calculate the amount of notes payables. (Assume that notes payable and accounts payable are the only two current liabilities of the company.)

Question 46 options:

$26,882

$15,471

None of these

$14,571

Question 47(0.2 points)

Which of the following best represents cash flows to investors?

Question 47 options:

Cash flow from operating activity, plus cash flow generated from net working capital

Net income minus dividends paid to preferred stockholders.

Cash flow from operating activity minus cash flow invested in net working capital minus cash flow invested in long-term assets.

Earnings before interest and taxes times 1 minus the firm's tax rate

Question 48(0.2 points)

In a balance sheet, assets are listed in order of their liquidity.

Question 48 options:

TrueFalse

Question 49(0.2 points)

Trident Corp., has debt of $3.35 million with an interest rate of 6.875 percent. The company has an EBIT of $2,766,009. What is its times-interest-earned ratio? Round your final answer to nearest number.

Question 49 options:

11 times

12 times

None of these

13 times

Question 50(0.2 points)

Trident Manufacturing Company's treasurer identified the following cash flows during this year as significant. The company repaid existing debt of $425,110, while raising additional debt capital of $750,000. It also repurchased stock in the open markets for a total of $63,250 and paid $233,144 in dividends to its shareholders. What is the net cash provided by (used in) financing activities?

Question 50 options:

-$28,496

$28,496

$91,746

-$91,746