Question 1

Nukin' Gnats Pest Control is trying to determine its cash flow per share. It has revenue of $50,000, $35,000 of expenses, $4,000 of depreciation, and $3,000 of interest expense. The firm is in the 40% tax bracket. The firm has 75,000 shares of common stock outstanding. The firm has a $15 stock price per share. Its stock price to cash flow is ____.

Accepted Answer

A)   150
B)   75
C)   100
D)   125E) A) and C)
F) A) and D)

Question 2

Which of the following is NOT true about generally accepted accounting principles (GAAP) ?

Accepted Answer

A)   They are outlined in Statements of Financial Accounting Standards.
B)   In the United States, they are issued by the Financial Standards Accounting Board.
C)   They are stringent, giving firms little latitude in reporting financial situations.
D)   Two firms that both follow GAAP can still have significant differences in how they compute their financial outcomes.E) None of the above
F) B) and C)

Question 3

A(n)  ____ calculates a firm's total assets and total liabilities and stockholders' equity, in dollars.

Accepted Answer

A)   income statement
B)   balance sheet
C)   common-size balance sheet
D)   common-size income statementE) None of the above
F) B) and C)

Question 4

A firm wants to receive cash earnings. Management's viewpoint is that cash earnings are ____.

Accepted Answer

A)   stock dividends
B)   high quality earnings
C)   retained earnings
D)   debt retirementE) A) and B)
F) All of the above

Question 5

Which of the following financial ratios is market-based?

Accepted Answer

A)   debt-to-equity
B)   price-to-earnings
C)   return on investment
D)   gross profit marginE) A) and D)
F) A) and C)

Question 6

Stocks with ____ dividend yield often indicate ____ expected future growth.

Accepted Answer

A)   high; high
B)   low; low
C)   low; high
D)   high; lowE) A) and B)
F) A) and C)

Question 7

The fixed-charge coverage ratio includes all of the following in the denominator EXCEPT ____ .

Accepted Answer

A)   lease payments
B)   preferred dividends before tax
C)   Before-tax sinking fund
D)   common stock dividendsE) B) and D)
F) A) and C)

Question 8

Nukin' Gnats Pest Control is trying to determine its cash flow per share. It has revenue of $50,000, $35,000 of expenses, $4,000 of depreciation, and $3,000 of interest expense. The firm is in the 40% tax bracket. The firm has 75,000 shares of common stock outstanding. Its cash flow per share is ____.

Accepted Answer

A)   $0.08
B)   $0.12
C)   $0.92
D)   $0.46E) C) and D)
F) B) and D)

Question 9

____ ratios indicate how efficiently a firm is using its assets to generate sales.

Accepted Answer

A)   Liquidity
B)   Asset management
C)   Financial leverage
D)   EquityE) None of the above
F) B) and D)

Question 10

A(n)  ____ calculates a firm's earnings after taxes, in dollars.

Accepted Answer

A)   income statement
B)   balance sheet
C)   common-size balance sheet
D)   common-size income statementE) A) and B)
F) B) and D)

Question 11

Nuking Gnats Pest Service, Inc. has a debt ratio of 50% and an equity multiplier of 2. What is Nuking Gnats' stockholders' equity if total debt is $100,000?

Accepted Answer

A)   $100,000
B)   $150,000
C)   $200,000
D)   $50,000E) B) and C)
F) None of the above

Question 12

How much cash and marketable securities does Gray Day Computer Co. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000? Gray's credit sales are $98,000, and its average collection period is 40 days? (Assume 365 days per year.)

Accepted Answer

A)   $3,660
B)   $14,440
C)   $10,740
D)   $12,660E) All of the above
F) B) and D)

Question 13

A firm has revenue of $60,000, its total operating costs (excluding depreciation)  and cost of goods sold are $50,620, depreciation is $4,620, and its interest expense on outstanding loans is $2,000. What is the firm's EBITDA?

Accepted Answer

A)   $55,380
B)   $2,760
C)   $9,380
D)   $12,000E) B) and C)
F) B) and D)

Question 14

The ____ ratio indicates the percentage of a firm's earnings that are distributed as dividends.

Accepted Answer

A)   dividend yield
B)   payout
C)   return on earnings
D)   earningsE) A) and B)
F) A) and C)

Question 15

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?

Accepted Answer

A)   $16.80
B)   $42
C)   $3
D)   $28E) A) and D)
F) A) and C)

Question 16

A common-size balance sheet shows the firm's assets and liabilities as a percentage of ____.

Accepted Answer

A)   stockholders' equity
B)   industry averages
C)   total assets
D)   net salesE) A) and B)
F) A) and C)

Question 17

;he ____ ratio, sometimes called the "acid test," is a more stringent measure of ____ than the current ratio.

Accepted Answer

A)   quick; liquidity
B)   fixed-asset turnover; activity
C)   net profit margin; gross profit margin
D)   equity; activityE) B) and C)
F) C) and D)

Question 18

Although ratios can provide valuable information, they can also be misleading for which of the following reasons?

Accepted Answer

A)   Ratios are only as reliable as the accounting data on which they are based.
B)   Compilation of industry norms often does not report information about the distribution of values.
C)   Comparative analysis depends on the availability of data for appropriately defined industries.
D)   All of these are correct.E) B) and C)
F) B) and D)

Question 19

Common stock prices are dependent on the amount and stability of a firm's cash flows so common stockholders are especially interested in ____.

Accepted Answer

A)   profitability measurements
B)   accounting profits
C)   earnings after tax
D)   NOPATE) A) and B)
F) A) and C)

Question 20

When considering the quality of a firm's earnings, high quality earnings tend to be ____

Accepted Answer

A)   cash earnings
B)   derived from infrequently recurring transactions
C)   earnings per sale
D)   earnings per shareE) All of the above
F) A) and B)

Exam 3: Evaluation of Financial Performance

A firm has revenue of $60,000, its total operating costs (excluding depreciation) and cost of goods sold are $50,620, depreciation is $4,620, and its interest expense on outstanding loans is $2,000. What is the firm's EBITDA?

Correct Answer
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;he ratio, sometimes called the "acid test," is a more stringent measure of than the current ratio.

Correct Answer
verified

A common-size balance sheet shows the firm's assets and liabilities as a percentage of ____.

Correct Answer
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How much cash and marketable securities does Gray Day Computer Co. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000? Gray's credit sales are $98,000, and its average collection period is 40 days? (Assume 365 days per year.)

Correct Answer
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Correct Answer
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The ____ ratio indicates the percentage of a firm's earnings that are distributed as dividends.

Correct Answer
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Which of the following is NOT true about generally accepted accounting principles (GAAP) ?

Correct Answer
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What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?

Correct Answer
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The fixed-charge coverage ratio includes all of the following in the denominator EXCEPT ____ .

Correct Answer
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Nuking Gnats Pest Service, Inc. has a debt ratio of 50% and an equity multiplier of 2. What is Nuking Gnats' stockholders' equity if total debt is $100,000?

Correct Answer
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Correct Answer
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A(n) ____ calculates a firm's earnings after taxes, in dollars.

Correct Answer
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Although ratios can provide valuable information, they can also be misleading for which of the following reasons?

Correct Answer
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When considering the quality of a firm's earnings, high quality earnings tend to be ____

Correct Answer
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Common stock prices are dependent on the amount and stability of a firm's cash flows so common stockholders are especially interested in ____.

Correct Answer
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Which of the following financial ratios is market-based?

Correct Answer
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Stocks with dividend yield often indicate expected future growth.

Correct Answer
verified

____ ratios indicate how efficiently a firm is using its assets to generate sales.

Correct Answer
verified

A firm wants to receive cash earnings. Management's viewpoint is that cash earnings are ____.

Correct Answer
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A(n) ____ calculates a firm's total assets and total liabilities and stockholders' equity, in dollars.

Correct Answer
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Exam 3: Evaluation of Financial Performance

A firm has revenue of $60,000, its total operating costs (excluding depreciation) and cost of goods sold are $50,620, depreciation is $4,620, and its interest expense on outstanding loans is $2,000. What is the firm's EBITDA?

Correct AnswerverifiedShow Answer

;he ____ ratio, sometimes called the "acid test," is a more stringent measure of ____ than the current ratio.

Correct AnswerverifiedShow Answer

A common-size balance sheet shows the firm's assets and liabilities as a percentage of ____.

Correct AnswerverifiedShow Answer

How much cash and marketable securities does Gray Day Computer Co. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000? Gray's credit sales are $98,000, and its average collection period is 40 days? (Assume 365 days per year.)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The ____ ratio indicates the percentage of a firm's earnings that are distributed as dividends.

Correct AnswerverifiedShow Answer

Which of the following is NOT true about generally accepted accounting principles (GAAP) ?

Correct AnswerverifiedShow Answer

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?

Correct AnswerverifiedShow Answer

The fixed-charge coverage ratio includes all of the following in the denominator EXCEPT ____ .

Correct AnswerverifiedShow Answer

Nuking Gnats Pest Service, Inc. has a debt ratio of 50% and an equity multiplier of 2. What is Nuking Gnats' stockholders' equity if total debt is $100,000?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A(n) ____ calculates a firm's earnings after taxes, in dollars.

Correct AnswerverifiedShow Answer

Although ratios can provide valuable information, they can also be misleading for which of the following reasons?

Correct AnswerverifiedShow Answer

When considering the quality of a firm's earnings, high quality earnings tend to be ____

Correct AnswerverifiedShow Answer

Common stock prices are dependent on the amount and stability of a firm's cash flows so common stockholders are especially interested in ____.

Correct AnswerverifiedShow Answer

Which of the following financial ratios is market-based?

Correct AnswerverifiedShow Answer

Stocks with ____ dividend yield often indicate ____ expected future growth.

Correct AnswerverifiedShow Answer

____ ratios indicate how efficiently a firm is using its assets to generate sales.

Correct AnswerverifiedShow Answer

A firm wants to receive cash earnings. Management's viewpoint is that cash earnings are ____.

Correct AnswerverifiedShow Answer

A(n) ____ calculates a firm's total assets and total liabilities and stockholders' equity, in dollars.

Correct AnswerverifiedShow Answer

Correct Answer
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;he ratio, sometimes called the "acid test," is a more stringent measure of than the current ratio.

Correct Answer
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Correct Answer
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Stocks with dividend yield often indicate expected future growth.

Correct Answer
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Correct Answer
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