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Exam 3: Evaluation of Financial Performance

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Question 51

Multiple Choice

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Heavily using debt to finance assets results in higher as compared to ROI.

A) Return on Sales
B) Return on Stockholders' Equity
C) Return on Assets
D) Times Interest Earned

E) C) and D)
F) B) and C)

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Question 52

Multiple Choice

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In an inflationary period, a firm is likely to show temporary profit increases because

A) accounts receivable collections increase
B) cash balances decline
C) inventory profits are realized
D) all of these

E) B) and C)
F) None of the above

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Question 53

Multiple Choice

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

A firm with an equity multiplier of 4.0, will have a debt ratio of

Market based ratios can be which of the following:

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

If a firm wishes to retain the same return on equity when its net profit margin and total asset turnover has declined, it must

Flash In The Pan Cooking School is considering the issuance of additional long-term debt to finance expansion.At the present time the company has $160 million of 10% debentures outstanding.Its after-tax net income is $48 million, and the company's (marginal) income tax rate is 40%.The company is required by the debenture holders to maintain its coverage ratio at 4.0 or greater.Determine Flash's present coverage ratio.

The greater the amount of financial leverage used by a firm, the greater its , all other things being equal.

What information can Asset Management Ratios provide?

Stocks with dividend yield often indicate expected future growth.

What is the net profit margin for TJX Inc.if the current ratio = 2;total asset turnover =1.5;total assets = $100,000;and EBIT = $30,000? Assume the marginal tax rate for TJX is 40% and that interest expenses are $10,000.

The following ratio(s) that would probably not be used to assess the profitability of a firm is:

Asset management ratios indicate

Successful financial ratio analysis requires all of the following EXCEPT:

Last year, Monroe Bro Products had $25,000 net cash provided by its operating activities.Its investing activities used $30,000, and its financing activities provided $10,000.Its cash and cash equivalents balance at the beginning of the year was $15,000.By how much did Monroe's cash and cash equivalents increase?

All of the following are users of financial information EXCEPT:

Financial ratios can be used to analyze a firm's performance from

What is the market price per share of Big Whoop, Inc.if the firm had net income of $200,000, earnings per share of $2.70, total equity of $800,000, and a market to book ratio of 1.5?

A firm has revenue of $60,000, its total operating costs including 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 EBIT?